The third consequences of all this money printing and deficit financial will be inflation.Although the Fed has been very good at countering the effects of inflation by increasing the interest rates aggressively whenever it is need, in this day and age when the Fed is under increasing Political pressure to sustain the economy, they would be hard pressed to increase the rates aggressively without triggering a massive downfall in the economic activity.
The Fed can only do so much and it must be up to the Congress to manage how to tame this deficit. Discretionary spending and unwanted projects to keep alive the jobs in their districts when the money is not available cannot be sustained over long periods of time.
If we want to make sure that our country is under sound footing and the debt sustainable, we will need to make some painful steps that may not be politically popular but will nevertheless be taken so that we our future generations are not swamped in a sea of debt not of their own making.
No comments:
Post a Comment