TheVoiceOfJoyce Wise words from Economist Joseph Stiglitz . Don’t raise interest rates to curb inflation. If interest rates increase, the poor and middle class will suffer. There is no need for a protracted Recession, instead lower prices with the tools we have and help the poor and middle class, too. Examples listed: encourage farmers to produce more and stop the don’t plant policies that raise prices, price increases attributed to monopoly power can be controlled with anti trust enforcement, raise wages and benefits, add child care allowances and allow sensible immigration policies.

Posted on by jaslvr

www.theguardian.com/business/2022/dec/09/raising-interest-rates-inflation-central-banks-recession

Well-directed fiscal policies and other, more finely tuned measures have a better chance of taming today’s inflation than do blunt, potentially counterproductive monetary policies. The appropriate response to high food prices, for example, is to reverse a decades-old agricultural price-support policy that pays farmers not to produce, when they should be encouraged to produce more.

Likewise, the appropriate response to increased prices resulting from undue market power is better antitrust enforcement, and the way to respond to poor households’ higher rents is to encourage investment in new housing, whereas higher interest rates do the opposite. If there was a labour shortage (the standard sign of which is increased real wages – the opposite of what we are currently seeing), the response should involve increased provision of childcare, pro-immigration policies, and measures to boost wages and improve working conditions.

After more than a decade of ultra-low interest rates, it makes sense to “normalise” them. But raising interest rates beyond that, in a quixotic attempt to tame inflation rapidly, will not only be painful now; it will leave long-lasting scars, especially on those who are least able to bear the brunt of these ill-conceived policies. By contrast, most of the fiscal and other responses described here would yield long-term social benefits, even if inflation turned out to be more muted than anticipated.

Leave a Reply