Dear FERAL Reserve: Stop Hiking Interest Rates!

By Ajax the Great 

(Originally posted on the True Spirit of America Party blog)

We at the TSAP have of course been advocating raising interest rates a while ago.  But now the FERAL Reserve seems to be overdoing it, to the point of further scaring already-jittery investors, and they need to tone it down a notch or ten, or they will risk creating a very nasty recession (or worse, stagflation or even a depression).  Inflation is still high but cooling off now, and keeping interest rates too high to for too long will ultimately do more harm than good.  Interest rates are a razor-sharp, double-edged sword, and to fight inflation any hikes need to be short, sharp, and early to be effective.  But they delayed it too long, didn't do it enough when it was needed, and now that the economy is in a technical recession, they want to keep hiking rates even more, in addition to quantitative tightening as well.

As Rodger Malcolm Mitchell notes, raising interest rates to cure inflation is often times the wrong medicine for the job.  Case in point, right now in fact.  Inflations are ultimately caused by shortages, and governments need to address the shortages to get to the root of the problem.  Neither taxes nor spending cuts nor interest rate hikes will do the trick.  Ironically, as Mitchell notes, solving shortages can often require MORE federal government spending to specifically incentivize more production of the things in short supply (oil, natural gas, energy in general, foodstuffs, computer chips, labor, etc.).  The government can purchase those things at a premium, and then sell or give those things away at a loss.  Two birds, one stone.  Problem solved.  Next.

Meanwhile, the Fed really needs to stop hiking interest rates, stop threatening to do so, taper off their quantitative tightening, and actually be ready to start cutting interest rates soon as well.

So what are we waiting for?

(NOTE:  Endorsement of some of Rodger Malcolm Mitchell's ideas, or the ideas of any third party for that matter, does not automatically imply endorsement of all of his ideas.)