The Riksbank (central bank of Sweden) only sets the interest rate. And interest rates have no impact on the energy prices that are driving inflation today. But higher interest rates lead to higher unemployment and lower output – and that can push inflation even higher. But there are other ways to curb inflation, write Dirk Ehnts, Sten Grahn, Peo Hansen, Jussi Ora and Patrik Witkowsky....The Gower Initiative for Modern Money Studies
Raising interest rates is like blowing up the garden to weed it
Dirk Ehnts, Sten Grahn, Peo Hansen, Jussi Ora and Patrik Witkowsky
2 comments:
Simile isn’t going to work…
The idea is that higher unemployment weakens the bargaining position of wage earners, as the threat of unemployment is now more acute.
It would work if it wasn't for unions.
I lived through the wage price-spiral of the 1970s. Union workers, especially the senior members, were undeterred by the high unemployment because their jobs were secure, so they kept striking for higher wages.
Job security is a private virtue and a public vice.
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