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Comment by imtringued | Hacker News Reader

Inflation is never out of control, the only thing that is out of control is our desire to deny reality.

You can stop inflation at any point with a negative interest rate. The moment you do that you can start increasing reserve requirements, if you are ambitious you can go all the way to 100%.

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Is this a novel theory or are you confused? Banks would just borrow all the cash needed to cover their outstanding loans from the Fed, and get paid by the Fed for doing so.

Standard theory is that higher interest rates == lower inflation.

Lower interest rates decreases inflation? Can you explain the mechanics behind that?

If interest rates went negative, I would literally borrow and spend and much money as I could.

MMT 101. The federal government is a net payer of Interest to the private sector. Thus, when interest rates are increased, Interest income to the private sector increases. Interest paid by the US treasury to the private sector is kind of printing money. When interest rates go down, interest income to the private sector decreases.

The total amount of interest paid by the government to all parties, domestic, foreign, private, and public sector was about $400 billion in 2021.

Meanwhile, America borrowed $1 trillion in new debt in the same year. Lower rates contribute to a higher money supply far more than raising interest rates adds to the interest income paid to the private sector.

When considering non-government sector burrowing due to lower interest rates, these transactions net to zero for the private sector, because an asset and a liability is created to the private sector. In the case of government paying interest to the private sector, the private sector balance sheet nets positive.

Please consider what your $400B number would be if the FFR were 5%. Here we are talking about perhaps 3 billion. Thats the point. Fed is trying to hit the brakes but actually is hitting the accelerator. MMT 101.

We are a long way from 5%. Fed is looking at raising rates a total of 0.75% over the next 12 months.

>Inflation is never out of control, the only thing that is out of control is our desire to deny reality.

This is great news for commie countries like Venezuela and Cuba whose currencies have collapsed and are worthless.

>You can stop inflation at any point with a negative interest rate. The moment you do that you can start increasing reserve requirements, if you are ambitious you can go all the way to 100%.

How does that work? You want to remove our fractional banking reserve? I want to know much more!

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