The US Federal Reserve voted to raise interest rates on Wednesday for the first time since 2023 as the central bank continues to fight to tamp down inflation.

The Fed’s open market committee voted unanimously to raise its benchmark interest rate by a quarter-percentage point to a range of 3.75% to 4%. This is the first time the Fed has raised rates since July 2023 and potentially sets Kevin Warsh, the current Fed chair, on a collision course with Donald Trump.

“The plain fact is that inflation is too high and has been for too long,” Warsh said on Wednesday. “This summer’s inflation readings do not tell me that underlying trends have meaningfully improved.”

  • pmtriste
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    20 days ago

    That’s actually not true at all. Raising taxes on the poor is less efficient exactly because they spend all their money. The purpose of taxation in this scenario is to increase buying power by reducing monetary supply. If you tax the poor, you weaken the economy because they are already spending all their money. The rich, who don’t spend all their money, are objectively a much better place to tax because it weakens the economy less through a lower decrease in spending. If you tax the poor more, the government ends up having to spend extra just to offset the loss of spending from the poor (which then increases the monetary supply, lowering the effectiveness of the tax).

    To put another way, government spending is how the government can positively impact economy by increasing spend in targeted areas, but this spending causes an increase in monetary supply, which causes inflation. The offset to this is for the government to tax the money back out of the monetary supply, which lowers inflation, but if they tax the poor then they are decreasing overall liquidity (because the poor reinvest all their money into the economy directly by spending it). So from a monetary supply perspective, the most effective taxation would be on “idle” money, or a wealth tax.

    • iopq
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      19 days ago

      Yes, weakening the economy is the point. That’s how you get the inflation down. A rich person might put $1000 into a bond fund. A poor person would spend it on necessities they have been putting off for a while. Which causes more inflation?