How does the constant upping the interest rates help with inflation?

[Anonymous]

With the interest rates hitting 6% a year, lowering the interest rates will help with inflation, not raising them. People who bought their houses at 3% cannot afford to sell their houses to move up because most often they can't afford to buy a new house because it is selling for more. What am I missing? Explain!

WASHINGTON—The Federal Reserve lifted interest rates by 0.75 percentage points

to combat inflation and signaled plans to keep raising them, though possibly in smaller increments.

Fed Approves Fourth 0.75-Point Rate Rise, Hints at Smaller Hikes© Graeme Sloan/Bloomberg News
Fed officials in a Wednesday policy statement acknowledged it could take time for rapid increases this year to be reflected in the economy. “The committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” they said at the conclusion of a two-day meeting.

The statement said continued rate rises were needed “to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.”

[BeMuse]

M*V= P*T

where,

M = Money supply

V = Velocity of money

P = Price level

T = volume of the transactions

The Fed Purposely pumped up M to crash the economy as a policy decision because they are loyal to the WEF/UN/Great Reset not to the American citizens. The USD is the main world reserve currency.

Thus P went up in response to the rise in M (inflation). Now they are beginning to reduce M. Economies are a product of supply and demand. Some individuals have more demand for present money than their current reserves allow them to spend. To get more present money to cover their expenses, these people have to borrow money in the credit markets from people that have excess money on hand. When demand exceeds supply, there is a shortage so the cost of money (interest rates) go up as people bid for access to present money in exchange for future returns. As the money supply shrinks, there is more risk that lenders will not see their money return, thus they need to be compensated more heavily for increased risk.

[BeMuse]

In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. It is therefore an economic inductance instead of an economic capacitance, and if balanced in no other way, will be balanced by the negation of population (war, genocide). The total goods and services represent real capital called the gross national product, and currency may be printed up to this level and still represent economic capacitance; but currency printed beyond this level is subtractive, represents the introduction of economic inductance, and constitutes notes of indebtedness.

War is therefore the balancing of the system by killing the true creditors (the public which we have taught to exchange true value for inflated currency) and falling back on whatever is left of the resources of nature and regeneration of those resources.

Mr. Rothschild had discovered that currency gave him the power to rearrange the economic structure to his own advantage, to shift economic inductance to those economic positions which would encourage the greatest economic instability and oscillation.

The final key to economic control had to wait until there was sufficient data and high-speed computing equipment to keep close watch on the economic oscillations created by price shocking and excess paper energy credits - paper inductance/inflation.

[BeMuse]

Sorry to break it to you, but they aren't trying to help you... They are trying to murder you and then steal your resources.

[BeMuse]

https://www.youtube.com/watch?v=JuDB1uCQYsY

[BeMuse]

Why did you think they wanted you to take those dangerous experimental covid vaccines that are hurting millions so bad? Why do you think they are so hungry for America to go to war with Russia?

[BeMuse]

https://www.youtube.com/watch?v=ZnMlHGzuv54

[BeMuse]

https://www.youtube.com/watch?v=HIAhOBJlR0M

[Pudsmucker]

I like your explanation of how the government's way of taking money off the market.

[lightbulb27]

"[Dorothy...], Pay no attention to the man behind the curtain". How dare you challenge the great..."wizard of oz"... lol.

It moves the money around, harder for people and business to afford investment, businesses cannot expand as much. So productivity growth slows, fewer jobs, less production, people don't move around as much, buy less... economy slows down, job losses.

This may actually cause a bigger mess though... if the problem is insufficient supply. Supply will be further tightened resulting in more inflation. e. g. imagine lumber prices going up more because of less supply... house prices go up... more inflation.

There are two sides to this and you are right..."Dorothy"... the Fed may be boxed into a corner they created and what they are doing... won't work right...

The Fed said last year... they wanted inflation to run hot... and that is what is going to happen I suspect. The underlying problem is govt has been spending like a mad wizard, more than it takes in, spare no expense, money is "free"... for decades, spending on war and military, bailouts, etc. So to pay for it all... they are stealing the $ out of your bank account. Kiss your purchasing power... and thus your savings... goodbye.

Your only ally in this is compound interest... not sure even gold will help, since they control it. Not sure what Dorothy would do... probably buy a farm... but can't afford to run the tractor and fertilize to grow anything. Wish I had a crystal ball.

[loveslongnails]

Well said. Take it to the extreme and it's easier to visualize. Let's say we had Carter era interest rates at 15%+. Who makes money then? Only people who already have money. Funny how it works for them at both ends, isn't it?

