Inflation and recession: Rooted in Imperialism – Part 1 / Capitalist solution to inflation – recession

1980 – Detroit, June 1 – Peoples Energy Committee pot-luck dinner. | Photo: David Sole

June 20, 2022

By Chris Fry

On June 15, the Federal Reserve, the central committee of U.S. finance capital, announced an interest increase of .75 percent, the highest single rate increase since 1994. And they announced that they will probably raise the rate by the same amount in July. This is the third rate hike so far this year.

Mortgage rates have already nearly doubled from last year. This last week ending June 18th marked a .5 percent increase, the biggest weekly increase since 1987. Families are being forced to pay hundreds more each month just to keep their home.

This comes just days after the Labor Department announced that the year-to-year inflation rate rose 8.6 percent in May, the largest increase in 41 years. Nationally, gas prices have soared past $5.00 a gallon, with $7.00 a gallon prices in some localities. This spike in inflation hits poor families, especially from the oppressed communities, particularly hard, as food, rents, fuel to get to and from work, automobile prices, all are rapidly becoming insufferably sky-high.

When the rate hike was announced, Wall Street, who has seen a deep decline in stock prices over the past few months, were pleased, believing that this move spells an end to inflationary pressure. The stock market climbed a few points that day.

But that bubble of optimism quickly burst. The next day, the Dow Jones index dropped 742 points, with the other indexes showing sharp declines. The market is now officially in “bear territory”. With millions of workers forced by their bosses out of guaranteed pensions and into risky 401K and IRA programs, they are forced to watch their modest retirement nest eggs melt away.

Many analysts predict that the Fed’s move to drastically raise interest rates will spark a recession, meaning that millions will lose their jobs and income, many of whom just found work after the pandemic downturn.

On June 16th, President Biden wrote a pathetic letter to seven oil giants begging them to increase gasoline production:

“The crunch that families are facing deserves immediate action,” Biden wrote in a letter to seven oil refiners. “Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis.”

The American Petroleum Institute wrote a scornful reply, blaming the sky-high oil prices on the struggle against climate change:

“While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” API CEO Mike Sommers said in a statement.

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