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The difference between this moment and 2018 or 2014 is that we are in the middle of a bona fide crisis, and we went into it with rates already near rock bottom.
by danhak 6y ago
The difference between this moment and 2018 or 2014 is that we are in the middle of a bona fide crisis, and we went into it with rates already near rock bottom.
That leaves few options if dollar continues to weaken and inflation becomes concerning.
- AnimalMuppet 6y agoIf inflation becomes concerning, rates near rock bottom is not a problem. You deal with inflation by raising rates, not by lowering them.
- danhak 6y agoYes, of course, I understand that. But in the middle of a recession that becomes Sophie's choice: do you raise rates to curb inflation while killing the chance of a recovery?
- AnimalMuppet 6y agoAh, I see your point. Still, this isn't the stagflation of the 1970s. While there may be underlying problems, the main issue is that Covid shut down parts of the economy, which also meant shutting down parts of employment. The trick really isn't to avoid inflation. The trick is to make it back to approximately normal without killing too many businesses and bankrupting too many families (while also not killing too many people). If inflation happens as a result, but we get back to a healthy economy, then we can worry about inflation. For the next one or two years, I don't think that inflation is the issue to focus on.
- danhak 6y agoThat is the big question and I think the answer remains to be seen. Is Covid an acute crisis where we quickly bounce back to "normal," or is it the catalyst for a broader deleveraging that may have been due for several years and with many of the layoffs being "sticky"