'Higher interest rates don't alleviate cost/push inflation caused by supply crises; they make it worse.'
Higher interest rates don't alleviate cost/push inflation caused by supply crises; they make it worse. Rather than making money harder to get, the government needs to focus on the supply side of the equation, stimulating local production to bring supply levels up. Rather than Volcker's solution, what we need is that pioneered by Alexander Hamilton, Abraham Lincoln, and Franklin D.
China has three massive state-owned infrastructure and development banks – the China Development Bank, the Export-Import Bank of China, and the Agricultural Development Bank of China.
Yet all this stimulus has not driven up Chinese prices. In fact consumer prices initially fell in 2008 and have hovered around 2% ever since.
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