I can add that the economy is made weaker with a low cost of money. It is like there is an addiction to low-cost money. Low inflation is related to this.

Is it socially efficient to raise interest rates? Interest rates aren't affecting savings accounts and consumer loans much yet. The real impact is among the rich who move large sums of money in arbitrage. So interest rates are not a major factor in being socially efficient now. The major factor will be the cut in taxes for the rich, the import taxes that will raise prices for US consumers, and the cap being put on wages as seen by the cap on Federal wages.

In the second to last paragraph, I meant to say... "... if corporate taxes are slashed NEXT year."

Alan #Greenspan was masterful in his monetary policies. Yes, you could say that I am seeing the possibility of #stagflation. There is #inflation potential but not much output potential. Yet, I tend to see it not lasting very long, before a contraction takes hold. And Gary, you make a great point about the risk of killing the collateral, which is a headwind against output growth as interests rise.