[mercy_dude]

Not if the Fed keeps raising rates because that will make cost of borrowing high and given at this point how debt reliant the US economy is it will not be a comfortable path.

But yeah that has been my thesis as well that after a point there will be another “hedonic adjustment” in defining the inflation and that will bring down the official inflation number even though the real numbers are far higher. Just like how the housing market has inflated far more than the actual inflation numbers in last decade but the real numbers barely took it into account.

[petronio]

In regards to government debt (since the thread was originally about it), the government's debt is denominated in its own currency and the US is in the very cushy position where the USD is core to global trade, so the government can print itself out of any problem up to the point that the USD loses the trust of the international community. For the above reason, the number that makes up the US government debt is actually meaningless and is only good for political maneuvering around "increasing the debt ceiling".

In regards to the wider US economy, creating pain via high borrowing costs is the whole reason the interest rate is being increased. People and companies see the higher borrowing costs and change their mind on borrowing to spend, demand is choked, inflationary pressure reduced. The hard part is finding the rate that chokes it enough to control inflation while not choking it so much that you cause a recession.