Crash the train to stop it

[whell]

https://www.politico.com/news/magazi...-debt-00057606

Powell sounds like a big Volker fan. Volker crashed the economy to stop runaway inflation, fueling a recession that lasted through the early 80's. He got inflation under control but not after a few tough years. Powell is going to have a much tougher job.


This matters for a simple reason. When the Fed tightens the money supply and raises interest rates, it inflicts pain on U.S. taxpayers who must pay interest on the nation’s debt. The higher the debt, the higher the pain.

It was the Fed’s own experiments that helped create all this national debt in the first place. The Fed did so through an experimental program called quantitative easing, or QE. The importance of QE can’t be overstated. Under this program, the Fed created about 9 trillion new dollars between 2008 and today. (To put that in perspective, the Fed created only about $1 trillion in its first 95 years of existence. So it has printed 900 years’ worth of money in a little over 10 years, when measured against its historic rate.) All that money was injected straight into the Wall Street banking system, pumping up the very markets, like stocks and bonds, that are now threatened by the Fed’s tightening.

Years of QE and voracious spending, from Reagan to Bush to Clinton to Bush to Obama to Trump to Biden, all fueled by debt. And that debt sounds like its going to get a LOT more expensive.