Is there more public debt now than the 1980s? Yes that’s true by a long shot.

https://fred.stlouisfed.org/series/GFDEBTN

But what about household debt? Yes, that too was considerably less in the 1980s.

https://www.federalreserve.gov/releases/z1/dataviz/z1/nonfinancial_debt/chart/

But wait, aren’t there other considerations besides debt when raising the Federal Funds Rate…such as well I don’t know, inflation and m2 money supply growth?

https://www.longtermtrends.net/m2-money-supply-vs-inflation/

The m2 money supply growth we have experienced is off the charts! Right now real interest rates are still well below the rate of inflation.

Can you find a time in history where a high level of inflation have been able to be curbed without raising the Funds Rate above the curve of inflation? You won’t be able to because such a time in history never existed.

Can you provide a source proving that the interaction of inflation and interest rates are more dependent upon debt in the economy? I have not been able to find anything to support this claim, in fact to my understanding, the outstanding debt in the economy when put under pressure of higher interest rates would remove liquidity in the form of dollar debt from system via-defaulted loans and fewer borrowers due to higher interest rates. This should function similarly to unemployment going up having a cooling effect of inflation because it would lead to a reduction of demand because less money would be available to be spent in the economy.

As far as I can tell your argument is that raising rates in a bigger pile of debt is a bigger number if the debt is bigger? Macroeconomic theories are incredibly complex so I would like to hear your logic a bit more.

Hikes of the Federal Funds Rate can have a delayed impact for certain factors (i.e.-inflation) of around 12 to 18 months but we can see that mortgage interest rates have begun to rise rapidly recently, as well as the strength of the dollar.

As far as the terminal rate, it's my understanding that what got the United States out of the inflation in the late 1970s - early 1980s was raising the Funds Rate above the curve of inflation. If core annual inflation is 6.6% as of September 2022 and this number is well below the actual inflation we're experiencing, a terminal rate of 5% would still be well behind the curve of inflation and it's very possible we would still be in stagflation or inflation would appear like it had gone away, only to return stronger.

A big question is if the FED will stop raising rates or even cut rates before inflation is ameliorated sometime in Q1 or Q2 of 2023 and what that would mean for the future of the US economy.