New Interest Rate 3.8%: Return Manufacturing a Possible Long-Term Solution?

 The goal stated by Fed Chair Powell is if we raise interest rates we can put demand in line with supply. You can read more about that in 'Federal Reserve Backs Super-Sized Hike, Sees Rates Hitting 3.8%; Dow Jones Rises' How it generally works is that when interest rates rise it makes the use of money more expensive and that in turn impacts consumer spending and again in turn the speed of the economy (In this case slowing it down.). 

I still continue to think about inflation and manufacturing. Consumer spending is great as long as we are buying more of our own stuff where the money is retained and makes its way through our supply chain that benefits wages from farmers to truckers. Where we have the highest value in the supply chain we earn the most rewards as a nation and negative impacts of inflation are lessened.

The flip side of buying most of our stuff from overseas is that we as Americans go into debt but other countries are at the center of the supply chain in some industries and reap the rewards of our appetite. In other words, they receive the advantages of our debt. We have done this for a few decades and I think once we look back we realized how much have we sold off some of our opportunities. Alarm bells are ringing.

There is some movement to return manufacturing back to the U.S.. How that impacts inflation I'm not 100% sure but I believe that it does maximize the benefits of any purchases thereby reducing the loss of debt and increase in personal benefits. Thus, maximizing the money, interest, and outputs won't necessarily stop inflation but will retain more of the benefits of that inflation (lost value).

For example, there are pressures from Russia and the war in Ukraine. When supplies are being expending and/or certain supply chains are tapped out we will experience more hardship in terms higher prices (inflation). We and the rest of the world have few other opportunities to find new suppliers and we are not yet able to provide that capacity yet. 

That brings up the concept of labor and its shortage. Its hard to increase the economy by completely avoiding high inflation without maximizing labor power. Having wearable tech/robotics, stronger infrastructure, innovation on a grand scale, etc. would also mean labor value and productivity would rise. We are filling labor gaps with new technologies that enhance existing labor productivity (Likely increase on the value of American labor above international labor.). 

Notice a lot of discussion on international supply chains and the complex web that is sort of raising cost and reducing supply. June 15th, 2022 FOMC Rate

(I'm just theorizing. It doesn't mean its a scientific fact. Economics are projections and not facts because they are based in human behaviors and choices. What I can say is that....well maybe. 🤷)