Billionaire investor Bill Ackman has a remedy to tame high inflation: a massive wave of Russian immigration
The Federal Reserve raised interest rates aggressively in hopes of calming 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 the rise in wages so that higher consumer prices do not “take hold”. But senior officials indicated this week that the process would not be “painless” for Americans.
Now some of the most famous minds on Wall Street are arguing that the Fed does not really have the tools it needs to tame inflation.
While central banks can slow down the demand side of the economy, their policies do not have much effect on the supply of goods, services, or workers. Many economists and large investors argue that increased domestic production of scarce and commodity goods, along with an increase in the labor force, is an important piece of the inflation puzzle.
On Thursday, Bill Ackman, CEO of Pershing Square Capital Management, made clear that immigration, not the Fed, could be the answer to inflation, striking a very different tone from his hawkish comments just months ago and urging central bank officials to raise interest rates. .
Inflation can be mitigated by reducing demand and/or by increasing supply. Ackman wrote in tweet. Doesn’t it make more sense to mitigate wage inflation while increasing immigration than to raise rates, destroy demand, put people out of work, and cause recession?
The billionaire investor, known for his heated discussions with fellow Wall Streeter Carl Icahn, has suggested using Russian immigrants to help reduce upward pressure on wages.
“If we can target immigration policy to achieve important political goals such as stimulating the drain of Russian talent to the United States, why not do it?” he wrote.
Let’s remove the barriers to the brightest Russians. The most skilled Russians must leave now before they are fodder for an unjust war. Doing so saves our economy and destroys Russia’s future.” tweet.
Ackman’s comments came after Russian President Vladimir Putin ordered 300,000 reservists to fight in the Ukraine war on Wednesday, prompting thousands of Russians to flee the country. Russia was already experiencing a serious talent drain, with nearly 4 million Russians heading to greener pastures in the first three months of 2022 alone. Ackman argues that the United States should be willing to accommodate at least some of these disaffected Russians, to help bolster our workforce and fight inflation.
As for Ackman’s view on the potential for immigration to lower inflation, a National Bureau of Economic Research study by Harvard economist George Bourgas found that increased immigration lowered the wages of competing domestic workers, which could have a cooling effect on inflation.
Researchers from the Federal Reserve Bank of Kansas City explained in an article in May that when immigration slows, wages can increase locally and exacerbate inflation.
While it may seem counterintuitive for economists and investors to advocate for more immigration to slow wage growth, their fear is that a wage-price spiral—in which wage increases caused by inflation contribute to firm costs, which then raise prices even more—will result in The end to increase is impossible to control inflation.
Olivier Blanchard, the former chief economist at the International Monetary Fund, said only last week that he believes the US is already experiencing a wage-price spiral, and warned that halting this trend will likely require significant job losses.
Ackman’s recent comments about the Fed fueling a recession with interest rate hikes represent a seismic shift in his thinking over the past few months.
Back in June, the billionaire called on the Federal Reserve to take a “firm” stance by raising interest rates by 75 basis points, arguing that the institution was losing credibility due to officials’ unwillingness to fight inflation.
Ackman got his wish. The Fed raised interest rates by 75 basis points in June, then proceeded with two additional increases of 75 basis points 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% this month alone, and more and more economists claiming a recession is imminent, Ackman warns that the Fed may be exaggerating it.
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