As I understand economics, prices inflate because the demand for things exceeds the supply. So, how to increase the supply of goods? Get investors to invest in more production and hire more workers. How to incentivize investors? Lower interest rates so they can borrow affordably.
Why is the Federal Reserve raising interest rates? Isn’t the Fed doing the exact opposite to cure inflation? Some believe that lowering interest rates enables consumers to buy more stuff, which increases demand over supply. So, lowering interest rates must be targeted exclusively to increasing production, not increasing consumption. Banks can do that, if they are directed to do so from the Fed. The Fed must tie lower interest rates to investments in farms, factories and businesses.
If the Fed can't do that, then Congress must step in. The interest rate hikes are leading us toward recession.
Bruce Joffe
Piedmont, Calif.
