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Megan McArdle
@asymmetricinfo
You cannot fix a supply shock with either fiscal or monetary stimulus. Real consumption is set by the quantity of goods and services available, and tariffs pull those real goods and services out of the economy. Lowering interest rates won’t make more stuff. It will just make more inflation.
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James Fishback
@j_fishback
American manufacturers are begging the Federal Reserve: "Please lower interest rates. We need it in order to boost the economy due to the uncertainty and tariffs." Why won’t Fed Chair Jerome Powell lower rates? Is it to spite Trump? Here’s the truth: the Fed’s own research x.com/j_fishback/sta…
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Megan McArdle
@asymmetricinfo
The people who are mad that Jerome Powell won’t save them from the political consequences of Trump’s actions are simply confused. Dropping interest rates would not make voters happier except very temporarily. It would make them madder after inflation surged.
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Carl Pham
@CarlPham9000
How are tariffs a supply shock? Seems more likely they create a demand shock, if anything. China isn't making any fewer dishwashers (at least in the short run). They just cost more to Americans.
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A$AP Bullwinkle
@rbcalvin
It’s like we just went through this right? Do we really want to inflict this on ourselves again? The administration has a short window to reverse course before the supply shocks are baked into the ‘26 election.
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Firas D
@firasd
Also bonds yields are high already.. if any new lower-interest-bonds don’t have enough demand that will be really bad
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nero
@n3ro
It will also increase inflation which is still higher than the target. Trump thinks he wants it, but he wouldn't like the outcome.
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darkness
@darknessatnite
You are correct that real consumption is fixed by goods and services available. But firms also have debt service. Both monetary and fiscal measures can help with that and give firms time to retool.
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Poi
@poiThePoi
In fairness you can keep the amount of money flowing intact which prevents a Great Depression. What it doesn't get you is more stuff. So you court inflation deliberately instead.
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Reuben Espinosa
@reubenesp
Supply shocks create "cost-push inflation". High interest rates are designed to address "demand-pull inflation" by reducing spending. Supply shocks also create recessions and widespread layoffs, exacerbated by high interest rates, which are by definition inflationary.
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patricio Il Tasso🇺🇦
@IlTasso84592
Agree, Megan. It also wasn't warranted in Covid. Interest rate changes make sense for more fined tuned management. It isn't really good at dealing with large issues, especially when it comes to boosting. Pushing string.
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BeaviSNoches
@BeaviSNoches
Making Bernie Bros sudden supply siders is one of the greatest silver linings in history, I must say... However grey the rest of the cloud.
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Ed Miller
@Ed_Miller73
Carol Roth has been saying for 8 months that Biden left the economy in a mess. That it had tons of trip wires in it. That it was going to take a lot of hard work to dig out. She’s been 100 percent spot on.
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privatize social security
@MakeUSAVAT
The president is not to set interest rates Willey Nilley as
@j_fishback
does. Moreover, the federal reserve is not supposed to always set interests at r* forever. Stop trying to create the conditions for stagflation.
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Plato Underwater
@platounderwater
> Votes for Trump primarily because of high prices/inflation > Beg for federal reserve to double down on inflationary tariffs with inflationary lower interest rates
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