Raising interest rates to fight inflation is the exact opposite of what needs to be done to lower prices. Instead, the Federal Reserve should raise payments to what is actually owed and leave the interest rates alone. Have Visa and Mastercard up the amount paid to the balance of the loan and you get both of the objectives needed to fight inflation. You cool the economy without raising prices and the consumers pay down their debt quicker, save money, and fuel a quicker and stronger recovery.
If you raise mortgage rates, you price many people out of the market and take away the American dream of home ownership. Instead, raise down payments from the current 3% to 5%, to something more like 6% to 8%. The buyer has to save a bit more, the market slows down, prices moderate and the recovery begins.
If you just raise interest rates, it adds costs throughout the economy and puts more money in the banks’ coffers. Then you have the situation that developed in the 1980s, when manufacturing abandoned the U.S. to go where they could get lower interest rates and great exchange rates because of the exorbitantly priced dollar. We’ve been down this road before. Please, let’s not do it again.
— Harry T. Crawford Jr.
Anchorage
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