[timr]

Yes, that's fine. But if the acute cause is not consumer demand, raising interest rates won't do anything.

(Note: a sibling comment suggests that it "doesn't matter", because if you slow the economy enough, you'll offset the artificial "inflation" due to tariffs. Maybe so. But that would be cutting off your arm to treat a paper cut.)

[resters]

Inflation is just a description of price movement, nothing more.

[patates]

Doesn't expectation of inflation increase consumer demand? If I like apples and expect that tomorrow they'll cost more, I may buy more apples today?

Disclaimer: I don't know anything about economics

[croemer]

It does but only if there's an increase in the expected rate of inflation as opposed to a one-off shock like we're seeing here.

[adgjlsfhk1]

calling 50% tarrifs on all of easy Asia is hardly a paper cut. it's more breaking someone's ribs while giving them CPR

[SpaceNoodled]

It's more like breaking your own ribs while breaking someone else's ribs, no CPR involved.

[TeMPOraL]

It gets extra confusing when considering import/export of ribs.

[rstuart4133]

> But if the acute cause is not consumer demand

But the acute cause is consumer demand. If the consumer reacted by not buying the tariffed stuff there would be no cause for alarm. But no, they continue to buy the higher priced goods. I'm not sure what happens next, but it seems if that is allowed to continue some sort of feedback loops develops leading to inflation getting out of control. We've seen that happen often enough, and the effects are devastating. So devastating governments use the interest rate hammer despite knowing it will likely get them thrown out of office, which is what happened to Biden.

The interest rates hikes (again for reasons I don't understand) effectively suppress demand. But it isn't necessarily demand for the tariffed goods, it's overall demand. Typically what you see drop is advertising, restaurants and similar discretionary spending. Notice they are services - not tariffed goods. This brings down spending to match income, and which somehow keeps inflation dragon in it's box.

In other words, the point of raising interest rates isn't to cure the tariffs. The only thing that can do that is to remove them. Instead it's to counter the effects of the tariffs - which is that they have made the economy less efficient, in the sense in the consumers can purchase less stuff with the money they have in their pocket. The consumers are in a very real sense poorer. The interest rates are just a hammer to ensure they act like they are poorer, and buy less stuff, and bring the economy back into balance. They react to being beaten with that hammer by voting out the party that chose to hit them with it. But it was for the own good, and so the political party deploying it has effectively decided to take one for the team. For all the cynicism our political systems and the politicians cop, I sometimes think they are undervalued. (But only sometimes, and only some of them.)

I suspect Trump is thinking "but the money hasn't been destroyed - I've now got it". And that's true. The effect of the tariffs is to divert trillions of dollars (by Trump's calculations) to the USA federal government. Before the citizens of the USA were free to spend that money as they see fit. Now they have handed over to Trump, and so have have effectively lost a freedom they once had.

If you look at other economies around the wold that have dragged themselves up by the bootstraps by imposing tariffs, like say China of Singapore, they poured that money into infrastructure, education and R&D. Maybe spending it in that way is perhaps more productive than letting Joe Sixpack using it to pay for takeout. I dunno.

Admittedly it's still an open question, but to me it seems the odds of Trump spending the money in that way is remote given he is currently cutting back on those very things. Perhaps even more telling is the USA go to be the most powerful economy on the planet by explicitly not letting government decide on where surplus money should be invested, but rather leaving that decision to it's capitalist economy. As it is, Trump is moving the USA from a capitalist economy to a command economy, with him in command.

Amazing stuff to see. I'm glad I'm watching from afar.

[mlsu]

I would be ready and prepared to sacrifice a fair amount of my quality of life for the greater good (of being more self-reliant, more secure, bringing some manufacturing back on shore, etc, etc).

But these guys have basically said "we're all going to have to suffer, and then..." nothing! No huge capital investments into green energy. No workforce retraining. No infrastructure. Nothing. So yeah, you're asking me to sacrifice my quality of life? For what? Ew, no thanks!

Of course, I'm pretty confident I know where this money is going to go: contracts and grants to private corporations owned by Trump's personal network. They are already prepping for this by gutting huge swathes of the federal government. When they say "actually, we think some of these functions were necessary after all, but for efficiency reasons, it's best that private companies take over these functions..." naturally those contracts will go to the right people who are capable of making america great again.

It's actually insane, it has me absolutely livid about this whole situation. Sorry, I do not care how anyone feels about "the libs." These people are going to steal the quality of life -- that my parents built, that my grandparents fought a war to create -- from me and my children. They will use it to enrich themselves. They will burn the this country to the ground to accomplish this.