It used to be the case that if inflation got out of control the interest rate hike would curtail spending and cause a downturn and rates would go back down again as everything ‘normalised’.
That doesn’t work now. There are a lot of boomers now retired and with a large amount of money and no debt. That’s the case for quite a few economies. So raising rates doesn’t affect them, and they go on spending.
The dynamic has changed. They need a new fix. But what? It was reported the other day that there are millions of boomers entering retirement with no reliance on interest rates at all. They also reported that the same cohort are making a mint from savings. I am one of those as many on these boards are.
Time to change. But the RBA, Fed and London, amongst others, have lost the plot. A GST raise to 20% perhaps may quell the spend to top out inflation? Rates for everyone else will do the trick as usual.
