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.
“I reinforced in a letter to President Biden and his Cabinet yesterday ten meaningful policy actions to ultimately alleviate pain at the pump and strengthen national security, including approving critical energy infrastructure, increasing access to capital, holding energy lease sales, among other urgent priorities.”
This month Biden is set to pay a visit to the arch-reactionary Saudi kingdom, sparking intense controversy for that regime’s murder of Washington Post’s journalist Kamal Khashoggi. Biden goes to beg them for an increase in oil production to make up for the shortage caused by U.S. and EU sanctions against Russian oil.
Biden will first visit Israel, who just murdered a popular Al Jazeera reporter:
Al Jazeera is airing an image of what it describes as the American-made bullet that killed its longtime Palestinian reporter Shireen Abu Akleh in the occupied West Bank last month.
The pan-Arab broadcaster said the bullet was a 5.56mm round shot by an M4 rifle often used by Israeli armed forces. The bullet was “first designed and manufactured” in the United States, Al Jazeera reported.
It cited a former Jordanian major general, Fayez al-Dwairi, as claiming it was the type of munition “used by the Israeli army”.
The bullet, which often comes with a green tip, is often described as a “penetrator round,” for its ability to pierce through armour.
Historical Inflation sparked struggle
As the inflation rate began to climb, some of the economic specialists in the corporate media moved to head off any thought of the government imposing price controls. One example is an article by the right-wing American Institute for Economic Research titled “Energy Infamy: Nixon’s 1971 Price Controls Turns 50”:
August 15, 1971, forever lives in energy infamy. President Nixon’s 90-day price freeze, as extended, disabled the impersonal market forces coordinating supply and demand. Petroleum shortages began the next year, and the industry was fast-tracked to allocation controls and a suite of government programs to increase supply or reduce demand (“gapism”).
The 37th president of the United States got on the wrong side of economic law three years before his resignation by imposing the first peacetime wage-and-price controls in American history.
Of course, this article never mentions Nixon’s war crimes in Vietnam, nor the fact that the war’s massive military spending caused the 1971 spike in inflation. But what concerns the billionaires at this time is that the Democrats, with Biden and the rest of the party sinking in the polls, might notice that Nixon’s price controls won his re-election in 1972, with his winning every state except Massachusetts and D.C. (Of course, unions opposed the wage controls since hard-won wage increases offset inflation – they do not cause it.)
Combined with Nixon’s opening with the People’s Republic of China (PRC), these price controls enraged Wall Street so much that they allowed the second-rate burglary at Watergate to force Nixon to resign from office. They do not want that experience repeated now by even a hint of price controls.
It must also irk the “wizards on Wall Street” that the socialist PRC, despite its stern public health measures to combat the Covid pandemic which have saved a huge number of lives, particularly compared with the U.S., where more than a million of people have lost their lives to Covid, that that country does not have an inflation problem:
The consumer price index (CPI) gained 2.1% from a year earlier in May, in line with April’s growth. In a Reuters poll, the CPI was expected to rise 2.2%.
The cooling inflation marks a sharp contrast to decades-high readings seen in other major economies and reflects the slump in demand due to China’s strict COVID-19 controls, which has chilled factory and retail activity in recent months.
The modest price pressures also allow China’s central bank to release more stimulus to prop up the economy even as monetary authorities in most other countries scramble to hose down inflation with aggressive interest rate hikes.
China does have a government agency to constantly control commodity supplies and prices of both public and private companies, called the National Development and Reform Commission (NDRC).
And it must be noted that when oil prices spiked later on in the 1970’s, Detroit activists successfully gathered thousands of signatures to put a public takeover of the oil industry on the ballot. Lobbying pressure by a representative of the American Petroleum Institute succeeded in getting Detroit’s City Council to reverse its original approval.