I am starting to doubt that interest rates are the best lever against inflation.
Rising prices are supply not meeting demand. It feels like improving productivity would be an equally powerful tool with less human cost. Granted that is a harder thing to control quarter over quarter.
The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.
We should be producing more stuff - especially housing - instead of trying to keep people from earning more.
At least you guys can have the bona fide real feudalism. We others have to pretend the Lords are just accomplished citizens, only a bit more equal than others.
Raising interest rates on its own doesn't do anything about inflation at all, actually. When you raise interest rates you are decreasing demand for borrowing but even that on its own doesn't decrease inflation. Inflation slows down as people pay off their debts as this destroys money that was previously created through loans. It's basically a side effect, not the main effect.
If you have a bankrupt government that can't afford interest payments, then raising interest rates will just lead to borrowing more money to pay the interest in a vicious cycle until hyperinflation sets in.
If you can limit borrowing and speed up payback of debts through any means other than raising interest rates you achieve the same effect much sooner.
The mainstream economists are wringing their hands over full employment and rising wages, the first time in decades that we might see the middle class grow, because production isn't sufficiently meeting demand.
We should be producing more stuff - especially housing - instead of trying to keep people from earning more.