Inflation, Fed rates and Recession

AlexTeddySG
2022-06-17

I don't Want repeat what is said again and again but just want to know why Fed is using rates to control inflation if rates are not the root cause of issue. Post covid demand, supply issues, war are the root causes for spike in prices. Wrong medicine for a real problem. Post pandemic, customers ability to spend more has increased, so no matteryou increase the rates they will still throw the money to get what they want, exception a little change. not sure how they derive and rely on CPI prices as a measure of inflation but I feel is nt more reliable to use CPI vs Salary increases as a measure? People are earning more, people have accumulated more during lock downs so they have funds to splash but supply is clogged with various reasons. Definitely NOT rates that caused this mess. If it is rates, then it should have happened in 2021 itself. 

Pressing a wrong button and inducing recession, fed is creating an artificial crisis. 

If you can't solve a problem, don't create anotherproblem. $SPDR S&P 500 ETF Trust(SPY)$

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Comments

  • ThunderPat
    2022-06-20
    ThunderPat

    I think there are no better alternative. Rate hikes are thought to reduce spending through borrowing and encourage saving with high interest. But risk is that it might disrupt businesses leading to recession or stagflation. This is just very general theory. In the real world, if the people can afford they will spend. Just that there will be a tipping point where price increase has to slow down. I am just a novice but I think experts cannot be absolutely sure as well.

  • EdwardLe
    2022-06-19
    EdwardLe
    Hyper Inflation is a problem itself, FED cant solve the root issue so its trying to suppress inflation thru raising rates. Such moves can be lame, it can aggravate the problems induced by inflation.
    • AlexTeddySG: 
      Exactly. It could create additional problems. I think prespectives too should change. As we are into 2020s old definitions has to be redefined. 😊
    • wenxia: 
      [smile]
  • CoE
    2022-06-21
    CoE
    theory based assumption. if turns out to be true, they say they have manage well. if not as expected, they blame on some other factors.
    • monkeydogReplyAlexTeddySG: 
      Well biden is the president in the world to the point he even shakes hand in the air god bless
    • AlexTeddySG: 
      Thanks for sharing your thoughts. Totally agree. With all tools in thr hands, I wnder why they dint estimate inflation growth in Sep21 and dec21 and recently mar22, until Biden takes it up with Powel.
  • CKF68
    2022-06-21
    CKF68
    Sadly to say that no one in this world an be 100% sure of the causes. Just have to figure out with plans and make adjustments along the way
  • Pluto891
    2022-06-21
    Pluto891
    (2) US also miscalculated the ripples effects of Ukraine - Russia. Now wheat n oil are severely limited, note that both items are by-product to other essentials pushing costs up.
    • AlexTeddySG: 
      Thanks for sharing your views. Yeah, besides these mistakes, imposing higher rates is causing another problem. Hope time will heal all these.
  • muiee
    2022-06-21
    muiee
    They have certain tools perscribed to them bases on their mandate?
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