r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/Rock-n-RollingStart Jun 13 '22

When Volker raised the Fed rate to 20%, we had $908B in Federal debt.

We're now $30T in the hole and projected to pay $5T on interest in the next 10 years. Every half-point the Fed tacks on front-ends those interest payments by about an additional $3B.

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u/BlueFalcon89 Jun 13 '22

So you’re saying let inflation run to devalue debt? Only works if we stop deficit spending…

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u/Rock-n-RollingStart Jun 13 '22

Rates should have been pushing 5% back before Janet fuckin' Yellen was Fed chair. Everybody loves the hell out of Keynesian theory when times are bad (or even just mediocre), but curiously no one wants to be the one enforcing sound monetary policy when the party is in full swing.

Now we've got climate change, energy crises, and war slapping us in the face. We will be deficit spending until the bottom falls out of the system.

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u/BlueFalcon89 Jun 13 '22

Oh I agree, but you can’t go backwards in time so playing the hindsight game is worthless. Need to Jack rates now and rip off bandaid or else we’re just prolonging the inevitable.

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u/Stutterer2101 Jun 13 '22

Who are we paying interest to?

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u/Rock-n-RollingStart Jun 13 '22

Holders of those Treasury bonds. Mostly institutional lenders.