We really shouldn't worry whether Janet Yellen and the Federal Reserve Board will raise interest rates. They will. We should worry about when. ?
?
Why are they going to raise rates? Because they have to. They have pumped so much money into the economy that eventually there will be inflation. More and more dollars mean that each dollar will be worth less and less. It will take more dollars to buy things, thus driving up prices. That's called inflation, and we know that it will come. So much money has been injected in order to lift the economy out of this terrible recession that eventually this monetary policy will generate inflation.
So the Fed will have to raise interest rates, but it shouldn't be too soon, and it shouldn't be too late. The Fed will have to walk a tightrope without a net.
If interest rates are raised too soon those higher rates could choke off business spending and also deter us from buying houses and cars. Reduced spending could thus drive us right back into recession. ?
But if we wait too late to raise rates then there will be too much money in circulation--"too many dollars chasing too few goods" as people say. Demand pull inflation as economists say.
So what we really need is what is really hard to get-- the "Goldilocks Solution". Not too much too soon, but not too little too late. For all our sakes we better hope that Janet Yellen and her Federal Reserve colleagues get it right. Nothing less than the health of the entire economy is at stake. I'm Bob Evans, and that's my perspective.
