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This wont help inflation, interest rates are still effectively negative when inflation is considered. What it will do is rise i interest payments on the US sov
by sbaiddn 4y ago
This wont help inflation, interest rates are still effectively negative when inflation is considered.
What it will do is rise i interest payments on the US sovereign debt very significantly.
The US has two options, as far as I can tell.
1. Slash govt. spending (entitlements and defense) and rise taxes on the laptop class (that's us folks!)
2. Accept structural inflation and high interest rates.
The Dollar dominance is coming to an end, we weaponized it too much, so option 3, exporting inflation is out.
Politically 2 is easier, but in the long run disastrous.
- Victerius 4y agoThe dollar survived the Great Depression, Bretton Woods, the oil supply shocks, the abolition of the gold standard, political games of brinkmanship over the debt ceiling, the War on Terror, the Great Financial Crisis, the Volcker shock, and Covid. The dollar's supremacy isn't going anywhere.
- uptownfunk 4y agoAgree if anything this will help the dollar supremacy and hurt the rest of the world.
- curiousllama 4y agoWasn't it Bretton Woods that _established_ USD dominance?
- actusual 4y agoWould appreciate some sources for these claims.
- eftychis 4y agoI am not even sure (1) is a practical option. Remember we have increased instability due to the Russo-Ukraine war. Thus, the U.S. Department of Defense is already getting and spending more money all while more money is spent on Ukraine aid -- which ends up in U.S. Defense industry hands. Entitlements not going to change, they should have but we are post pandemic, a lot of things are messy and we are in a midterm election season. And finally taxing the laptop class more might be politically taboo -- see midterm/future election note -- and improbable as a lot of shuffling has been taking place and over taxing might/will scar "unicorns and the VC" system way too much in the long run. Recall, you can't tax capital gains if there are no gains, but huge losses. And the laptop class taxation is based on capital gains I'd say. Option (3) is already in effect indirectly, due to inflation being world-wide, and Europe being hit much harder due to the conflict. Like every past pandemic this one is going to hit the economy like a sledgehammer... We failed, once again.
- jnwatson 4y agoRaising interest rates makes the dollar more attractive relative to other currencies, because receiving more interest is better than receiving less.