Seems like a convenient coincidence that all your "smart" friends agree with you lol.
Actually the fed has a dual mandates: price stability and unemployment. Price stability can also be achieved by taxation.
And in this case the massive inflation we saw was mostly due to supply chain issues. So many businesses shut down during the pandemic. Others were hanging on by a thread. Which sounds like it will help supply chains recover? Increasing interest rates for loans? Or keeping access to lots of liquidity? Hmmm, seems like if we're wanting to expand capacity again, we want liquidity. Then prices can go back down due to capacity going back to normal, rather than artificially reducing demand by getting everyone fired.
If we need critical immediate measures to stem inflation, then we can raise taxes. Get some of that PPP money back. Make everyone who was speculating on housing sell their investment homes. That will drive inflation back down without starving the recovering supply chains.
I did say "primary mandate". I don't think that is controversial.
>then we can raise taxes
I totally agree that raising taxes is the right thing to do (as do my smart friends and most economists ;) ). But that's not the lever the Fed has. And of course it's politically untenable.
> Make everyone who was speculating on housing sell their investment homes.
Agree there too. But that's not the lever the Fed has.
Actually the fed has a dual mandates: price stability and unemployment. Price stability can also be achieved by taxation.
And in this case the massive inflation we saw was mostly due to supply chain issues. So many businesses shut down during the pandemic. Others were hanging on by a thread. Which sounds like it will help supply chains recover? Increasing interest rates for loans? Or keeping access to lots of liquidity? Hmmm, seems like if we're wanting to expand capacity again, we want liquidity. Then prices can go back down due to capacity going back to normal, rather than artificially reducing demand by getting everyone fired.
If we need critical immediate measures to stem inflation, then we can raise taxes. Get some of that PPP money back. Make everyone who was speculating on housing sell their investment homes. That will drive inflation back down without starving the recovering supply chains.