The Bizarre Theory That Says Fed Increases Will Fuel Inflation
From bloomberg.com
Many economists are so perplexed by the lack of inflation in the U.S. after years of unprecedented monetary stimulus that a bizarre, century-old theory is suddenly gaining traction: Maybe higher interest rates are what’s needed to push up consumer prices. The idea runs counter, of course, to basically everything taught in Economics 101 classes (higher rates, we’re told, discourage rather than encourage spending and therefore curb inflation). But near-zero borrowing costs have done so little to trigger inflation that several prominent economists including John Cochrane, a senior fellow of the Hoover Institution at ...
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