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All my life I have been hearing about the fed using interest rates to either prime the economy when its down or slow it down when its going too fast. When the economy is expanding too quickly, I am told that the fed needs to raise rates to slow it down.
This makes sense, raise rates, business and individual costs go up, less spending, okay.
My question is, wouldn't raising taxes do the same thing, with extra benefits?
When you raise interest rates, what happens? Well, people with invested capital make more money. Banks make more money. Poor people who owe money, they owe more. And the government, which owes more than anyone, pays more in interest.
So if the government wanted to slow the economy down, why not just raise taxes, instead of interest rates? The pain, theoretically, would be the same and it would be spread more evenly through society. But better yet, instead of it making the rich get richer and the banks get richer and starving the federal budget by increasing debt service, it would actually increase federal revenues, allow more services for the poor, maybe even do something about healthcare.
So why do we give our money to the moneylenders when we want to slow down the economy, instead of using it for good purposes?
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