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by FredPret 447 days ago
True but that mechanism is indirect at best. Usually high interest rates discourages more borrowing and lowers spending that way.

But in this case the price increase is already due to the government putting its thumb on the scale. The best way to reduce the price is not via the Rube Goldberg interest rate mechanism to shrink spending and thus demand for the $60 shoe, but by removing the tariff and make it a $30 shoe immediately.
1 comments
roflyear 447 days ago
It is how it works in all scenarios, though. Higher rates usually cause people to spend a little less which is a reduction in demand.
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FredPret 446 days ago
Sure but it's extra stupid to do it that way. Cause inflation with a tax, then mess with the money market to fix the inflation.
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roflyear 445 days ago
I 100% agree with you, but the Fed is independent and they only have a few levers to pull.

They don't make policy and they go out of their way to not comment on policy. They say they are apolitical (though of course they are 100% pro-establishment).

If the entire government was working together, yeah, sure, your theory holds. But that isn't how things work.

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