Interest rates are not the only government mechanism that can be used to control interest rates.
Stimulus can be done in a way that is highly targeted. When it is not, it has the same effect as rates being too low and can lead to things like overemployment and inflation.
Politically, there has been significant demand for overemployment, that is, unemployment levels that are lower than they should be, or, put another way, an economy where labor is too scarce.
Anyone who has tried to hire tech talent domestically in recent years has faced significant scarcity and can attest to the quality tradeoffs that must often be made such as hiring someone with insufficient experience and hoping it works out, or needing to invest more heavily in training and mentorship than seems reasonable.
In growth areas like tech, this is normal and is the result of growth itself, but recently the US economy has seen this kind of thing in many different kinds of jobs, even retail and food service jobs. It's not uncommon to find a packed restaurant being handled by one or two waitstaff, leading to slower turnaround and overall reduced capacity of the restaurant and less money being made overall.
This is blamed on the pandemic and all kinds of other causes, but the root cause is the infliction of intentional labor shortages on the economy for political reasons.
Similarly, the COVID stimulus in the previous administration was given out with minimal vetting and significant misallocation (payments to businesses that didn't need it), and there has been no retrospective accountability for any of it. It boils down to something that was supposed to be a targeted stimulus (to prevent firms from going out of business or laying off workers) became an untargeted one and spoils were given to firms that misrepresented need and used the money for things other than staying solvent or keeping payroll going.
So of course we are seeing the consequences of this now in the form of both inflation and economic stagnation.
This is not the fault of one political party. Neither has any restraint when it comes to wanting broad stimulus and artificially low unemployment numbers, and there is a lot of finger pointing about the extremely predictable inflation that is occurring.
Raising rates penalizes all the firms that did not seek stimulus inappropriately, as well as the ones who sought it because they needed it.
Chances are rates will go up at least another 1.5 or 2 percent in the next year. This is unfortunate, and the economic correction resulting from it will be significant and will last for many years longer than the brief period of artificial joy we got over the past few years.
Stimulus can be done in a way that is highly targeted. When it is not, it has the same effect as rates being too low and can lead to things like overemployment and inflation.
Politically, there has been significant demand for overemployment, that is, unemployment levels that are lower than they should be, or, put another way, an economy where labor is too scarce.
Anyone who has tried to hire tech talent domestically in recent years has faced significant scarcity and can attest to the quality tradeoffs that must often be made such as hiring someone with insufficient experience and hoping it works out, or needing to invest more heavily in training and mentorship than seems reasonable.
In growth areas like tech, this is normal and is the result of growth itself, but recently the US economy has seen this kind of thing in many different kinds of jobs, even retail and food service jobs. It's not uncommon to find a packed restaurant being handled by one or two waitstaff, leading to slower turnaround and overall reduced capacity of the restaurant and less money being made overall.
This is blamed on the pandemic and all kinds of other causes, but the root cause is the infliction of intentional labor shortages on the economy for political reasons.
Similarly, the COVID stimulus in the previous administration was given out with minimal vetting and significant misallocation (payments to businesses that didn't need it), and there has been no retrospective accountability for any of it. It boils down to something that was supposed to be a targeted stimulus (to prevent firms from going out of business or laying off workers) became an untargeted one and spoils were given to firms that misrepresented need and used the money for things other than staying solvent or keeping payroll going.
So of course we are seeing the consequences of this now in the form of both inflation and economic stagnation.
This is not the fault of one political party. Neither has any restraint when it comes to wanting broad stimulus and artificially low unemployment numbers, and there is a lot of finger pointing about the extremely predictable inflation that is occurring.
Raising rates penalizes all the firms that did not seek stimulus inappropriately, as well as the ones who sought it because they needed it.
Chances are rates will go up at least another 1.5 or 2 percent in the next year. This is unfortunate, and the economic correction resulting from it will be significant and will last for many years longer than the brief period of artificial joy we got over the past few years.