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Fed Ends Zero-Rate Era

bloomberg.com

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Re: Fed Ends Zero-Rate Era

#101

Post by Estragon »

nemanja wrote: post #68
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> ...move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes Markets respectfully disagree, see the uptick across all indices since the announcement. As you point out, there is only so much Fed can do and they are taking a measured, responsible stance, well within expectations. The fact that Fed's actions are fully aligned with expectations is kind of the poin…

All a rise means today is that the markets had priced in a higher hike than the Fed posted.

Re: Fed Ends Zero-Rate Era

#102

Post by zeveb »

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner.

Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves?

Keynesian pump-priming ends up thinking it makes economic sense to tax people for money to fill up jars, tax people to pay for workers to fill jars with cash, tax people to pay for workers to bury the jars, and tax people to pay for workers to dig the jars up. Although I think there is a very valuable insight about velocities and derivatives rather than simply values-at-times, I think that government spending in general is essentially a drag on the economy: a necessary and inevitable malinvestment, but one to be avoided where possible.

Re: Fed Ends Zero-Rate Era

#103

Post by dragonwriter »

narrator wrote: post #78

What is this going to do to interest payments on the national debt? Will this put a squeeze on spending? Cause tax increases? Or will it be business as usual and the fed buy as many bonds as needed? In the latter case, I think that will cause inflation to pick up unless we can export it all out the trade deficit.

> What is this going to do to interest payments on the national debt? Will this put a squeeze on spending? Cause tax increases?

Spending and taxes are driven by political decisions which can remain extremely distant from any clear relation to the market for quite a long time, so the effect a rate hike like this has on fiscal policy is (even after the fact) murky at best -- even once we know future policy, there will be as many theories as observers as to the contribution of monetary circumstances to those policies.

Re: Fed Ends Zero-Rate Era

#104

Post by PaulWillis »

roymurdock wrote: post #83
PaulWillis wrote: post #61

Earlier quoted context omitted.

Isn't investing in bonds putting money to work in the economy? And how does the government really stimulate demand? Nobody demanded an IPhone before it existed. Good products stimulate demand.

Bonds are government debt. When you buy a bond, you are giving the government your money now in order to receive a return on that money later, with the expectation that the government will do something useful with the money in the meantime. So if the government is allocating its budget well, then yes, purchasing bonds is a good thing. If it is not, you are making a bad loan to someone who may not be able to pay you b…

Didn't Jobs quit college because it was too expensive?

Re: Fed Ends Zero-Rate Era

#105

Post by jbooth »

zeveb wrote: post #102
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. Investing tax dollars in a smarter manner. Isn't it highly unlikely that tax dollars will be spent or invested more wisely than the original owners of those dollars would have spent or invested them, since no-one would have known the owners' preferences as well as the owners themselves? Keynesian pump-priming ends up thinking it mak…

It's not about 'wisely' in terms of returns to the individual who invested, it's about 'wisely' in terms of creating aggregate demand.

For example, funding a bunch of national infrastructure projects would have horrible returns, being a 100% loss to the person who spent the money. But that money circulates in the economy, creating demand, and we get the infrastructure afterwards as well.

That's speculation, of course, but we can look back to the New Deal to see that it's worked at least once before, and look at current-day corporate balance sheets and their underwhelming investment in demand-creating ventures to see that what we're doing now is not working. If the goal was to generate novel tax-avoidance schemes like the double-irish, though, we'd be a rousing success, so there's that.

Re: Fed Ends Zero-Rate Era

#106

Post by gotchange »

roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

> We need the Federal government to stimulate aggregate demand at the consumer level. How?

Simply put by distributing cash to the people directly. Why do only rich people on Wall St. get subsidies and bailouts where the Fed purchase their worthless papers with hefty sum of money and push on their balance sheet on the taxpayer's dime?

Not only this but they are also engaged with them in destroying the labor market by bankrolling Wall St greed and their endless chase of efficiency at the expense of people's jobs as they get more aggressive with M&A activity evading taxes and expanding robotics & automation to eliminate labor costs.

This can't be going this way forever and something has to be done to stop this madness.

Re: Fed Ends Zero-Rate Era

#107

Post by dragonwriter »

chad_strategic wrote: post #73
reefoctopus wrote: post #57

Earlier quoted context omitted.

Why not?

Because as soon as you can get a risk free rate of return, (savings) then why would someone invest in a half brained start up that has a low probability of any return, when you could get a risk free return. The FED has reduced interest rates to drive spending in startups, lending, housing market, and the stock market. But don't worry, .5% is only a start, we have a ways to go before Unicorns start to starve.

> Because as soon as you can get a risk free rate of return, (savings) then why would someone invest in a half brained start up that has a low probability of any return, when you could get a risk free return.

Because startups, while they may have a low probability of return, have a high potential upside, whereas low-risk (and essentially zero-risk, like US government debt) investments have fairly locked-in maximums as well as minimums.

Sure, the higher returns in low-risk investments, the better returns have to be in high-risk investments to justify choosing the latter over the former with the same risk sensitivity.

Re: Fed Ends Zero-Rate Era

#108

Post by PaulWillis »

jrmurad wrote: post #97
roymurdock wrote: post #83

Earlier quoted context omitted.

Bonds are government debt. When you buy a bond, you are giving the government your money now in order to receive a return on that money later, with the expectation that the government will do something useful with the money in the meantime. So if the government is allocating its budget well, then yes, purchasing bonds is a good thing. If it is not, you are making a bad loan to someone who may not be able to pay you b…

>> Isn't investing in bonds putting money to work in the economy? > Bonds are government debt ... Could be referring to corporate bonds.

Either one. The money still gets into the economy.

Re: Fed Ends Zero-Rate Era

#109

Post by laotzu »

dsr_ wrote: post #50
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

If you want to stimulate aggregate demand at the consumer level, you need more people to have good jobs, so they can make money, so they can spend money. This would represent a reversal of the trend since 1970 towards greater income inequality. It is not clear to me that anyone is doing anything about that (except, of course, in the negative sense.)

I question the assumption that "job creation" is the necessary prerequisite for money creation especially in an age of automative ephemeralization and surplus. Large demand for money already exists among the poor whether or not they have a job.

>In technology's "invisible" world, inventors continually increase the quantity and quality of performed work per each volume or pound of material, erg of energy, and unit of worker and "overhead" time invested in each given increment of attained functional performance. This complex process we call progressive ephemeralization. In 1970, the sum total of increases in overall technological know-how and their comprehensive integration took humanity across the epochal but invisible threshold into a state of technically realizable and economically feasible universal success for all humanity.

-Buckminster Fuller

Re: Fed Ends Zero-Rate Era

#110

Post by jonknee »

PaulWillis wrote: post #61
roymurdock wrote: post #28

Fed raising interest rates 0.25% and setting a goal of "normal" 2% by 2018 means little to nothing. Market already priced the miniscule rate hike in as the move was widely expected, and move did nothing to assure markets that the Fed is in control, or set credible, measurable goals for future hikes. Fed can continue to push on the supply side of money at the bank/institutional level all it wants. We need the Federal…

Isn't investing in bonds putting money to work in the economy? And how does the government really stimulate demand? Nobody demanded an IPhone before it existed. Good products stimulate demand.

> And how does the government really stimulate demand?

Building things (roads, spaceships, bridges, etc), funding things (medical research, education, etc) and other obvious things. Low interest rates make longer term projects much more viable.

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