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What the Upper-Middle-Class Left Doesn’t Get About Inflation
(www.theatlantic.com)
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this post was submitted on 15 Apr 2024
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politics
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Interest rates were raised to kick people in the teeth, the Federal reserve says that it needs to keep kicking people in the teeth for a few more months.
Economists are saying that people are not being kicked in the teeth.
Logicians everywhere are banging their heads on their desks, as people are both being kicked in the teeth, and not kicked in the teeth.
Interest rates were way too low for way too long which led to the situation we're in now. While the Fed will probably lower rates this Summer they really shouldn't because inflation hasn't stabilized at all which was the entire point in the first place
China just dropped interest rates.
This world is not the world of 20 years ago.
Currant inflation is being caused because of high interest rates. Mortgages cost more, so landlords (40% of which are small mom and pop ordinary people renting a second home) increase the rents. It takes years for all the mortgages to flip over to the higher interest rates, so we've see this persistent and high inflation.
A significant portion of inflation is just corporate greed trying to camouflage itself in necessity. Actual pure economic inflation doesn't coincide with so many businesses achieving record-breaking profits
Lowering and raising interest rates directly correlates with the increasing or reducing inflation.
When rates are high there is less money in the market because people by bonds because they guarantee a return of x%. This means there is less money in the market and the currency becomes stronger.
When rates are low money floods the market as people acquire assets, property etc The decreased price of loans like mortgages results in increased demand which results in more expensive houses.
If you have a lot of cash buying a house in a high interest market is actually the best case because houses have to be priced lower to compensate for the mortgage costs.
All that being said China lowering it's interest rate will make loans cheaper but increase inflation. They have a weird real estate market though.
Meh. When you raise interest rates, companies raise prices, and go on borrowing. Raising rates doesn't help fight inflation.
We are now seeing housing starts grinding to a halt, as average people stop buying homes do to high interest rates. These stories are starting to trickle into the press. Housing developers are calling high interest rates a disaster and economic killer. Politicians and banks listen to housing developers. The anger is building against bankers that believe simple stories such as 'Lowering and raising interest rates directly correlates with the increasing or reducing inflation', the real world is never that tidy.