As the interest rates on the bonds go up, the Fed will get less money up front. Therefore, they will have to borrow more—and print money to pay it back. Rinse, and Repeat.
That will drive up the prime rate on mortgages and other “prime” customers. Those with lower credit ratings will not be able to get loans without usary level interest rates.
That will cause consumers and companies to put off making capital purchases. You will drive your car into the ground because it will be more expensive to buy one.
Savings will dwindle, because you will tend to buy your staples NOW rather than wait until next week, because the price will go up. 12% inflation means that your core baskets of goods will rise about 1% per month. So, consider your $200 shopping bill this month will be $212 next month. Gonna buy that 5 pound bag of sugar now, or wait?
Because savings have dwindled the banks have less to loan. This means production will drop, and you will have even more dollars chasing after fewer products.
Wages will rise, but not enough. Remeber the days of 12-15% raises every year?
Thats just the start, and its just the consumer side. The corporate world and state-economics will be worse.
And THAT’s why this is important.
“...12% inflation means that your core baskets of goods will rise about 1% per month. So, consider your $200 shopping bill this month will be $212 next month.”
How about $200 bill will be $202 next month, with 1% inflation per month.
Sorry to nit pick.