[lightbulb27]

@loveslongnails thank you sir! yes, the ones at the top always win.. that's the reality [wealth disparity] after so many years and why the divide is so great socially... many have no hope of functioning "in the system" and having wealth, so they go to crime, which is largely now... legal. Thus reason for rebellions, overthrows, wars, debt jubilee's, confiscation schemes, mahem... been brewing for a while.. can see it "frothing now". @dubiousintentions is on it and many others. Question then... what to do about it. It's the essential issue of our times... wealth disparity.
All should check out Ray Dalio for some good angles and thoughts.
Everyone has to think about how they will respond when faced with a human conflict situation, which all the more of us, can easily be.
https://www.youtube.com/watch?v=zVT_B4SwBA4

[Daniela1982]

both of you, grow up!

[loveslongnails]

@Daniela1982 What ARE you talking about, Daniela?

[lightbulb27]

@Daniela1982 butwere having fun... you want me to go ride my dirt bike down the street in nyc doing a wheelie?

[Daniela1982]

I'd like to see that during rush hour.

[FilmGuy93]

It won't.

Before I can answer this question, you have to understand that not all inflation is the same. There's two kinds: inflation due to lack of supply, and inflation due to too much demand. Both cause the currency to lose value because the amount of value you have to exchange to obtain the exact same product or service goes up. The difference is that in one case, the product to sell than expected, in the other case, the number of people all trying to obtain the product is greater than expected.

Raising interest rates addresses inflation caused by too much demand. It does that because the interest rates determine how favorably people/banks can borrow money. Assume for the purpose of our conversation that any time you're spending money, you are effectively borrowing it because our economy runs on something called "fiat currencies" (which is a conversation for another time). Because it costs the bank more to give you access to your money, there's less money to spend. We can always generate more product to meet the demand, with this kind of inflation.

Now, the problem we are facing right now is caused by a lack of supply. Inflation is going up because the amount of product we have available to purchase is less than what we need.

So the Fed is trying to address the problem of companies not being able to produce enough product, by making it harder for customers to buy product...

[Ryfyle]

So we need to kill 4 billion people to make it work. Good plan.

[FilmGuy93]

@Ryfyle The fuck are you talking about?

[Ryfyle]

A solution to the demand problem. Less people, less demand.

[FilmGuy93]

@Ryfyle I just said the problem we're facing now is a supply problem. We can solve the inflation without jacking interest rates by simply addressing the supply problems, but that would force the Democrats to roll back a lot of their policies.

[Ryfyle]

Or we can just kill a few billion people. Human lives are cheap. Its an easy, economical solution to many a problem. Should also really help with climate change.

[FilmGuy93]

@Ryfyle based

[Vegasrunner]

@Ryfyle If that was your interpretation after readin @filmguy93 bery helpful answer you may want to think about finishing tmyour GED and seeking professional help.

[Ryfyle]

@Vegasrunner Maybe you should reply on an actual computer instead of fat thumbing on whatever poverty slab you call a phone. People like you are the pinnacle of mediocre filth I want to see burned away before me.

[Vegasrunner]

@Ryfyle Good luck w/ that I'd be interested to see how that works out for you. I doubt I'll ever be bad off enough to associate w/ someone as slow as you.

[Daniela1982]

@Ryfyle What? Are you insane?

[Ryfyle]

@Vegasrunner There you go again, fat thumbing on your Xiaomi tweaker phone. Took your whole 15 minute break at Walmart to ham thumb that pithy reply? There was more wasted potential wasted on the backseat of of your dads Ford Pinto after he half assed the pull out.

[Ryfyle]

@Daniela1982 It's an objective assessment of the economic reality. We got 4 billion useless eater squatting on strategic materials, sucking up diesel, and chucking tons of plastic into the oceans. Kill the Demand, free up the supply, extract more resources for the humans that know what toilet is. I'm sick of this bullshit of having to drag the third world out of the 20th century because of some bullshit idea the "human lives" are priceless.

[Vegasrunner]

@Ryfyle Judging by the fact that you need to use the words Walmart and Pinto, seems obvious who has exprienced a rudementary life. Really hope you make it out of the trailer park someday.

[Daniela1982]

What? Why is inflation due to lack of supply and due to too much demand different? They are both the same?

[Ryfyle]

@Vegasrunner You smooth brained retard, its called fucking Google and having a basic understanding of socioeconomic and how they can be used for comedic epithets, you 40 year old cum stain of a man. And dont bullshit me, you wouldn't know Johnie Walker from Jim Bean. You sure as fuck not smearing your greasy thumbs on an iPhone 14 next to your pool in Anthem.

