The Class Dynamics of the Federal Reserve's Recession Program

The Class Dynamics of the Federal Reserve’s Recession Program

On Thursday, the Commerce Department announced that the US economy had contracted for the second consecutive quarter, entering a “technical recession”.

Along with the economic contraction comes a series of layoffs that threaten to turn into a torrent as the economy slows further. This month, more than 30,000 layoffs took place in the technology sector alone. Last week, Ford announced 8,000 layoffs, suggesting further carnage in the auto industry.

Amidst the whirlwind of economic data, it is always necessary to understand that these numbers are the abstract expression of underlying social and class forces, that the “economy” is not some kind of machine, but that it is based on precise social relations and that it functions through them. This is especially necessary when looking at the latest economic data.

A debate has now erupted in media and financial commentary circles over whether or not this “technical recession” – defined as two consecutive quarters of economic contraction – is real.

The key question here is not one of definition, but of knowing what are the essential class interests at stake, and especially with regard to the policies of the American Federal Reserve, the key financial institution of the capitalist state.

Federal Reserve policies are still framed in various forms of jargon that disguise the real agenda through a series of mystifications that seek to make it appear that the central bank somehow sits above class interests, regulating life. economy in the interest of the population.

Amid this flood of talk, the essence of the current situation is this: the central bank, guardian of the interests of corporations and financial capital, has set out to bring about a sharp downturn and, if necessary, a major economic contraction. The aim is to stifle working class wage demands under conditions where inflation has reached its highest level in four decades.

This assault is being waged through the mechanism of rising interest rates, which are being raised at the fastest rate in decades under the banner of fighting inflation. But interest hikes will neither lower gasoline prices nor solve supply chain problems. The objective is to cause an economic contraction in order to suppress wage demands.

The current policy agenda echoes that of Federal Reserve Chairman Paul Volcker in the 1980s, when he pushed interest rates to record highs, causing the deepest recession since the Great Depression. Current Federal Reserve Chairman Jerome Powell has expressed his admiration for Volcker on numerous occasions, making it clear that he is more than ready to follow the same path.

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