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Raising interest rates won't fix the real reason behind inflation: price-gouging and corporate greed

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26.03.2022

Last week, the Federal Reserve issued the first of a projected seven interest-rate hikes this year in order to slow the American economy down and, hopefully, lower the skyrocketing prices that American consumers are paying. This is how the Fed successfully curbed inflation in the 1980s: Raising interest rates knocked the economy into a recession and spiked the unemployment rate as high as 11%, which drove down prices. But some experts doubt that raising rates will actually address the realities of our current inflationary crisis.

The rising prices that have plagued Americans for the last six months are "not your grandfather's inflation," said "Pitchfork Economics" podcast cohost David Goldstein in the latest episode. The spiking prices for gas, groceries, and housing supplies we've seen have "nothing to do with what we experienced in the 1970s," when America suffered from "high unemployment and high inflation at the same time," Goldstein said.

To be clear, inflation is a very real problem that is making life difficult for about half of all Americans, and some 70% of all poor Americans. But today's causes for inflation bear no relation to the inflation of the late '70s and early '80s, so it's doubtful that the Fed's solutions from the past will work today. For one thing, the pandemic threw the whole world's manufacturing, storage, and delivery capacity into a state of chaos, and it takes time and money to repair........

© Business Insider


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