Can anyone explain why a strong jobs report and economy it's necessary to have high interest rates to drive down employment?
What the fuck?
Over.
It's all Hocus-pocus - everyone guessing. Regulation of price gouging would do more to regulate inflation than interest rate raising - Fed can't, congress can - but won't/can't/doesn't.
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SUPER simplified: When the economy is good, everyone wants to borrow $ for big ticket items - cars, homes - & banks can't handle everyone borrowing at once, esp at such low interest rates. Bubbles get created, like the housing market recently, where everyone wants a house & sellers jack up their prices. These bubbles eventually pop, which leaves huge #s of people upside-down on those loans, which leads to mass foreclosures/repossessions, which can trigger recession/depression.
There are a lot of other factors involved, of course, like the economies of our trade partners, but I nutshelled it.
@Agatha
That's not quite ELIF enough.
I still don't get it and I try to pay attention to these kind of things. But it just doesn't make any sense to me.
Raising interest rates can control over-borrowing/irresponsible lending, which can help prevent bubbles that ruin the economy and people's lives. In a perfect world, the balance is between interest rates being not too high that people can't borrow, but not so low we get a bubble. It's about stability.
@FireMonkey The Fed's primary purpose is to keep inflation down. Interest rates are its only tool for this. A functional Congress could balance this with increased taxation and/or decreased spending. We don't have a functional Congress, so here we are.
So some of you say it's to keep over-borrowing which leads to bubbles.
- we've had relatively low interest rates since 2008. Bubble?
Some say it's to keep inflation down.
- we didn't have much inflation until post COVID corporate price gouging. (It's not very much labor related.) Which made us afraid of hard landing recession - Bloomberg swore a year ago we'd be in a hard recession by today.
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