Today I heard another concerned American with a public platform talking about how much the FED can raise interest rates, and how effective it could be in stabilizing inflation.
The discussion seemed very serious, and the speakers seemed very sincere, and intelligent, but were they really asking the right questions? Not once did either participant mention halting the creation of currency.
If you have read my writings on inflation, you will understand that I believe the sole generating factor in inflation is the creation of new currency. Likewise, if you understand the US Constitution, you know that its framers bore the same belief.
Let’s consider what effect raising interest rates might have on the value of our currency.
One of the participants of this discussion suggested that an increase in interest rates would reduce demand. Rather than just accept this on its face value, let’s think about just how it might do that?
The only way higher interest rates would reduce demand is by reducing the availability of capital, and increasing its cost, limiting American’s ability to conduct comerce. This would not really reduce demand, since it would also increase the cost of production, reducing supply, which would in turn increase demand, and thereby prices.
The likely “correction” for this would be to flood the market with more money, adding another trip on the merry-go-round.
As I wrote recently, most of the suggestions that are made for fixing inflation are centered around addressing symptoms, rather than cutting to the root, (which is fiat currency, with no inherent worth.)
We have a current event/lesson in what America has in store, if we continue on the path many of our politicians want to pursue. Shri Lanka.
In Shri Lanka, many of the goals proposed to us by our politicians have been embraced. In a very short time, this prosperous nation has been destroyed. In the last few decades we have watched similar destruction of the economies of Venezuela, and Zimbabwe. Do we really want to follow “the experts,” who accept no accountability for their failures?
But you may say, “that can’t happen here.”
To that I ask, just how many things, “that could never happen in the USA,” have happened, “here,” in recent times?
I assure you that if we apply insane economic principals, we too will experience insane economic results.
Good bless you