LETTER: The Federal Reserve and inflation
Wouldn’t it be great to be a member of the Federal Reserve? Maybe not. Inflation is running wild because of the politicians’ dumping way too much money on the country. The Fed is supposed to keep things in check.
The solution is well known. Just raise interest rates from essentially zero. Fractional reserve bank lending creates money. Putting the brakes on commercial lending reduces the excess money pouring into the economy.
But wait. The stock market feeds on that excess money, too, and will likely tank. Additionally, the sudden withdrawal of the excess money (from lending) and the tightening of business credit will combine to tank the economy. A bonus problem is that raising interest rates raises the price that the government pays to borrow all that excess money it is releasing into the economy.
So raise interest rates — or don’t. As they say, damned if you do, damned if you don’t.