[Ryfyle]

@Daniela1982 4 billion dead will sure as fuck reduce the demand.

[FilmGuy93]

@Daniela1982 the difference is that with too much demand, you still have access to supply. You are still able to look at your supply chain and find other ways to get the stuff you need to make products. Inflation from lack of supply is happening because the ability to make the product people need does not exist at the price point people want to pay. If I’m experiencing supply shortages, I have to tell my customers that I literally lack the ability to provide them what they want. If there are simply too many people who want my product, I just tell my customer to wait a little longer. Does that make sense?

[Ryfyle]

@FilmGuy93 "You are still able to look at your supply chain and find other ways to get the stuff you need to make products."
Pure fantasy. The Gurgling retards at the top can't be asked to shit their golden toilets let alone fix the mess they caused. The cocaine pile for the Raytheon board of directors is looking a touch thin. It's time for WW3.

[WarrenH]

“So the Fed is trying to address the problem of companies not being able to produce enough product, by making it harder for customers to buy product...“

Yes, the Fed, ECB, BOE, BOJ, etc al are all empty suits unsuited to manage anything, always behind the curve, always pretending they are the center of the monetary universe.

[FilmGuy93]

@WarrenH I’m just explaining how monetary policy works. If you aren’t comfortable with my explanation, then I would encourage you to hit the textbooks and find an alternative explanation.

[Vegasrunner]

@Ryfyle Spanish Trails but it's cute that your stepdad rents a place in Anthem.

[Ryfyle]

@Vegasrunner Glad to see your content being some sperg living smug in some 90's McMansion. Secondly, who the fuck rents when a mortgage payments cost less?

[Vegasrunner]

@Ryfyle I can't speak to why you would choose to rent except for the fact that you clearly have mental issues so perhaps that has slowed your growth.

[Ryfyle]

@Vegasrunner If you can't understand deliberate misanthropic trolling from a sincere statement, you need to get the fuck off the internet.

[Vegasrunner]

@Ryfyle You spelled loser wrong

[Ryfyle]

@Vegasrunner Does it really fucking matter?

[Vegasrunner]

@Ryfyle Guess not, you dont really have much going on to begin w/. I'm at Sierra Golds 40th anniversary party on Sahara feel free to pull up and run your mouth.

[Ryfyle]

@Vegasrunner So you want to start an actual physical confrontation about internet posts, at a fucking party. Where the fuck do you think that's a great idea?

[Ryfyle]

@Vegasrunner You want to have your little shit fit, at private event, for folks that want to have a good time, for mean posts made by some random fuck on the internet? Why the fuck should I waste my time?

[Vegasrunner]

@Ryfyle I dont "start" anything

[Vegasrunner]

@Ryfyle That a decesion you will have to make for yourself. In my life I've found that people like yourself are only able to act tough when protected behind a keyboard, besides this would be a perfrct opportunity for you to "decrease the population" as you claim.

[Ryfyle]

@Vegasrunner " I'm at Sierra Golds 40th anniversary party on Sahara feel free to pull up and run your mouth. "
That's text book starting shit words there, Broseph.

[Ryfyle]

@Vegasrunner "@Ryfyle That a decesion you will have to make for yourself. In my life I've found that people like yourself are only able to act tough when protected behind a keyboard, besides this would be a perfrct opportunity for you to "decrease the population" as you claim."
Again, with the angy ass prose wanting to start shit. Staring at a phone during a party all because of mean posts on the internet.

[Vegasrunner]

@Ryfyle I dont think you catching on. I dont start anything I only end it.

[Vegasrunner]

@Ryfyle Thankfully for you, you proved me correct. I'm sure you feel much comfortable saying these things in the safety of daddy's trailerpark

[Ryfyle]

@Vegasrunner Are you still ass mad? "Cause it sounds like you're ass mad.

[Vegasrunner]

@Ryfyle Im not sure what you'rereferring to but I do realize how much women like you need to he heard so ty for sharing.

[Ryfyle]

@Vegasrunner And your retarded fuck that lives in a glorified town house next to an expensive puddle. First, you barge into a conversation. Second, you try to start shit by suggesting a confrontation irl in what most consider PT's with less used needles. Third you're so socially retarded you can't tell how men and women differ from typing. I dont give a fuck about your McMansion, your plastic cars, or what single mom slam pig you found on Flamingo and Decatur. You're a Gen X loser that belongs in Bakersfield.

