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> Maybe just let inflation happen for a while There is no "just a while". Once it starts it's hard to stop. They're trying to save the dollar (and everything w

• fnordpiglet 4y ago
  If there’s a lot of money to capture I will expand by businesses to capture it if capital is cheap. This causes competition, which causes prices to drop as demand has more options to purchase. There is just a while by the way. Increasing interest rates is a very indirect way to manage inflation. You essentially stimulate savings and increase the cost of growth by making capital more expensive and makes services that depend on warehouse credit more expensive to operate. Stimulating savings decreases spending which decreases economic activity which decreases demand and makes supply exceed demand and prices drop. But it also means less economic activity, which translates into unemployment, lack of wage growth, and other factors. But this process takes time, just like supply expansion through cheap capital (low interest rates). It’s also really hard to reverse a recession while it’s easy to stop a boom. I’d rather stuff become more expensive for a while and keep my job and get raises to account for it while the economy expands to meet demand than lose my job and have absolutely nothing and struggle to make ends meet while we stumble through a recession, especially since inflation will keep going for some time despite the recession.