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Fed Ends Zero-Rate Era

bloomberg.com

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Re: Fed Ends Zero-Rate Era

#291

Post by skylan_q »

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…

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.

I'm pretty sure it doesn't mean nothing and that it actually is more than just symbolic.

Re: Fed Ends Zero-Rate Era

#292

Post by encoderer »

Renevith wrote: post #218
encoderer wrote: post #124

Earlier quoted context omitted.

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...

Great link, thank you!

Re: Fed Ends Zero-Rate Era

#293

Post by danieltillett »

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%.

We the people.

I was being a bit generous with the we bit since I am Australian, but the same thing applies to our government too. My state just sold off a hugely productive piece of infrastructure (electricity poles and wires) to pay down debt. The crazy thing is the infrastructure returned twice as much per year in dividends than the interest on the debt retired.

Re: Fed Ends Zero-Rate Era

#294

Post by nhaehnle »

dragonwriter wrote: post #258
vezzy-fnord wrote: post #235

Earlier quoted context omitted.

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e... It's pretty weak. The fi…

> The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. All policy arguments are moral. Economics (to the extent it is a useful, predictive, empirical science) can tell you what outcomes to expect from what actions, but not tell which actions should be preferred, without firs…

Your first sentence is phrased too extreme :)

People who agree about objectives can still have (non-moral) policy arguments. That may be due to a misunderstanding or a lack of knowledge by some of the parties, or simply because society (and hence the economy as part of it) is an extremely complex dynamic system that we only understand in broad strokes. That's when the good kind of economics happens. (Unfortunately, most economics that you see in public is the bad kind perpetuated by "think tanks".)

Re: Fed Ends Zero-Rate Era

#295

Post by nikdaheratik »

gotchange wrote: post #167
mywittyname wrote: post #157

Earlier quoted context omitted.

The USD is about as free market as a currency can be reasonably obtain. The Fed allows the market to drive the money supply through lending. Institutional banks can effectively create an unlimited supply of money on demand through lending; they just ask the Fed for money and pay the discount rate. So it's largely the market that drives short and medium term inflation through borrowing. The Fed uses treasury bonds to…

> The USD is about as free market as a currency can be reasonably obtain. Nothing about the USD is free market. The USD is shored up by the petro dollar standard and its status as a reserve currency esp. in the commodities market and its supply and management is governed by a quasi-private institution that is in bed with Wall St.

Not only did you ignore what the guy said, but you don't even seem to understand the points you are trying to make. The reason why the dollar is a reserve currency, and why so many oil contracts are made out in USD is because both parties have a reasonable expectation that it will retain its relative value over a reasonable time period. This means that it is a reserve currency because no one group can manipulate its value. If it was subject to as much political machination as you seem to imply, then no one would want to use it.

Re: Fed Ends Zero-Rate Era

#296

Post by gozur88 »

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…

>Not raising the interest paid out on short term bonds so that institutions are incentivized to keep even more money in bonds rather than putting them to work in the economy.

There's plenty of money around. Oceans of it. The problem is a lack of demand.

Re: Fed Ends Zero-Rate Era

#297

Post by ceejayoz »

Spooky23 wrote: post #265
vezzy-fnord wrote: post #235

Earlier quoted context omitted.

The reason many economists are unsure or against the minimum wage is not because they're some agents of bourgeoisie capitalists, but because arguments in favor of it tend to be moral, not economic. For instance, here's a case for the minimum wage presented by an (otherwise very knowledgeable, I'll grant) Post-Keynesian economist: http://socialdemocracy21stcentury.blogspot.com/2013/02/the-e... It's pretty weak. The fi…

Minimum wage has been around for a long time, and there are plenty of counter examples like restaurant workers and soldiers who could be studied who often get paid less than the minimum wage that has been around for decades. You also cannot ignore that when the social safety net exceeds the value of working wages, particularly for women, there's a strong incentive to not work. Given the unavailability or high cost of…

> You also cannot ignore that when the social safety net exceeds the value of working wages, particularly for women, there's a strong incentive to not work. Given the unavailability or high cost of health insurance, Medicaid makes that a no brainier for any woman with one or more children.

Which is why basic income, single-payer health insurance, and free college are such compelling ideas.

Re: Fed Ends Zero-Rate Era

#298

Post by gozur88 »

adventured wrote: post #239
xxpor wrote: post #199

Earlier quoted context omitted.

>Look up the term dead weight losses to get an idea of how bad government spending is for the economy versus private spending. Look up the term Fiscal Multiplier to get an idea how good government spending is for the economy vs private spending.

We have indeed seen it in action since 2008, to horrific results. $9+ trillion in new public debt added in eight years, to go with ~$11 trillion in additional government spending, boosting federal spending by nearly 1/2, to achieve the slowest average growth in non-recessionary times in US history, and the slowest employment recovery in US history. More typically you get examples like the governments of Japan and Chi…

>$9+ trillion in new public debt added in eight years, to go with ~$11 trillion in additional government spending, boosting federal spending by nearly 1/2, to achieve the slowest average growth in non-recessionary times in US history, and the slowest employment recovery in US history.

While I agree with the general outlines of your point, this really doesn't make the case. It's impossible to know what would have happened in the absence of whatever policy you want to discuss. You can say "We spent X and as a result our recession was the longest ever." But you could also say "We spent X, and despite that our recession was the longest ever." It's impossible to prove one way or another.

Re: Fed Ends Zero-Rate Era

#299

Post by millstone »

brc wrote: post #238
millstone wrote: post #186

Earlier quoted context omitted.

You're arguing that a glut is due to producing what is not desired, instead of what is desired. So when there is a glut in one area, there must be corresponding shortages in other areas. This is easy to debunk. Look at the labor market. The US unemployment rate went from ~4.5% in 2007 to 10% in 2010: a big labor glut. The "malinvestment" theory predicts unfulfilled demand comparable in size to the unemployment. Large…

I don't agree with the statement that a glut in one area must equal a surplus elsewhere. You've added at interpretation to my statement. If a person produces hot pink sweaters and finds nobody wants them, that doesn't mean there is a shortage of blue sweaters, or even sweaters in general. Additionally, it might mean that people might want hot pink sweaters, but not at the price being asked. Taking this back to labor…

You wrote "The person who produces unwanted goods and services must...switch production to what is desired," which presupposes that there is something else desired, i.e. there is no general glut.

For example, we Americans demand less oil today than we did 10 years ago. This contributes to the oil glut, which has turned many drill sites into malinvestments and caused layoffs in the petroleum industry. How can you say that that consumer demand is irrelevant here? Isn't it obvious that if there was a nationwide ad campaign to buy gas guzzlers and take them on road trips, it would increase oil prices and improve the state of the petroleum industry?

And if it can happen in the petroleum sector, why not at the scale of the entire economy?

Re: Fed Ends Zero-Rate Era

#300

Post by gozur88 »

Estragon wrote: post #101
nemanja wrote: post #68

Earlier quoted context omitted.

> ...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.

I don't think anybody believed there would be a larger increase, particularly in light of the lack of inflation.
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