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Fed Raises Interest Rate To 5.25% – Are They Done?

Necessitated by the Biden $6 trillion spending and borrowing spree with inflation soaring to as high as 9% and still running at 5%, the Fed has now raised interest rates 10 times in a little more than a year. These are the bitter fruits of Modern Monetary Theory – the concept that the U.S. government can borrow ad infinitum with little or no cost to the American economy. These higher rates will choke off growth for sure and we pray they don’t plunge America into recession… Can we now throw that theory into the dustbin of history?

For non-economists who don’t live and breathe this stuff, we thought this would be a good time for a little historical perspective. The short-term view shows that rates are now higher than at any time in a decade and nearly in two decades.

But those of us over the age of 60 will recall that rates can go a LOT higher than that. In the 1970s and early 1980s, the Fed raised rates to nearly 20%! Those rate hikes under then-Fed chief Paul Volcker were a reaction to high gas prices driven by OPEC, sluggish real economic growth, an inflation rate that hit double digits, a weakling president in the Oval Office, huge expansions in the welfare state, and a sinking dollar. Does any of this sound familiar?

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