US Federal Reserve raises interest rates for first time since 2018

The ONLY way for any government to escape their massive debt is inflation. The US is no different from other countries that used the pandemic as an excuse to prop all kind of businesses.

This is no different that real estate. If you have bought property at a fixed rate, then high inflation (= higher salaries) will make your loan look smaller year after year.

Of course the collateral damage is a weaker US$. But what is the alternative to the US$? Crypto? Yuan (see the recent move of the oil producing countries to accept non US $ payments).

The US knows that there is NO alternative to the US $, hence their reckless borrowing strategy (= issue more Treasuries).

But wait! Isn't what the HN is used to hear? "There is no alternative to the dominant position of Microsoft Explorer, Blackberry or anything else. Until THERE IS a replacement and a newcomer replaces the incumbant.

I am really worried over the long term about the so-called invicible US $ as a store of value.

MMT proponents will argue that no one has ever properly implemented it.

However, an economic theory that is not effective in practice, given the realistic constraints of human nature and politics, is useless.

In theory the only way MMT works is to arbitrarily raise taxes to counter inflation. The Fed does not have the power to raise taxes, Congress does. But such a floating, variable tax rate is ripe for abuse of power and I don't know anyone who would not revolt under such a system.

Such areas aren't doled out by the government. They're invented by entrepreneurs. Your "uninhabited land" analogy obscures that vital point since uninhabited land is not invented, it's already there.

> Maybe for example repairing worn out infrastructure or creating new infrastructure.

As I already pointed out, if there are things like this that are worth doing, and there are unemployed people who can do them, the government can just use tax revenue to pay them to do it. There's no need to print new money.

> You maybe thinking of Quantitative Easing.

That's one way of doing it, which has been common in recent years, yes. But it's not the only way.

> The Government doesn't just print a whole lot of money and give it away to someone.

The government goes to great lengths to try to convince people that it's not doing that. But economically speaking, that is what it's doing.

When someone "cashes in" a government bond under "quantitative easing", the money they get is not taken from currently existing dollars. The dollars are newly printed money; they are newly created purchasing power that is given to whoever is "cashing in" the bond. That purchasing power doesn't come from nowhere: the purchasing power of a dollar is not fixed, it's determined by the total number of dollars in circulation. So printing new dollars and giving them to someone, even if it's in exchange for a "government bond", is still increasing the total number of dollars in circulation, and that means the purchasing power represented by the new dollars is taken from everyone else who holds dollars.

For a simple example, if there are a thousand dollars currently in circulation, and I "cash in" my government bond for 100 dollars of "quantitative easing", there are now 1100 total dollars in circulation, and I now have 100 dollars of purchasing power that was obtained by reducing the purchasing power of all other dollars by 10 percent. It's economically equivalent to taking 10 cents in tax for each dollar of the 1000 dollars that existed before, and giving it to me. Calling it by some other name doesn't make it something else. It just obfuscates what is actually going on.

(The Fed can in principle also destroy money, by selling securities and retiring the dollars that it gets for them, but historically it has almost never done this.)

well, yeah, a hot economy means that borrowing even at high interest is attractive, which is why you are trying to constrain lending (money creation) with higher interest in the first place to prevent inflation.

What would you expect to see?

Also home prices did not take a very long time to recover all things considered.