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> On the one hand, it's holding a fire extinguisher (raising rates). There’s a lot of discourse that questions I’d rate increases are the most effective tool t
by vineyardmike 4y ago
> On the one hand, it's holding a fire extinguisher (raising rates).
There’s a lot of discourse that questions I’d rate increases are the most effective tool to tame inflation. It may be the only tool the Fed has, however.
I’m confident the fed is aware of what its actions do, but they themselves admit they aren’t a political organization and the other parts of the government can made different decisions that have different consequences.
- gerad 4y ago> it may be the only tool the Fed has Traditionally, raising taxes or cutting government spending was another way to limit the money supply - and hence curb inflation. The Fed is doing the best it can using monetary policy because the federal government is too fractured to have a cogent fiscal policy response. But fiscal tools probably would be useful to have in this environment. We’ll see what happens when the now higher interest rate debt payments that we’re using to fund federal spending come due. Consumers aren’t the only ones that have gotten used to easy credit and cheap borrowing over the last 20 years.