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If the Fed raises rates too high or keeps them high for too long, it will push the economy into a deep deep recession. As we're always using lagging indicators,
by neom 3y ago
If the Fed raises rates too high or keeps them high for too long, it will push the economy into a deep deep recession. As we're always using lagging indicators, economists are generally unsure where we are in the cycle, some folks believe it's been pushed to far for too long, and further pushing is going to cause either a deep recession or, even worse, stagflation.
I'd love to know what Volcker thinks about our current situation.
- onlyrealcuzzo 3y ago> If the Fed raises rates too high or keeps them high for too long, it will push the economy into a deep deep recession. They'll just bring back out their bazooka and lower rates again and cause more inequality. Tale as old as time.
- nstj 3y ago> I'd love to know what Volcker thinks about our current situation. Volcker is dead.[0] [0]: https://en.m.wikipedia.org/wiki/Paul_Volcker https://en.m.wikipedia.org/wiki/Paul_Volcker
- neom 3y ago... hence I can't know what he thinks.
- tmaly 3y agoI they are only staring at lagging indicators, then it seems they would likely overshoot on keeping interest rates too high for too long. I am surprised they have not come up with better models given the technology and data available.
- dahwolf 3y agoDon't know about the FED but the ECB has openly stated that they will keep raising rates as long as necessary to get inflation back to ~2%. It doesn't seem to be working, for very obvious reasons: demand for energy and food (main cause of inflation) isn't that elastic. Further, there's no unemployment, so people spending and will spend only more because of inflation itself. The one thing that could motivate people to stop spending, raising bank savings interest rates to something meaningful, is oddly not in the playbook.