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    • Jan 31, 2022

More Buyers or Sellers: What is The Fed thinking?


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Jeremy Martin
2022年2月15日

I read here about creating solutions to battery limitations. There seem to be so many options to explore. Solving problems in the economy has a very limited play book. Is that because of the writers 😉 or .........

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john
2022年2月15日
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It's a fair point. My inclination is to agree that we must be able to come up with better solutions if we think about the problems correctly. In my piece this week I commented on how central banks and companies may be trying to lower inflation explanations using words as an alternative to interest rate policy. I also see lots of stories about cutting sales tax since this directly lowers inflation. For example. https://finance.yahoo.com/news/thailand-cuts-excise-tax-diesel-093131889.html


An argument for caution is that a free market is generally the most efficient way to allocate capital to solve problems. Any intervention will have potentially chaotic consequences (chaotic in the chaos theory sense) so sticking to methods that the market understands will limit this unpredictability.…


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john
2022年2月15日

A useful analogy may be to compare the economy to an engine. Think of the Fed as the fuel pump supplying fuel to match the volume of air being sucked in. As an engine runs faster it pulls in more air which allows it to run even faster. If left unchecked this feedback loop will cause the engine too run too fast and damage itself somehow (in one of many ways). As such at some known limit the fuel pump will cut off/reduce the fuel supply to stop this from happening. The point is that the benefit of higher interest rates isn't supposed to be anything direct, but just that they stop the economy from blowing up somehow. There's …

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Jeremy Martin
2022年2月05日

There is a lot of talk about the Fed and interest rates, but not much about tax rates. If interest rate rises are about stifling demand to reduce inflation do tax increases do the same job? If not can you expand on why?

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Jeremy Martin
2022年2月15日
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Yeah, I got that. Thanks for taking the time to address my question. Not that most Governments spend it that well, but more revenue to reduce the overall debt or whatever they decide to spend it on or save it, verse whoever gets the benefit of higher interest rates. Not much and not many that I see.

I get the simplicity of interest rate hikes as opposed to tax changes. Great answer thanks again.

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