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Fed Ends Zero-Rate Era

bloomberg.com

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Re: Fed Ends Zero-Rate Era

#211

Post by cperciva »

randomname2 wrote: post #183

Analysis from TD on how banks (Wells Fargo, US Bankcorp, JPMorgan, M&T, PNC, Citi) rushed to hike the prime rate to 3.50%, and forgot to increase the deposit rate: As CNBC reported [1], "a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans, a Wells Fargo representative told CNBC. Existing home equity lines of credit, credit ca…

forgot to increase the deposit rate:

I don't think there was any forgetting involved.

Re: Fed Ends Zero-Rate Era

#212

Post by eru »

theGimp wrote: post #207
CydeWeys wrote: post #188

Earlier quoted context omitted.

There is a sticky price effect, but interest rates on savings accounts will inevitably rise as the prime rate increases, as banks compete with each other for customer business. Yes there will be lag time, but it will happen.

I'm not sure if the Fed pulled back the trillions it pumped into the banks during the crisis, but until that happens, banks don't have a real incentive to compete for deposits.

And isn't that how it should work? The extra money around is supposed to make people do something with their money apart from depositing it with a bank.

Re: Fed Ends Zero-Rate Era

#213

Post by gohrt »

toomuchtodo wrote: post #185
randomname2 wrote: post #183

Analysis from TD on how banks (Wells Fargo, US Bankcorp, JPMorgan, M&T, PNC, Citi) rushed to hike the prime rate to 3.50%, and forgot to increase the deposit rate: As CNBC reported [1], "a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans, a Wells Fargo representative told CNBC. Existing home equity lines of credit, credit ca…

> Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said. > "We won't automatically change deposit rates because they aren't tied directly to the prime," a JPMorgan Chase spokesperson told CNBC. "We'll continue to monitor the market to make sure we stay competitive." Heads I win, tails yo…

Does it matter though? 21st Century, everyone with savings can open a Vanguard mutual fund account with the risk/reward profile of their choosing, that's almost as convenient wrt withdrawals.

Re: Fed Ends Zero-Rate Era

#214

Post by vezzy-fnord »

ZenoArrow wrote: post #191
vezzy-fnord wrote: post #74

Earlier quoted context omitted.

increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... legislation increasing entitlements such as social security Expected to run structural deficits by a certain point. Theoretically speaking, an endogenously determined fiat money system doesn't really have "government debt" what with it being the sovereign issuer of debt to begin with, but in reali…

> "increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... " Let's look at what is being said: "Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes" Is that a problem? The minimum wage should be the minimum needed to li…

Competition drives prices down, but chances are people with limited options to shop around and who disproportionately head towards mass retailers already, by example, live in areas with imperfect competition and in the worst case, food deserts. As such, a minimum wage would seem to negate itself again.

Re: Fed Ends Zero-Rate Era

#215

Post by superuser2 »

randomname2 wrote: post #183

Analysis from TD on how banks (Wells Fargo, US Bankcorp, JPMorgan, M&T, PNC, Citi) rushed to hike the prime rate to 3.50%, and forgot to increase the deposit rate: As CNBC reported [1], "a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans, a Wells Fargo representative told CNBC. Existing home equity lines of credit, credit ca…

>a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans

>Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said

That is literally what fixed and variable rates mean, so I hope it isn't surprising to anyone.

Re: Fed Ends Zero-Rate Era

#216

Post by eru »

ap22213 wrote: post #172
vezzy-fnord wrote: post #74

Earlier quoted context omitted.

increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... legislation increasing entitlements such as social security Expected to run structural deficits by a certain point. Theoretically speaking, an endogenously determined fiat money system doesn't really have "government debt" what with it being the sovereign issuer of debt to begin with, but in reali…

So, the alternative is what? Allow wages to move toward zero? Then what?

Allow competetion to set the wages, just like all other prices.

Singapore doesn't have a minimum, and wages there are not zero. (Neither did Germany until recently.)

Re: Fed Ends Zero-Rate Era

#217

Post by eru »

vezzy-fnord wrote: post #214
ZenoArrow wrote: post #191

Earlier quoted context omitted.

> "increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... " Let's look at what is being said: "Unlike most public income support programs, increased earnings from the minimum wage are taxable. Over 25 percent of the increased earnings are collected back as income and payroll taxes" Is that a problem? The minimum wage should be the minimum needed to li…

Competition drives prices down, but chances are people with limited options to shop around and who disproportionately head towards mass retailers already , by example, live in areas with im perfect competition and in the worst case, food deserts. As such, a minimum wage would seem to negate itself again.

> Competition drives prices down, [...]

Tell that to Google and Facebook bidding on programmers.. Or people trying to buy real estate in London.

Re: Fed Ends Zero-Rate Era

#218

Post by Renevith »

encoderer wrote: post #124
danieltillett wrote: post #82

Earlier quoted context omitted.

The fact that we can borrow at 3% for 30 years and we don't use this to invest in productive infrastructure assets is insane.

Who is we? The federal govt can borrow at far lower rates than 3%.

Not for 30 years. In fact, as of yesterday 12/15, the 30-year treasury rate was exactly 3.00%.

https://www.treasury.gov/resource-center/data-chart-center/i...

Re: Fed Ends Zero-Rate Era

#219

Post by toomuchtodo »

gohrt wrote: post #213
toomuchtodo wrote: post #185

Earlier quoted context omitted.

> Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said. > "We won't automatically change deposit rates because they aren't tied directly to the prime," a JPMorgan Chase spokesperson told CNBC. "We'll continue to monitor the market to make sure we stay competitive." Heads I win, tails yo…

Does it matter though? 21st Century, everyone with savings can open a Vanguard mutual fund account with the risk/reward profile of their choosing, that's almost as convenient wrt withdrawals.

I have yet to be convinced there's no downside to everyone piling into ETFs in Vanguard. Also, funds are traditionally not FDIC insured as checking and savings accounts.

Money market funds have broken the buck before. Its rare, but can happen.

Re: Fed Ends Zero-Rate Era

#220

Post by gohrt »

vezzy-fnord wrote: post #74
toomuchtodo wrote: post #51

Earlier quoted context omitted.

Exactly correct. The Federal Reserve has the knobs and levers to create asset bubbles, but not to stoke consumer demand. Only Congress can do that with legislation increasing the minimum wage, changing corporate taxes so it behooves companies to pay employees more, or legislation increasing entitlements such as social security. Those in lower and middle classes are the ones who govern the velocity of money through th…

increasing the minimum wage Be careful what you wish for: http://marginalrevolution.com/marginalrevolution/2015/03/how... legislation increasing entitlements such as social security Expected to run structural deficits by a certain point. Theoretically speaking, an endogenously determined fiat money system doesn't really have "government debt" what with it being the sovereign issuer of debt to begin with, but in reali…

Form the linked article:

> allocates benefits as higher earnings nearly evenly across the income distribution

OK by me. Note that it doesn't allocate benefit to idle owners f investment income.

> Even after taxes, 27.6 percent of increased earnings go to families in the top 40 percent of the income distribution.

"top 40%" is rather silly bucket. That includes basically the median family, all the way to billionaires.

> Over 25 percent of the increased earnings are collected back as income and payroll taxes

(aka effectively a tax on businesses that pay the minimum wage)

It takes massive concern trolling to argue that this effect is worst than not raising the minimum wage

Pardon me if I overlooked the anti-minimum-wage camp yelling "lower taxes on the working poor!"

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