[Ryfyle]

@Vegasrunner So I take it your idea of a good date night is cruising around UNLV in a rented Late model Dodge Charger, with a bag of GHB laced weed, looking for chubby sociology students.

[Vegasrunner]

@Ryfyle TY for sharing whatever that was. You had an opportunity to say all this in person but elected to stick w/ bitch tendency. Behind keyboard probably best spot for you anyway.

[Vegasrunner]

@Ryfyle Sounds like you've spent a lot of lonely nights. Word of advice women dont typically like men only able to be tough from the comfort of their trailer park.

[Ryfyle]

@Vegasrunner The fuck are you even going on about, Retard? Ran out of Andrew Tate's Premeir Top G Cum Chug so you had to double reply? You are an absolutely boring fuck that's spends more time here rather then wrangling your next post wall, train wreck, slam pig to gift with crabs.

[FilmGuy93]

@Ryfyle @Vegasrunner Why the fuck are you two STILL fighting in my comment thread?

[Ryfyle]

@FilmGuy93 That retard fucking bumbled in after everything was said and done and is pissy he couldn't grand stand in front of he's newest Fridge Body pity fuck. Sent DM's about throwing down in front of a Denny's

[Vegasrunner]

@Ryfyle Odd statement considering you spend majority of your time contacting me w/ immature comments. I'm sure you're the class clown of your middle school.

[Vegasrunner]

@FilmGuy93 stop it. Don't lump me in w/ this trash. I provided him w/ an option to voice his concerns to me outside of this platform. He declined, so not sure why either of you are tagging me.

[Ryfyle]

@Vegasrunner
"I'm at Sierra Golds 40th anniversary party on Sahara feel free to pull up and run your mouth. "
You wanted to start shit IRL, pulled directly from your comment. And its a reply, not a Direct contact.

[Ryfyle]

@Vegasrunner Bottom line, you're a boring fuck filled with pride for being able to plow well bored out holes. Reviewing your opinions, your as one dimensional as it gets. You're a smug mid-wit with loads of daddies money, fat thumbing on your iPhone, slapping out prose thinking your Vonnegut.

[Vegasrunner]

@Ryfyle i realize how frustrating it must be for you, to still be struggling w/ your virginity at this age. At least you've realized the importance of reading my comments hopefully you learn something to help you out of that lifelong slump of yours.

[Ryfyle]

@Vegasrunner Bro, your wing men are GHB and boxed wine. Sorry your a genetic dead end.

[Telekinetic-Potato]

I don't really understand this stuff, but I think the mentality is supposed to be that higher interest rates mean debt needs to be paid off quicker. Since our money isn't really backed by anything, having lots of money that only exists ad debt is going to lower the worth of real money.

So to give real money (money that exists beyond debt people owe eachother) more worth, the amount of debt needs to be lowered.

Kinda like the principal of supply and demand only the supply can be tainted but it's worth goes down all the same.

When less of a percentage of all money in circulation is debt, then I would think that should lower inflation.

Would appreciate someone who knows what they're talking about clearing this up though.

[Oigit]

It's going to hurt for anyone that isn't making six figures, but what we need is a market correction. Because in general the fed and Biden are doing is kicking the can down the road, hoping that the market doesn't start correcting itself while our current admin is in office. But by doing so they are only ensuring that the coming market correction is going to be worse then it would be if both simply stepped back and stopped attempting to kick the can down the road.

But I don't see that happening. Given that Biden's admin did tweet about how we should be happy about inflation due to people getting higher SSI checks. Only for said tweet to be quickly deleted after it was fact checked. Because the higher amount given on peoples SSI checks is due to the dollars drop in value, mainly due to the inflation we supposedly should be happy about. So it's like giving someone 25 dollars and telling them to be happy about it. Despite a dollar only being wroth 15 cents.

[DJB72]

Inflation is reduced by reducing the amount of money in circulation. Raising interest rates encourages investment (in theory) and reduces the cash circulating.

Historically, anyway.

Reserve Bank policies don't take the need for a living wage into consideration. Macroeconomic policy works eventually but most people live microeconomic lives. Prices were relatively stable until the end of the 19th Century then prices started to climb as bigger stores appeared looking to increase profits by hiking prices. Workers then demanded higher wages to be able to pay and this monster was created.

So now we have houses selling for millions that were built for hundreds. It's all bullshit. Government policies are just 21st Century Robber Barons screwing the poorest to increase the wealth of the richest 5% globally.

[AviatorTom]

I'm not an economist, but I understand the logic goes like this.

