Opinion | Inflation Won't Be Remedied by the Federal Reserve Imposing Higher Interest Rates

As Putin’s war shakes up the world economy, the Fed last week raised interest rates by a quarter point and penciled in six more increases by the end of the year. Fed Chair Jerome Powell says he’s ready to do whatever it takes to bring inflation down, including following the example of his predecessor Paul Volcker, who increased interest rates to 20 percent in 1981.won’tVolcker’s rate rise triggered a deep recession and double-digit unemployment.

Inflation is running almost 8 percent annually, which is surely a problem. But it’s not due to permanent wage or price hikes. In fact, it has nothing to do with the business cycle. So expecting the Federal Reserve to remedy today’s inflation by raising interest rates to slow the economy is like trying to cool off on a hot day by aiming a battering ram at your head. Wrong diagnosis. Wrong remedy.

Now, at the other end, and without much opportunity to buy for the last two years, American consumers are flush with cash . So they want to buy lots of stuff . Yet the nation’s productive capacity can’t be fully operational all at once. The resulting excess of demand over supply is causing major inflation.

That inflation is being driven by other unique events as well. In housing, the real engine of rising prices is demographics. The huge Millennial generation , born in the 1980s, is now storming into the housing market after COVID their world for two years. Making matters worse, the Great Recession clobbered the construction industry, dramatically reducing the number of available houses to buy or rent.Another culprit is the pricing power of big corporations.

Higher prices = higher profits This simple equation doesn't register with the brainwashed masses. Those on the 'right' want to blame Biden, who has nothing at all to do with price increases, while those on the 'left' want to blame it on 'inflation'.

It's all the Fed's got.

Rent more damaging than inflation...whennyou consider how much of famiky budget it takes

RUN AWAY INFLATION RARELY OCCURS DUE TO HIGHER WAGES OR GOVERNMENT SPENDING Just like in the 70's, present day inflation is primarily a 'cost-push' phenomenon COST-PUSH INFLATION 'food and energy costs push prices to highest in more than 40 years'

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