Federal Reserve cheering! High interest rates are FINALLY “working” ?

Photo above - Facebook is laying off 22% of its workforce. And spending the money on server farms and AI data centers like this. Big, isn't it?

Fed chairman Jerome Powell must be in heaven. 18 months after the government tripled interest rates (“to cure inflation”), it's FINALLY showing results. Well, inflation isn't down, but the tech giants are firing people. See link below.

The government and media are coy when they discuss curing inflation with higher interest rates. They pretend it's like taking two aspirin and waking up with your headache gone. In fact, the ONLY way high interest rates reduce inflation is by jacking up unemployment. When THAT happens, unemployed people buy less, and eventually prices start to come down. In theory . . .

Except that hasn't worked over the past 18 months. The prices of food, fuel, housing and the other things I spend half my paycheck are only getting WORSE.

So Alphabet/Google is laying off 5% of their workforce. Intel too. Meta/Facebook has a whopping 22% of its employees slated for termination. Even Amazon is laying off people. Amazon!!!

When thousands and thousands of these skilled workers hit the bricks, our problems will be over, right? Unemployed people stop buying stuff, and inflation will screech to a halt. Well, that's the theory, anyway. Maybe they keep buying stuff if they get unemployment benefits. Or they have severance packages. Who knows. Don't look a gift horse in the mouth. This is what the Fed has wanted for nearly two years. They just didn't want it in 2024, an election year.

It's probably NOT what voters wanted at all. We don't want our friends and neighbors to lose their jobs. And we especially don't want to lose our OWN jobs. We just want inflation to end. Inflation isn't caused by Facebook and Google. Inflation is actually the result of the US government spending twice as much each year as it collects in taxes. All that borrowing, to buy stuff for the government. The Fed cannot stop congress and the white house from reckless spending. Their only tool apparently is throwing people out of work.

Huge numbers of people could lose their jobs. Ignore the fact that they also lose their health benefits, stop making payments on their student loans, and might become homeless. THOSE things might not be so good for America.

That might even bring down housing prices. People have to put their homes on the market, because they're facing foreclosure. Or homes might actually be foreclosed on, like they were in 2008, and sit vacant deteriorating for months or years. All these scary scenarios are theoretical, with no hard numbers attached, of course. Just like the Fed's original guess that tripling interest rates would return inflation to 2%. There was never any attempt by the Fed to calculate the amount the government would need to spend on unemployment coverage, homelessness, or Obamacare for people who lost their jobs. Those could all cost big bucks. And result in MORE government borrowing.

But here's the craziest part. You know what the tech giants are doing with their payroll savings? They're buying commercial real estate. This is absolutely true. See the link at bottom. Zuckerberg, Bezos, and his pals must have read the news about 20% of America's office space being vacant. Google, Facebook, etc. are stepping in. This is some investment strategy, eh? Using payroll money to buy vacant buildings.

If you think my theory is wrong, ask yourself this: Why does corporate America need MORE office space, if they have lower headcount? The answer is, they don't. Unless they're planning to grow the number of mainframes and servers they use for stuff like Bitcoin mining and AI. The electrical costs for those activities are astronomical, and we already know the grid is overextended.

I'm just sayin' . . .

~Microsoft, Meta, Amazon, and other tech giants are cutting back on headcount—but their spending on hardware and real estate keeps soaring (yahoo.com)~