Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why I Dissented

medium.com

Post reply on HN
Print view View original

31–40 of 65 posts

Re: Why I Dissented

#31

Post by YZF »

tempestn wrote: post #30
YZF wrote: post #27

Earlier quoted context omitted.

Raising rates signals things are "normalizing". It may be what's necessary to convince everyone that they really are. A lot of this is about the psychology of the market and sometimes the psychology has to lead the change. When companies feel things are "normal" they will become less conservative with their investments. With a low interest rates, somewhat counter-intuitively, everyone has been in a fight or flight mo…

The essay actually addresses this right at the end, in the last paragraph before the conclusion: > One additional consideration that I think about is the possibility that low rates are scaring people and causing them to save more and invest less, while conventional wisdom is that low rates should lead to more investment and less saving. It is not a crazy argument because negative rates seem to be having unexpected re…

Right. It's a chicken and egg though. The Fed isn't just raising rates. They're also saying we have full employment, inflation is up, so we can begin to normalize. Rates are still low and the increases are measured. Keeping them low would signal the Fed thinks something is wrong.

EDIT: So far the small increases haven't had any adverse effects. If anything the opposite. So that's one counter-argument. The other thing to consider is that it's not the absolute rate or the derivative of the rate. It's the actions of the Fed vs. the market expectations. The expectation has been set for a long while that the Fed would try to normalize. If anything the Fed has not quite met the expectation. My last point is that the rates businesses borrow at are somewhat disconnected from the Fed rates, at times of higher perceived risk the premium vs. the Fed rate is higher. So the Fed raising rates doesn't necessarily increase costs to businesses.

Re: Why I Dissented

#32

Post by trendia »

tootie wrote: post #25

Kashkari is a chump and my read of this is that he's sucking up the Trump administration who has been critical of the Fed for holding back growth to further his own political aspirations. http://www.rollingstone.com/politics/news/bailout-architect-...

What has Kashkari done that makes you think he is a "chump"?

Re: Why I Dissented

#33

Post by alvern »

tootie wrote: post #25

Kashkari is a chump and my read of this is that he's sucking up the Trump administration who has been critical of the Fed for holding back growth to further his own political aspirations. http://www.rollingstone.com/politics/news/bailout-architect-...

That RS article is kinda gossipy garbage, the WaPo article that was written about him in 2009 does a better job illuminating Kashkari.

http://www.washingtonpost.com/wp-dyn/content/article/2009/12...

Re: Why I Dissented

#34

Post by boulos »

pdog wrote: post #2

I don't agree with the premise (that the dual mandate set by Congress of maximum employment and 2% inflation should be the overarching goal of the Fed) or the conclusion (that the Fed should wait on raising interest rates), but I appreciate the transparency and attention to detail of Mr. Kashkari's analysis. More public officials should publish the reasoning behind their decisions.

> I don't agree with the premise (that the dual mandate set by Congress of maximum employment and 2% inflation should be the overarching goal of the Fed)

What would you propose instead? Anytime they seemingly target something else, they're (rightly, in my opinion) chastised for overstepping their mandate. Are you instead arguing they should have a different mandate? (If not, I don't think we agree on the definition of mandate ;))

Re: Why I Dissented

#35

Post by boulos »

I feel like there's an important missing statement: the next meeting of the FOMC is on May 2 [1], so waiting to see if inflation or wages really pick up would not have been a big deal. Most people are arguing we need to raise rates now, but I don't see the argument versus six weeks from now.

[1] https://www.federalreserve.gov/monetarypolicy/fomccalendars....

Re: Why I Dissented

#36

Post by chad_strategic »

The premise that government should dictate the interest rates and not let the market determine rates through price discovery is absurd. 100 of Phd's couldn't predict the housing bubble and the financial crisis of 08 and if you think we are safe from that again, good luck.

http://amzn.to/2mGM5hA

Re: Why I Dissented

#37

Post by rodionos »

FWIW, the US Fed is the only major central bank in the world that is substantially privately owned. All of its federal reserve banks are owned and governed by private shareholders. The implicit interests of these stakeholders can be considered as the 3rd mandate, even though it is not encoded in legislation.

Re: Why I Dissented

#38

Post by goldenkey »

chad_strategic wrote: post #36

The premise that government should dictate the interest rates and not let the market determine rates through price discovery is absurd. 100 of Phd's couldn't predict the housing bubble and the financial crisis of 08 and if you think we are safe from that again, good luck. http://amzn.to/2mGM5hA

Please dont post affiliate links on HN, especially shortlinks intended to hide the actual tagged URL. You won't go far here doing so.

Untracked URL:

https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserv...

Re: Why I Dissented

#39

Post by grigjd3 »

u801e wrote: post #17
autokad wrote: post #13

Earlier quoted context omitted.

they could always use quantitative easing. the argument "we need to raise rates so we can lower them if the economy tanks" doesn't fit well with me. its sort of like saying lets take poison so that if we get sick we can stop taking poison and feel better. it might hold some water if there was inflation, but there's not. deflation is still a bigger risk. I think the fed should use interest rates to fight inflation, an…

> it might hold some water if there was inflation, but there's not. deflation is still a bigger risk. I've always wondered if the worry about deflation is overblown. We still have a lot of things that people and businesses buy that have inelastic demand which will not change regardless of whether or not we are experiencing deflation. Also, when looking at expenses related to computer hardware, it has been going down…

Under deflation, there is decreasing motivation to work or produce. Why buy seeds to grow food when your money could just buy more later? A little inflation motivates people to produce, either by labor, investment or both.

Re: Why I Dissented

#40

Post by patrickg_zill »

skywhopper wrote: post #14

Glad to hear that someone on the Fed has some sense. The confusion of "target" with "ceiling" has been disastrous for the economic recovery. Raising rates now is a terrible idea. Moderate inflation is good for an economy based on credit, _especially_ so when so many individuals are overburdened by overwhelming student loan debt and underwater mortgages. Running under 2% core inflation for the past nine years has dest…

What is the source of your view, that supports your pro inflation statements?

I have heard this argument before, but only get arguments from authority when I ask for actual data that shows this.

Post reply on HN