by Anura Guruge
on April 22, 2022
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Soon to be 69 I am old enough to have lived through multiple cycles of rising inflation & rising interest rates. Yes, of course, I know that raising interest rates is said to be the ‘silver bullet’ when it comes to reining in inflation. I, however, think the so called ‘experts’ (most of them economists) missed out a key phrase: “all other things being equal”.
That is why we have a UNIQUE situation — & hence a problem — in 2022. All other things are NOT equal. We have supply-chain issues that we have NOT seen since probably WW II (i.e., over 70-years ago) & unprecedented shortages in labor. If something, e.g., dog biscuits, are hard to come by folks will end up paying more to get some WHEN they can find them on a shelf. If they pay for the dog biscuits with a credit card, most will end up paying more for their interest. It becomes a vicious cycle.
Yes, we have runaway inflation & it needs to be checked. No debate on that.
But, aggressively raising interest rates, in 2022, is not going to help. It is just going to cause additional pain to many. Inflation will continue to rise.
Not good. The remainder of 2022 looks GRIM economically.
Mark my words.
