Officials are trying to understand why consumer spending, the job market and overall growth have not responded to the most aggressive interest rates in decades.
Caveat: I’m no economist.
Despite the clear desire to see mass layoffs and unemployment so we will slow all our damn spending, the usual club to make that happen isn’t working. Labor is strong. Support for unions is strong.
To explain this, I’d look at what has changed. I believe stock buybacks have been extremely high of late and that would be my guess. The big companies aren’t leveraged so, just like how the rates aren’t affecting recent home buyers who bought before the hike, they also aren’t hurting companies as much as would normally be the case.
Another possibility is lingering effects of boomers taking COVID as a sign to retire, creating a labor shortage and putting pressure on companies not to have a layoff because they are worried they might have trouble re-hiring folks when the economy cools off.
If anyone else has ideas, I’d be curious. I might not be right about the cause, but I’m right about looking at what is different right now.
Another option to decrease spending is to increase taxes. That would of cause target the rich more, whereas increasing the interest rates is usually a benefit for the rich and hurts everyone else.
No wonder why increasing taxes instead of interest rates are never discussed to tackle inflation.
I work because I don’t have a choice and I spend my money because even saving 100% of my gross won’t get me even remotely close to affording a house because they keep going up in price faster than my income does.
