100 sats \ 3 replies \ @faithandcredit 2 Nov 2022 \ parent \ on: FED rate hike 75 basis point - its highest level since 2008 bitcoin
Serious question who says this inflation we are experiencing is caused by low rates? It is possible that they are misdiagnosing the situation and making things worse.
I'm not sure it matters what the cause is, because many causes of inflation can't be addressed directly or reversed. afaik the thinking goes: Raising interest rates reduces credit in the system -> reduces the amount of money in the system competing for goods -> cools prices. ie it's unlikely this causes inflation to get worse. It definitely wreaks economic havoc though, particularly for sectors/people dependent on cheap credit.
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The cause of Inflation is always manipulation of the money supply. Supply chains etc react to that, but the cause is 100% manipulation of the money supply every time.
What the Fed is doing now is killing market demand and creating joblessness to bring down the inflation caused by the government.
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30% of all dollars that exist in the world were created since 2020. So it's hard to see how current price inflation doesn't have a significant tie-in to monetary policy. Is it possible to print $6T dollars in less than three years, and not cause 8%+ price inflation?
Of course getting the toothpaste back in the tube isn't as easy as getting it out. So there's not a linear, direct, timely relationship with raising fed rates and lowering price inflation.
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