Inflation is caused by having too much money chasing too few goods. The Fed reduces the money supply by raising interest rates, and this hurts persons with credit card debt, and those buying and selling houses, among others. Instead, the Treasury should offer savings bonds and other incentives for consumers to hold onto their money, instead of spending it. This reduces the money supply in the near term, which is what’s needed to fight inflation.
The money is released back into the economy later as people cash in their savings, stimulating economic growth. Raising interest rates just takes money from people, whereas saving the money gives consumers a future benefit. That saved money also stimulates future economic growth.
John McConnaughey
Oro Valley
Disclaimer: As submitted to the Arizona Daily Star.
