Maybe this will help @cawacko :
Decreasing the cost of money, increases the borrowing, which in turn increases the money supply, and that causes inflation. It is not the only cause of inflation, but it is the easiest to control cause of inflation. So there is not a perfect interest rate for all situations, but interest rates should be decreased when inflation is low, and increased when inflation is high. That way we work out the perfect interest rate for the moment.
Yes, when we were in danger of deflation, 1% or even lower made sense to try to spur inflation. Now that we are in danger of inflation, we need to increase interest rates to fight inflation.
The solution for drought and floods are different. We are in danger of flood, so it is not time to turn on the spigot.
And we have not even touched on inflation expectations. Near double digit inflation would fuel inflation expectations so much that it would cause double digit inflation. The only way to prevent that would be to take a much harder line against inflation than we did last time. Do you think trump is willing to let that happen?
And it does guarantee higher inflation, at a time we are already on the verge of high inflation. When you are on the verge of higher inflation, and you make it higher, it is called high inflation.
Decreasing the cost of money, increases the borrowing, which in turn increases the money supply, and that causes inflation. It is not the only cause of inflation, but it is the easiest to control cause of inflation. So there is not a perfect interest rate for all situations, but interest rates should be decreased when inflation is low, and increased when inflation is high. That way we work out the perfect interest rate for the moment.
Yes, when we were in danger of deflation, 1% or even lower made sense to try to spur inflation. Now that we are in danger of inflation, we need to increase interest rates to fight inflation.
The solution for drought and floods are different. We are in danger of flood, so it is not time to turn on the spigot.
It is possible that it will "only" be 9% inflation, but in my opinion such an extremely inflationary monetary policy along with an inflationary trade policy, and actual real inflation will lead to double digit inflation. If your claiming that it would just lead to near double digit inflation, I disagree, but admit it is not completely impossible.
And we have not even touched on inflation expectations. Near double digit inflation would fuel inflation expectations so much that it would cause double digit inflation. The only way to prevent that would be to take a much harder line against inflation than we did last time. Do you think trump is willing to let that happen?
Again with the claim that because we turned on the spigot when we had a drought, we should also turn on the spigot when we have a flood.
It is free money, no matter what else. It is money at an interest rate much below inflation. There is no cost to the cash.
And it does guarantee higher inflation, at a time we are already on the verge of high inflation. When you are on the verge of higher inflation, and you make it higher, it is called high inflation.
The most reasonable thing you have ever said. In any situation, lowering interest rates helps raise inflation, but in some situations that is a good thing. In the current situation, it would be a disaster. The Fed would lose all credibility in caring about inflation.
