alt Hacker News> any efforts to reduce energy inflation with interest rates is going to be futile
Raising rates makes credit more expensive. That cools down growth. That, in turn, eases resource demand (as a function of the resource intensity of GDP).
Practically speaking, higher rates today would mean less borrowing to build datacenters. (And new homes, et cetera.) Which would mean those marginal resources going to other uses. Which would ease price pressure.
> there will be, for long into the future, more projects chasing a shrinking supply of capital
Capital is priced in rates. Too many projects chasing too little capital will drive rates up until the capital markets balance. The case where that doesn't happen is when rates are being held low.
And current spreads indicate a surplus of capital [1]. That's why we're seeing e.g. multi-trillion dollar IPOs.
> the Fed could beat on the economy all it wants with higher rates and this would not cause mass unemployment, because the world is rapidly aging and how fast workers are retiring out of the labor force
I like this thesis–it means the Fed has a lot more room to raise rates than is conventionally appreciated. I'm also cautious about embracing it. Reminds me too much of the MMT-means-inflation-isn't-real nutters from the early 2020s.
[1] https://www.macrotrends.net/3229/us-high-yield-bond-spread
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Thank you for keeping me honest and checking my work, as someone more sophisticated and smarter than I in these matters.
> Practically speaking, higher rates today would mean less borrowing to build datacenters.
This is only true if the cost of capital is a functional constraint. If the constraint is elsewhere (in this case: sourcing GPUs, bringing online energy resources) it will not have any significant effect.
When the expected return is very high because the captured resource is perceived to be monopolistic, this lever does practically nothing. Unless they raise it so much they destroy everything else.