Week 6 Blog

Welcome back to my blog. In my research I have found that it is not just important to cover the past few years of interest rate policy in the US but to understand how the Fed is currently acting. As the Biden administration has continued to make fighting inflation a key priority the Fed has held strong in maintaining high interest rates. This week Jerome Powell and the Fed met to provide the latest update, and decided upon maintaining the rate at 5.3% until inflation reduces further. The problem with this is that it will continue to cause damage to the American economy furthering class inequality in the United States as interest rates continue to serve as a regressive tax on all but the one percent. Understanding these issues through an MMT lens one would rather choose to continually keep interest rates low as people’s ability to borrow does not generally impact what qualifies as inflation, people do not need to borrow for the small day to day purchases which have been impacted so heavily by inflation in the past few years.

Additionally, across the globe in countries like Argentina we have seen further evidence of the downsides of a government deficit. Since Javier Milei, an economics professor from the Austrian school was sworn in, Argentina has run a strong government surplus. When a nation runs a surplus it means they are imposing taxes to a sum higher than government spending. The greater the surplus the more money is taken out of the economy. This has had vast negative impacts as economic activity has been down consistently since those austerity measures were imposed (https://tradingeconomics.com/argentina/monthly-gdp-yoy ). Milei has proven that his strongly held economic convictions are not beneficial to the Argentinian economy in only a few months.