Billionaire Investor Bill Ackman Has The Cure To Tame High Inflation: A Massive Wave Of Russian Immigration

The Federal Reserve aggressively raised interest rates in hopes of cooling the economy and taming inflation, which remained near a 40-year high in August at 8.3%.

Their goal is to reduce demand and slow wage increases so that high consumer prices do not become “entrenched”. But senior officials noted this week that this will not be a “painless” process for Americans.

And now some of Wall Street’s most famous minds are arguing that the Fed doesn’t have the tools to truly tame inflation.

Although central banks can take action to slow the demand side of the economy, their policies don’t have much effect on the supply of goods, services or workers. And many economists and big investors argue that increasing domestic production of scarce commodities and commodities, along with an expanding workforce, is a big part of the inflation puzzle.

On Thursday, Bill Ackman, CEO of Pershing Square Capital Management, said immigration, not the Fed, could be the solution to inflation, taking a very different tone from his hawkish comments a few months ago, urging officials from the central bank to raise rates.

“Inflation can be mitigated by reducing demand and / or increasing supply. The Federal Reserve can only reduce demand by raising rates, a very blunt instrument, “Ackman wrote in a tweet. “Doesn’t it make more sense to moderate wage inflation by increasing immigration than by raising rates, destroying demand, putting people out of work and causing a recession?”

The billionaire investor, known for his heated debates with fellow Wall Street titan Carl Icahn, has proposed using Russian immigrants to reduce upward pressure on wages.

“If we can steer immigration policy to achieve important political goals such as catalyzing a flight of Russian talent to the United States, why shouldn’t we?” she wrote.

“Let’s remove the barriers for Russia’s brightest. The most talented Russians must leave now before they become fodder in an unjust war. In this way we save our economy and destroy the future of Russia “, he added aside tweet.

Ackman’s comments came after Russian President Vladimir Putin ordered the mobilization of 300,000 reservists to fight in the war in Ukraine on Wednesday, leading thousands of Russians to flee the country. Russia was already experiencing a serious talent drain, with some 4 million Russians headed for greener pastures in the first three months of 2022 alone. Ackman argues that the US should be willing to welcome at least some of these disaffected Russians, to help. to strengthen our workforce and fight inflation.

To Ackman’s point on immigration that could lower inflation, a National Bureau of Economic Research study by Harvard economist George Borjas found that rising immigration reduced the wages of competing domestic workers, which it can have a cooling effect on inflation.

And researchers from the Federal Reserve Bank of Kansas City explained in a May article that when immigration slows, it can raise wages nationwide and exacerbate inflation.

While it may seem counterintuitive for economists and investors to argue for more immigration to slow wage growth, their fear is that a wage-price spiral, in which inflation-induced wage increases contribute to the costs of firms, which then drive prices up. even more, it will eventually make inflation impossible to control.

Olivier Blanchard, the former IMF chief economist, said last week that he believes the US is already experiencing a wage-price spiral, and warned that stopping the trend will likely require significant job losses.

A big change

Ackman’s latest comments that the Fed fueled a recession with its rate hikes represent a seismic shift in his thinking in recent months.

In June, the billionaire called on the Fed to go “aggressive” with an interest rate hike of 75 basis points, arguing that the institution was losing credibility due to officials’ reluctance to fight inflation.

Ackman made his wish come true. The Fed raised rates by 75 basis points in June, then followed up with two more 75 basis point hikes in July and September, marking the fastest pace of US monetary tightening since the 1980s.

But now, with the S&P 500 down more than 10% just this month and more economists saying a recession is imminent, Ackman warns that the Fed may be exaggerating.

Subscribe to Characteristics of luck mailing lists so you don’t miss our most important features, exclusive interviews and surveys.

Leave a Comment

%d bloggers like this: