Fed chief Powell defends the dictatorship of finance capital

A speech by Federal Reserve Chairman Jerome Powell earlier this week provided an insight into the anti-democratic and outright dictatorial character of the policies of central banks, acting in the interests of finance capital, as they pursue a policy of deliberately increasing unemployment in an effort to slash workers’ wages.

Speaking at a symposium in Stockholm, Sweden, Powell said, “Restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy.”

Federal Reserve Chairman Jerome Powell speaks during a news conference at the Federal Reserve Board building in Washington, Wednesday, July 27, 2022. [AP Photo/Manuel Balce Ceneta]

He added, “The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors.”

In other words, in seeking to impose economic “pain” onto the population—in the form of increasing the unemployment rate to suppress workers’ wages—the Fed must operate as a law unto itself, in the interests of the corporations, the stock market and finance capital.

The effects of the Federal Reserve’s class war policy have already begun to be felt in major layoffs in high-tech companies and in firms such as Amazon, hitting tens of thousands of workers, while manufacturing firms, including the auto industry, prepare savage cost-cutting measures.

Powell’s justification for seeking to increase unemployment is the claim that rising wages are driving inflation. In reality, wages are falling in real terms, even as corporate profits soar.

The inflationary crisis is driven by the impact of the Federal Reserve’s cheap money policies over the past decade and a half; the contraction of the labour force because of COVID deaths, continuing infections and the impact of Long COVID; the US-NATO war against Russia in Ukraine; and, not least, price-gouging by major corporations, particularly in the food and energy sectors.

The Fed aims to place the burden of this deepening crisis of capitalism on to the backs of the working class through its high-interest rate regime.

While this has caused turbulence in the stock market, it is seen as a necessary price for achieving the strategic objective of battering back the resistance of the working class.

The longer the monetary tightening continues, the clearer this goal has been set out in the Fed’s own policy statements and minutes of the meetings of its governing body.

Its documents and statements are replete with references to the “tight” labour market, that even limited wage rises, well below the rate of inflation, are incompatible with its objective of 2 percent inflation, and the need to increase labour supply, that is, by driving up unemployment.

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