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by dragonwriter 1784 days ago
> The fed is very much aware of the inflation, but is on the awkward position that were they to raise the rates even a tiny bit, it would bankrupt the federal government. Going from 0-1% to 4-5% interest rates

400 basis basis points, back to the level of late 2005-early 2007, is a “tiny” increase in rates? That's an enormous increase...

> just the interest on the money owed is at $hundreds-billions yearly. Now double or tripe that cost…

If you look at history of Treasury interest rates and Fed Funds rates, the relationship you imply where even that giant increase to the Fed Funds target would do that... doesn't exist.
2 comments
talentedcoin 1784 days ago
For what it’s worth, the unusually large increase in inflation as measured by CPI seems to be at least partially due to base effects:

https://www.dallasfed.org/research/economics/2021/0513

Long story short, we are comparing year-on-year when last year was itself almost as unusual as can be.

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imtringued 1784 days ago
It's kinda like the 3.5% GDP growth in Germany being celebrated by politicians. Guys... we had -5% growth last year...
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whb07 1784 days ago
Going from 0-1% to 4-5% is massive I agree on that. But in the absolute, it’s still tiny and even a negative real interest rate.

The other stuff about the fed activities not influencing treasury rates is about as true as inflation being 2% avg for the last couple years.

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dragonwriter 1784 days ago
> But in the absolute, it’s still tiny

No, it's not; its from the global minimum to, while not the historic global maximum, a level clear on the other side of average.

> The other stuff about the fed activities not influencing treasury rates

No one said that. The relation historically is not such that going to a 4-5% fed funds target would double or triple debt service costs.

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