Why Have Rate Hikes Not Done Anything? Americans have cut their borrowing but not their spending. The result is that the economy is still growing briskly despite years of “tight monetary policy”. Higher consumer spending has been financed primarily by more people working at higher pay.

10 comments

1. It’s a weird situation where even though the supply is decreasing, the velocity of money is increasing.

2. Half the time I’m being told we’re spending more by going into debt; half the time we’re spending more because we’re making more.

3. Credit card debt. It’s like drugs. People thing their debt will be forgiven like student debt.

4. Much of inflation is driven by basic needs that consumers have to buy regardless of price such as food, housing, transportation, energy, and healthcare. Demand for these items is fairly inelastic.

   Plus, inflation is also a result of material and labor shortages (plus a considerable amount of price-gouging). We can’t fix a supply-side problem with ONLY a demand-side solution. In fact, in some ways, it can just make the problem worse because higher borrowing costs curtail the business investment necessary to relieve some of those material and labor shortages.

   So, prices keep rising and consumers go more and more into debt despite interest rate hikes which have very muted and narrow effect.

5. Closest analogy I can come up with there is that “the beatings will continue until things improve” the rates may need to hit 20% until spending is suppressed and prices slow.

6. All I know is that when Iran attacked Israel, I started spending shit nickles.

7. Because ZIRP is all that wall street wants. It has convinced all economists that ZIRP is the only way the economy can function.

   Powell and economists now take jobs as “hostage” when talking about raising rates.

   “You dont want me to take away ZIRP from WallStreet because jobs wont exist”

   How the fuck did jobs exist before ZIRP when rates were relatively high? How did jobs exist before the invention of fed.

   They make it believe that theyre are some mythical job creators that create jobs out of financial manipulation.

8. Because $20T was already printed

9. If you’re not in a position where you need to borrow and you got steady raises the last 4 years, you’re doing great in this economy (especially if you’re a home owner).

10. Spending isn’t causing inflation. Looks at corporate profit margins.