9 ms·

But interest rates should rise only in case of inflation otherwise, the rise would simply slow the economy and increase both unemployment and underemployment

• anoncoward111 8y ago
  The hypothesis is that raising rates slows the economy. That might be false, because one has to account for what happens when speculative bubbles burst.
  • toomuchtodo 8y ago
    Rising rates must deflate the real estate and equities bubbles, but TBD if that actually occurs. Owners of these asset classes are sitting on trillions of "gains" from ZIRP, and they will not be pleased when these paper gains evaporate (due to rising interest rates bringing those values down to a more realistic equilibrium).
    • anoncoward111 8y ago
      Most laborers (people who care about being employed) don't own extremely meaningful amounts of real estate/stock equity. Most people rent or have very low equity in their mortgage, and their 401k balance is not terribly high. The exception to this would be your doctors, lawyers, executives, and rockstar programmers. And maybe anyone else who doesn't have kids and doesn't live a material life. These people are typically landlords too. So, I personally wouldn't care too much about affecting them. I would put much more focus on preserving the value of the dollar (without killing exports), and keeping the business credit availability constantly adequate so that there aren't any overreactionary bubbles where unemployment goes from 4% to 17% virtually overnight as everyone deleverages