Raising rates is the best way to kick the can down the road in the current conditions. The problem is that the economy got really close to the end of the road (

Raising rates is the best way to kick the can down the road in the current conditions. The problem is that the economy got really close to the end of the road (as far as we understand it). And no, the US is unlikely to follow the Japanification scenario. From the article: >And indeed, higher interest rates may work in the short term, for indirect reasons. If money gets tight enough over a cyclical period, then it could indeed cause a recession and a temporary drop in inflation. The private sector gets squeezed with higher interest expenses and tighter credit standards, and asset prices drop or stagnate. Fundamental solutions to this situation are incredibly painful and require strong political will accompanied by wide support in society. We do not see it today in the US. The best solution would be to completely eliminate fiscal deficits (either by raising taxes, or by cutting spending) and simultaneously hike rates. Already issued debt will not be affected by the higher rate, thus resolving the article's dilemma. But good luck selling this solution in today's political environment, especially considering that it will cause a huge recession and painful restructuring of the economy in the short-to-medium term.