By raising interest rates, things get more expensive, which forces people to spend less for the same amount of goods, or buy less, reducing overall demand. The law of Supply and Demand says that prices fall when demand is less, which means that raising interest rates ultimately leads to a drop in prices, and less inflation.

It's not that easy though. Rising interest rates can cause companies to increase wages, in order to keep employees, which allows people to buy more, which can lead to more inflation. That's the balance the Fed has to try to manage.

[Fireguy17]

I could be wrong, but it helps to curb spending so there isn't such a demand for things, so with supply and demand, there is less demand.

When I bought my first house the interest rate was over 8% on a home loan.

My new house I did a refinance and I'm just a bit under 3%, so at least for me I'm good.

So hopefully the return on my investments will start to go up.

I have gone through double digit inflation before, I forgot who had the WIN buttons, it stood for whip inflation now.

Also price controls, where companies couldn't raise the prices they charged, to the opposite getting 12 to 18% return on you investments.

It ends up working itself out, and things get back to normal and then years down the road it starts all over again.

You are young enough, so you will go through the cycle a few times in your life.

[WarrenH]

Not so much curbing spending, but curbing credit creation, which eventually can curb discretionary spending. Credit cycle always leads business cycle.

[leonidas84]

What you're describing may apply to some home owners. Otherwise, in theory: raising interest rates raises borrowing costs for companies, etc. There's less of an ability to spend if borrowing costs are higher, so inflation would be somewhat stabilized. But this situation is unique compared to historical inflationary environments. It seems they're too aggressively raising rates too much vs. doing it gradually.

[Anonymous]

Great question, extremely complicated answer.

Distilled into one sentence/phrase: In theory, the raising of interest rates (cost of capital) is designed to curb malinvestment (unjustified bidding up of asset prices) by contracting the supply of credit.

Message me if you want to know how to learn more.

[Asker]

Wait, what?

[Opinion Owner]

Learn about money

[Opinion Owner]

In theory, yes, higher interest rates curb credit creation and by extension inflation.
In a capitalist society, higher interese rates are actually a good thing; people are rewarded for saving/investing in feasible endeavors.
The problem eventually occurs when rates become so attractive that too much capital is parked in interest-bearing instruments. This then stifles productive investment into physical assets/real economy and this leads to nasty deflationary depressions.

and speculators are punished for malinvestments. Think:

[Anonymous]

Unless you have an advanced degree in economics, you should approach this question with a different atitude: "Can someone please explain to me how the Fed raising interest rates curbs inflation. I don't understand this." Assuming that people with more education and experience are wrong is a bit egotistical.

[joeldalton]

Inflation is caused by a supply of dollars outweighing demand, which devalues them. Raising interest rates makes the supply of money shrink because fewer people will take loans. This slows the devaluation of the dollar. The downside is then demand for homes will shrink. this will put negative pressure on prices, but will negatively affect companies that rely on the homebuilding industry

[Pudsmucker]

Up in the interest rates makes us slow are buying power down when interest rate goes up on the things that we buy. And those that have money in the banks get a little something on the side for letting bank borrow our money, so somebody can buy something at a higher rate of interest.

[DryGermanGuy]

As a warning example, check out the failing financial situation in Turkey: Erdogan has been terrorizing the central bank for years to constantly lower the interest rates. As a result, they are now at 85% (!!!) inflation.

[Illustrator01]

More interest leads to people paying more money to govt/banks. Which leaves them with less money to spend (Disposable income). Less money to spend equals less spending. Thus demand for stuff will fall. When demand is low and supply is high, prices fall.

[andreasderjuengere]

The money system of this planet is not there to help people get along.

Its only purpose is to continue domination over those who have nothing or little.

And that's what they do. ''They'' can't lose

[JPresidente]

It's a plan you see. Anything that doesn't make sense and won't work they do it. Anything that needs to be done to fix a problem, they pretend the problem doesn't exist and there's nothing wrong so they do nothing.

[WarrenH]

Yep!
Gov’t policy ‘solutions’ are always one, two, twenty-two steps behind the problems. ‘Generals fighting the last war’, etc.
But more gov’t is good, more bureaucracy is better... NOT!

[MadClown]

To come and think if it, you’re right.

thank you.

[Anonymous]

Interest rates are designed to keep you at a lower vibration, and to force you into poverty. Everything else linked has the same purpose. To keep you from ascending.

[Summeroflove]

No. Neither does the Brandon administration

[exitseven]

The theory is that if you tighten up the money supply you will have less inflation.

[Friendlybro79]

It helps banks make more money on every loan they give?