ontradictions. Not too long ago, the Fed raised interest rates in anticipation of inflation. The increase was not because of actual inflation, but because the Fed (and particularly Chairman Greenspan) was concerned that the low interest rates would spark inflation. This move was loudly criticized by liberals, but can be appreciated by those who are not in favor of easy money.
If the Fed allows inflation to return to the levels of the early 1980s, when interest rates reached well into double digits, there is a slowdown in investment by industry. Plant and equipment investment is put off because of the high cost of capital, and companies must issue higher coupon bonds in order to compete with the high interest rates available elsewhere. The economy slows and it can be difficult for it to recover. Liberals who claim to look out for the "little guy" should be wary of this scenario as well, since downsizing also takes place during these periods and those who may have pur
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