> Higher interest rates generally reduce inflation by reducing spending, which in turn slows the economy and can lead to mass unemployment.
But higher interest rates aren't what the Whitehouse wants.
But higher interest rates aren't what the Whitehouse wants.
The White House wants to reduce prices without raising interest rates. So you need some other way of slowing down the economy. There’s lots of ways to do that, such as laying off federal workers.
Higher interest rates are about shifting investment priorities and loan rates. It increases the cost of lending, which results in people making choices about taking on risk and debt.
The reduction in loans being written, and the increase in interest being paid means that people start moving their money into savings, reducing the velocity of Money.
Laying off people from the government reduces the amount of money being used productively, but doesn’t do a thing to stop loans being written or money being printed.
It destroys the ability of the system to be efficient, resulting in more waste, and with more risk appetite + weaker regulators it results in the ability for people to break laws with impunity, resulting in captured or rent seeking markets.
This results in a recession, and a failed economy.