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Post By
bd2999 
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Member Since: Sat May 17, 2008
In Reply To
Late Great Donald Blake 
Moderator

Member Since: Sat May 17, 2008
Posts: 7,462
Subj: Re: But suffice to say it's your estimation that there's nothing Biden can do?
Posted: Wed Jun 22, 2022 at 10:55:27 am EDT (Viewed 117 times)
Reply Subj: Re: But suffice to say it's your estimation that there's nothing Biden can do?
Posted: Tue Jun 21, 2022 at 02:52:46 pm EDT (Viewed 122 times)



    Quote:
    I'm curious... who will be most affected by a FED instituted recession made to reduce inflation. From what I understand the economic orthodoxy you're referring to suggests that because demand is outstripping supply, inflation is increasing and so the only way to cool down the economy is to  cause a recession which among other things reduces wages and decreases thereby demand. So to stop working people from paying more for goods, we'll reduce the amount they have to spend. That's the basic idea, right?


It does not state that the ONLY way to deal with it is that. It is just a possible solution that the government has some control over.

Hypothetically it is possible to reduce those rates and not have it lead to a recession. One could make the case that the housing market in particular had gotten out of hand anyway and this slows that down and some other markets.  

The best way to deal with inflation is to deal with the root causes, but that is not something that can always be done quickly. And I think the incentive to deal with it giving the market environment is low given companies can make more profit on it. 

The problem is that interest rate alone is often looked at as the fix when in reality it is just buying time to take other actions that impact the middle and long term. 

As it stands, the problems through out the world are not changing because the Fed changes rates. Which one can argue is a reason to let it be and let things play out, but the higher costs are also impacting individuals. So it is either telling folks to suck it up through high inflation and do nothing or do something and cause varying levels of problems on the population and for the individuals. 

I am not sure there is one fix to make this not happen.

If anything, I think this should spur strong investment by the US into renewable and alternative energies to reduce the needs for foreign oil and to push a policy to develop the technology to sell elsewhere to diminish the impact of the some of the oil producers on the world stage and prevent this from happening in the same way again.

As the largest oil producer though the chances of that happening within the US are near zero. But even if they started that tomorrow that does not get around inflation today and that the electorate will 

The other major driving force is the war between Russia and Ukraine. Ending that war should be a primary goal. But that is up to Russia as to when that ends at this point. The world could step back, or just agree to terms that suit Russia better, but that also encourages actions from Russia or others in the future. But economically it would be in the best interest of the world economy to end it, but would it offset future economic problems brought on by repeat behavior? 

Long story short, the fed taking the action that they are is akin to being on a sinking ship and using hammer and tape when a better fix would be to replace the boards, but if the boat is sinking and those in the boat are demanding not to get wet it is at least a way to get to shore. 

In that regard I support it, but I much more strongly support dealing with the causes of the problem outright. 






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