The economist who correctly predicted the Great Financial Crisis says that the world’s central banks have chosen a “class war on financial stability.”

Under the leadership of the US Federal Reserve, central banks around the world last year adopted a unifying philosophy: to bring inflation down at all costs, even if it means risk to people and businesses. But this month, that approach has been called into question more than ever after several high-profile bank failures in the US and Europe. Now the British economist who predicted the 2008 global financial crash has exacerbated the problem by saying that central banks prefer “class warfare” to financial stability.

The Fed and other central banks highlight tight labor markets and high wages as the main causes of inflation. But while weakening labor markets could help cool the economy, it also means layoffs, unemployment and potential recession—an unacceptable and risky trade-off for some critics.

“[C]The evil servants at the head of central banks seem willing to sacrifice private banks and global financial stability in their rush to raise rates, crush demand, discipline workers and cut national income.” – Anne Pettifor, British economist and frequent economic adviser who predicted the 2008 crisis of the year. global financial collapse with a prophetic 2006 book about rising debt around the world, wrote in her Substack newsletter on Sunday.

“In other words, they actually prefer class warfare to financial stability.”

‘It’s hard to resist what central banks are doing’

The Silicon Valley Bank was rightfully criticized for its collapse earlier this month, with many criticizing its management, but the Fed also played a role in its collapse.

The Fed was accused of blocking any language about regulatory blunders that could lead to the collapse of the bank when the government announced the bailout of SVB. The SVB’s failure was also linked to a drop in the value of its assets over the past year as the Fed pulled back sharply from a near-zero interest rate environment. This has left SVB particularly vulnerable to a liquidity crunch, and other banks are in a similar position.

The story goes on

“The fact is that I found it difficult to resist the actions of central banks, and not just raising rates, suppressing demand and reducing wages,” Pettifor wrote. “Because of a lack of analysis, regulation, oversight and foresight, central banks demonstrated last week that they were willing to use high rates to risk and even hasten bank failures and global financial instability.”

She also criticized the European Central Bank for sticking to significant rate hikes last week despite the bank’s recent collapse in the US. Credit Suisse went bankrupt just days later and was bought by USB in an emergency deal brokered by regulators.

Pettifor went on to refer to an interview between former Treasury Secretary Larry Summers and comedian and political commentator Jon Stewart that aired last week. Summers insisted that raising rates and fighting inflation at all costs was the right way to go, while Stewart chided him that corporate profits played a huge role in fueling inflation, to which the Fed paid relatively little attention.

Pain for workers and low-income groups has been portrayed as a necessary evil in the fight to bring inflation down by Fed Chairman Jerome Powell and other prominent economists such as Summers. But the approach to targeting the labor market to bring down inflation has also been widely criticized around the world. Bank of England governor Andrew Bailey came under fire last year for asking UK companies to show “restraint” in wage talks. More recently, in the US, the Powell method has been heavily criticized for causing financial instability due to this month’s banking crisis and for ultimately shifting the burden of reducing inflation onto the shoulders of workers.

Pettifor is not the only voice criticizing central bank policies. US politicians, mostly on the progressive left, including Senators Elizabeth Warren and Bernie Sanders, have also criticized Powell and the Fed for risking pushing the economy into recession and putting millions of people out of work. Warren was at the forefront of the attacks, saying on Sunday that Powell “failed” in his job and should no longer be chairman. She has long criticized Powell for the risks high interest rates pose to the labor market, warning earlier this month that the Fed could put up to 2 million Americans out of work by the end of the current tightening cycle.

Rising interest rates and a slowing economy tend to hit workers hardest, especially low-wage workers, causing layoffs and slowing wage growth. “Higher interest rates will hurt millions of workers who will be unwittingly drawn into fighting inflation through job losses or long-overdue wage increases,” Robert Reich, a former U.S. Secretary of Labor, wrote in an op-ed for The keeper last year, shortly before the Fed began its tightening cycle.

To be sure, since last year, inflation has become a major concern for Americans, often more so than any other issue. According to Gallup, last month 13% of Americans cited inflation as their biggest current concern, with only 1% mentioning wage problems.

Inflation has taken a heavy toll on Americans of all income levels since prices began creeping up in 2021. This has been particularly painful for low- and middle-income Americans, who have had to invest heavily in their savings to cope with soaring food, energy and house prices. High-income people have also been hit hard by inflation, as more than half of high-income Americans now live paycheck to paycheck.

But the Fed’s focus on inflation – and especially on labor market tightness, which Wharton professor Jeremy Siegel called “monomaniac” earlier this month – may be overlooking some of the important points behind the rise in prices. A 2022 study by the leftist Economic Policy Institute found that more than half of the increase in the prices of goods and services could be attributed to higher corporate profit margins, while only 8% of inflation was due to higher labor costs.

Siegel said CNBC this month that since the start of the COVID-19 pandemic, workers’ wages have risen more slowly than inflation and it was “difficult to argue” that labor costs were the main driver of inflation.

Some economists, including Mohamed El-Erian, have argued that the Fed’s overall inflation target is outdated and would result in severe economic damage, while a “higher stable inflation rate” of around 3–4% could be more effective. corresponding.

It’s not clear if Powell’s recent bank failures and pleas from the left have swayed his drive to bring inflation down at all costs, though Fed officials will make their direction clear when they meet Wednesday to discuss the next interest rate. hike.

This story was originally published on Fortune.com.

More from Fortune: