Ever since Joe Biden took the Office of the President, things have gone downhill quickly for the United States economy. Inflation hit near record highs, as interest rates also climbed to reaches that make affording a home impossible for many younger Americans. By definition, he has directly hurt achieving the American dream, with no real end in sight.
After keeping interest rates north of 8 percent for quite some time, Fed Chairman Jerome Powell said recently they hope to install at least one rate cut this year. However, inflation still remains well above their goal of 2 percent, so any rate cut now might be disastrous.
Economist EJ Antoni says any cuts right now could trigger another round of huge inflation, the likes of which we have not seen.
“We would see it go up more than it did before…in 2009, we were at 9 percent…if you cut rates right now, we could see it spike beyond double digits in 2025,” he says.
Unemployment recently hit the highest level since 2022, rising to 4 percent. Confidence in the economy is sinking, and inflation has no real valve to relieve pressure on Americans.
Former Fed Chair Paul Volker famously ‘ripped the band aid off,’ back in the 1980s, raising the rates to help steer America out of an inflation nosedive. If Powell had taken a page out of his book, we might not be where we are now.
“We should have had them up higher much sooner…while that would cause short term pain, there is more long-term gain,” he says.
But even if they did cut these rates at the moment, it would have virtually zero impact on the average American financial situation.
“We would just get a series of quarter percent rate cuts…they seem high to us today, but we have been spoiled with artificially low rates for the last 20 years,” he says. “Instead of a mortgage at 8 percent, you get it at 7.75 percent…it will just be another sugar high for Wall Street.”
On paper, that looks great for a politician, but is bad for Americans. Which sums up American politics perfectly.
Antoni adds that it is already probably too late to hike rates and save us from more inflation.
