Quote:
Originally Posted by tophcfa
Remember the days when our country and its residents weren’t hopelessly dependent on unsustainable debt levels. Back then the Federal Reserve would use it’s available tools to guide interest rates to a level where responsible savers could earn a real rate of return owning US Treasury notes and bonds. A real rate of return was a yield above and beyond inflation. Both our country and its residents were typically fiscally responsible. Spending was limited to what could be afforded without taking on crazy levels of debt.
It makes me shake my head when I hear the Federal Reserve is now becoming hawkish on inflation. Since inflation has begun to run out of control, they have raised the Fed Funds rate by a minuscule 25 basis points, or one quarter of 1%. If the Fed really wanted to make a bold statement, and demonstrate seriousness about containing inflation, several rate increases of 1 - 2% each are necessary, but it can’t happen because it would effectively bankrupt both our country and many debt laden citizens. Last time inflation was this bad was in 1981. Paul Volcker was the chairman of the Fed back then and short term interest rates were jacked up to 20%, which quickly nipped inflation in the bud. We desperately need someone like Volcker overseeing our country’s monetary and fiscal policies now.
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I remember those days. I had cousins building a huge house in Oregon at the time, using a building loan, and they had to get a mortgage when the home was finished at a punishing 20% interest. There was no way I could have bought a house at that rate. What would happen to home sales—and thus home values—in The Villages if we had 20% interest? The only reason I can afford to live here is that I put my retirement money entirely in stock mutual funds, and between 2016 and 2022 the worth has doubled. (Unfortunately, the war is hurting me a lot.)
I had a girlfriend who was a hotshot in investment banking, and the word “on the street” (Wall Street) was that regardless of who won at the polls, Covid and the money we would need to spend to help millions of people stay afloat, along with the losses to many businesses and employees from loss of customers (think airlines, oil companies, construction, restaurants, hotels) would INEVITABLY lead to serious inflation. There was no way around it. If you pay restaurant and warehouse employees a fairer wage—and we should—of course our food is going to cost more in restaurants and stores. If there are transportation bottlenecks, and those were also inevitable, that also increases costs. If people go on buying sprees for things that are hard to find, that causes inflation. That’s just how it works! Meanwhile, desperate restaurants and hotels and airlines that lost a huge amount when they had almost no customers are raising prices to unusually high levels, even unprecedented levels, to try to make up for what they have lost and avoid being forced into bankruptcy.