A reader sent me a question that combines the top three drivers of U.S. economic news in the past two years — federal debt, inflation and the Federal Reserve — and asks for logical cause-and-effect linkages between them, and real-world implications. I'm happy take it on because understanding how those factors interact is important. Here's the question: Q: Michael, I am trying to understand something here.
Taylor: Inflation? I’m not that worried. Here’s why. Yes, the government did spend money it didn’t have. But that's an ordinary thing for the U.S. and most other governments over the past century. Or basically forever. The magnitude of U.S. borrowing has gotten substantially greater in the past decade, though. We do not have an actual answer yet for “how much is too much debt,” but the activity itself is highly precedented. Am I worried? Yes.
Taylor: Is anyone serious about reducing the federal deficit? “Who is making extra money off of higher interest rates?” is part of your question, and viewed a certain way, the Federal Reserve actually books extra interest income based on the difference between what it pays banks for deposits and what it earns on securities with its balance sheet.
Taylor: Why my inflation is not the same as yours Your statement “the poorer section of our society is being taxed to pay for government spending” is an inaccurate understanding. To vastly simplify things, I would generalize the situation the following way instead: Folks with no savings are generally paying high interest rates to credit card lenders in every interest rate environment. At all time.
Taylor: Is anyone serious about reducing the federal deficit? Meet a Rice prof who has some ideas. The federal government is a pauper in this scenario and is paying out higher interest rates. Not exactly like on a credit card, because the rates are roughly 4.5% to 5.5%. But that’s much worse than the 1.5% to 2.5% it was able to pay a few years ago. The Federal Reserve pays higher rates of interest for private bank deposits but also earns higher rates on the bonds it buys.
Loans Loans Latest News, Loans Loans Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Source: 10TV - 🏆 560. / 51 Read more »
Source: KSLcom - 🏆 549. / 51 Read more »
Source: FOX10Phoenix - 🏆 83. / 68 Read more »
Source: KVUE - 🏆 244. / 63 Read more »