Consequences Of Fixing The Inflation Overnight

In today's world which is suffering from the aftermath of a pandemic, along with bad climate, and Russia going berserk over taking over Ukraine, the people all around the globe are suffering. Suffering through inflation. That's the only way to hurt the whole world without causing chaos in every part of it.

Due to inflation, the prices are rising. Buying stuff is becoming hard. The rich might not feel the heat yet but every other category of people are having life hitting them hard. Inflation rates take time to ease in. Today's crumbling economy might take 2-3 years to recover. So, brace yourselves. While stating the obvious, let's talk about something unrealistically possible. Fixing the inflation overnight. Yes, with US Dollar being the responsible currency, the federal reserve of USA can indeed fix the inflation overnight. But it'll tank other stuff.

The federal reserve is responsible for the interest rates. They decide the rate every time. What they usually do is increase the interest rates in the economy. What this does is, make a domino effect with the bank. If they raise the bank interest rates, the bank increases the loan or deposit interest rates. So increasing these rates will only result in loans being harder to come by.

Due to the high interest rates, many loans can't be taken out because people simply can't pay them back. This makes less loans out there and less money floating in the economy. Less money floating in the economy, inflation decreases. But what this does is it kills off a lot of possible loans. So many people or businesses who might survive on a loan, go under because they can't take a loan which they can't pay back. Usually this the most used method.

On top of this they can use the mortgage payments. The loans taken out to buy a house are mortgages. If the interest rates on these increase, the person who could pay off a 200000 dollar loan will be able to pay off, let's say, 150000 dollar loan. And if this happens to the whole economy then the housing prices will go down. And housing or real estate prices going down means only thing, the whole real estate empire going down with it. The federal reserve usually just print money and supply it. On a normal economy. This is done by buying up the corporate bonds. But to decrease inflation the federal reserve can sell those bonds back to basically delete the money they supplied by buying those bonds in the first place. This will also help to make less money available to the masses but an overflow of corporate bonds make business running more harder.

Above all, there is no actually viable way to save an economy from inflation fast enough without hurting anyone in the process. We have to treat it slowly. Sustaining the inflation is our only way out. It's basically treating it like an angry bear and stepping away and let it do it's thing. Bear market. Get it? Most first world countries aren't facing extinction yet. It's hard but life is going on. All we can do is wait out these ongoing storms.