Federal Reserve Rate Hike Fails to Address Bigger Economic Concerns

The Federal Reserve's recent rate hike decision has been getting a lot of attention from investors, but according to Mike Maharrey, it's just one small part of a larger fiscal story. The U.S. government's $40 trillion debt and persistent overspending are the real issues that should be on everyone's radar.

The Fed increased interest rates by 25 basis points in September, but Maharrey argues that this move won't solve the underlying problems driving the economy. With inflation concerns reignited due to rising oil prices and a stronger-than-expected August jobs report, Maharrey believes that higher borrowing costs will ultimately harm the broader economy.

The real problem, according to Maharrey, is the government's inability to manage its debt. The U.S. recorded a $166.8 billion deficit in August, with a fiscal 2026 shortfall of $1.97 trillion. This means that for every dollar in revenue, Washington spends $1.41, with 28.9% of federal outlays financed through borrowed money.

Maharrey expects the long-term outcome to be the same regardless of whether the Fed raises rates or holds them steady: economic stress followed by rate cuts, renewed monetary easing, and continuing currency debasement. He believes that a rate hike would increase the odds of a recession or market crisis, prompting the Fed to return to near-zero rates and money creation.