The Federal Reserve announced that it is increasing interest rates again in attempt to curb inflation, moving the benchmark fed funds rate to 5.25% - 5.50%. As you probably have noticed, gas and food prices are going back up. And it's not getting cheaper to eat out these days.

The Federal Reserve is playing with fire! If they don't raise rates, which many politicians in Washington prefer, then consumer prices continue to rise and hurt American families. Raising rates contracts the money supply by making it more costly for people to take out loans, therefore less money is put into the banks and circulates in the economy. With less money circulating in the economy, the less bidding up of consumer goods there is, therefore, less inflation.

However, raising rates makes bond prices fall, housing prices fall and makes servicing government debt more unmanageable. Plus, many of the banks that have bet big on artificially low bond and housing interest rates, will go under. We've already seen a couple banks go under with the previous rate increases in the last year. More notably, the amount of assets of those banks rival the total that failed in the Great Recession.

We're damned if they do and damned if they don't. The prospects of a gloomy economy in the future is high. Just remember that it was politicians in Washington that caused it. 

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