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  • When the FED wants to fight inflation, it raises interest rates, which sets up a chain reaction in the economy.

  • We build this machine to show you how it works.

  • It all starts when the FED makes money more expensive for big banks and hedge funds, and that pushes up short term and long term rates.

  • Now, more people want the dollar, making it stronger and stronger. And more people want bonds, so stock prices fall.

  • So, while you might earn more with your savings account, you'll pay more on your credit cards and loans.

  • This might make you buy less,

  • which means businesses could sell less, hire fewer workers, and put things on sale.

  • All slowing the economy, and everything goes as expected, inflation will fall.

  • But, it's a delicate system, and there're a lot of places where the machine could fail, so, like many of us,

  • the FED will be watching the economy to see what happens next.

When the FED wants to fight inflation, it raises interest rates, which sets up a chain reaction in the economy.

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A2 TheNewYorkTimes machine economy inflation stronger goldberg

Fed Rates Explained in a Rube Goldberg Machine | The New York Times

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    Kristi Yang posted on 2021/06/27
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