The FED increased the policy rate by 75 basis points and the policy rate rose to the range of 2.25-2.50%.
Do you think raising interest rates will be enough to reduce inflation?
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Inflation isnt something people need to worry about. Deflation is the major risk that is facing us. We already see it in Walmart. They are having to aggressive discount higher profit items as people arent buying them. Instead, they are having to spend more on necessities.
If this were true inflation, due to the concept of too much currency, everything would be skyrocketing. Instead we had a supply chain shock globally with an energy crisis. As some things are worked out (like on clothing and electronics) those prices revert to the mean.
We are also seeing some horrific economic numbers which means we are going to have a massive cliff that we fall off.
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It's a big mess seriously. I don't think we have ever seen a time like this before that it could be really compared to in history is there?
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Unfortunately, we have to be prepared for the worse, and especially with regard to energy.
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Yea, its not looking great I gotta say
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Ironically we say that each time something bad happens.
The problem, economically, is the Eurodollar market is suffering in a big way. Since the bank balance sheets are contracting, there is not the collateral to sustain the global economy.
Welcome to the world of deflationary money. This is what many wanted, well they got it.
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You are right, I agree with you. You are so right about deflation.
However, the increase in the price of basic necessities every month causes an increase in the number of people suffering from financial difficulties. It seems that this problem can be solved in the coming months, but the fact that the energy shortage will not be solved in the short term makes things worse.
I think that the fact that the production of many products depends on energy and that the increase in interest rates may reduce production-based investments and cause production to be interrupted.
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That is what causes the flip from inflation to deflation (using contemporary terms). The fact people have to pay more for basic necessities means they spend less in other areas. This affects those industries which means layoffs, That ends up crushing demand for everything, which causes recession.
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Not immediately. At the very least interest rates need to match the consumer price inflation rate. It will be at least 2 years before that happens even if they keep the current pace of the increases.
Other events may take place before then which will make the reduction in inflation a look like a speed bump in comparison.
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Yes, this is true, but the increase in interest rates may cause disruptions in production.
There is no danger for now, but if it continues like this, I think this problem will arise.
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Already been happening. Recall how people were complaining about the increase in prices of laptops, tvs, and appliances. Guess what is happening? Those arent moving and inventories are up. So they will have to be reduced.
And so we see the same thing in the opposite direction. The fact that supply chains in many instances are starting to sort themselves out (maybe simply because demand gets crushed) means the move is on.
When you have deflationary money and not even USD in the global economy, things are unsustainable.
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