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US Federal Reserve raises interest rates for first time since 2018

theguardian.com

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Re: US Federal Reserve raises interest rates for first time since 2018

#171

Post by hn_throwaway_99 »

simpthrown8id wrote: post #159
andreyk wrote: post #137

An interesting aspect of this is that the endless printing of money in the last few years was a sort of stress test of modern monetary theory, which has been seeing lots of discussion in those same years. I never quite understood how this theory would work while avoiding inflation, and what's happening now seems to at least be related - https://www.nytimes.com/2022/02/06/business/economy/modern-m... Conceptually the…

>>Conceptually the answer in the theory is to suck up the excess money with taxes Govt spending is already 45% of GDP, so there's not much room to increase it more. As for MMT, I think what the MMT crowd doesn't realize is that there's a lot of latent inflation coming. Asset prices and CPI do not go up in tandem. First Asset prices are inflated, then later for the next decade or so, as people slowly make withdrawals…

> >>Conceptually the answer in the theory is to suck up the excess money with taxes

> Govt spending is already 45% of GDP, so there's not much room to increase it more.

Taxes (government income) is not all that related to government spending, as we've seen recently.

Re: US Federal Reserve raises interest rates for first time since 2018

#173

Post by chiefalchemist »

MR4D wrote: post #65
mactitan wrote: post #54

The Fed is trapped: It can’t raise too much since trillions of debt rely on very low rates. If it doesn’t raise enough then inflation will cause a recession.

It’s even worse - if the Fed actions tank the markets, then millions of retirees who have been enjoying high market values are screwed and have no other source of wealth or income. I do not envy the position the Fed is in.

> I do not envy the position the Fed is in.

Let's not be naive. The Fed put itself in this position. You're correct. Most of the rest of us will - once again - take a massive shot to the wallet. But to The Fed and its "fan base" it's simply another cycle in the process of moving more from the bottom to the top.

Put another way, you or me are simply not The Fed's priority. I'm not sure why we voted for them.

That last bit is sarcasm.

Re: US Federal Reserve raises interest rates for first time since 2018

#174

Post by anonporridge »

tomc1985 wrote: post #142
anonporridge wrote: post #128

Earlier quoted context omitted.

> Jesus Christ, work til you die eh? That is the normal human experience. But also not what I'm suggesting.

Among the poverty-striken, sure. But nearly every society has some form of elder care.

True, but almost every society expects its elders to still do some kind of work, usually house work and child care, which helps free the healthy adults to do the more difficult work. Those who can't do that are usually very close to death.

Re: US Federal Reserve raises interest rates for first time since 2018

#175

Post by nightski »

pastor_bob wrote: post #127
sillyquiet wrote: post #91

Earlier quoted context omitted.

What a horrific ageist and bigoted comment. This literally could mean the difference between living independently or not for a lot of people. Not to mention everybody working today with a 401k as their retirement plan will lose value no matter their age, which means they have to work longer than planned. This is a real life impact to a lot of people.

If you're in all stocks (growth particularly) and retired, you're living pretty foolishly.

Depends. If you plan to draw down your savings to 0 to survive retirement maybe. But if you have enough saved up for a safe withdrawal rate to survive retirement, why not keep it invested normally and have more for your inheritors?

Re: US Federal Reserve raises interest rates for first time since 2018

#176

Post by pessimizer »

mc32 wrote: post #110
anonporridge wrote: post #74

Earlier quoted context omitted.

It's rough. On the one hand, retirees bring nothing of real value to the economy. We serve them because of the obligations they built up over their working careers. But, they get the focus of attention because a) they have all the money, b) they have all the time to be engaged in politics, and c) they vote. But they're purely an extractive cost center. A kind of economic parasite that keeps getting bigger and bigger…

Retirees are everyone, except older. What would “you”[1]want from the fed once a retiree? [1] other working people once they too retire.

Far fewer young people have any possibility of retiring. You can't build retirement from gig labor and shitty service jobs.

Re: US Federal Reserve raises interest rates for first time since 2018

#177

Post by AnimalMuppet »

photochemsyn wrote: post #118
mcs5280 wrote: post #56

The Fed has created a debt bomb.

Probably best to not let Wall Street gamble with boomer retirement money on when the debt bomb will blow up. Putting Glass-Steagall rules on investment vs. commercial banking back in place would probably make sense around now.

It would have made sense to never remove them in the first place.

Re: US Federal Reserve raises interest rates for first time since 2018

#178

Post by ryandrake »

windpower wrote: post #68
bshep wrote: post #55

Earlier quoted context omitted.

How did anyone buy a house or a car with interest rates in the 20%s?

Not 100% sure about cars, but houses were cheaper. Interest rates being higher means that the monthly payment on a given mortgage amount is higher, meaning the house price that an average buyer can afford goes down. Low interest rates mean that people can afford a more expensive house, and that causes prices to go up. Anecdotally, my dad complains about paying an interest rate in the teens for the house I grew up in.…

Also, returns from other investments tied to interest rates were higher. I seem to recall seeing CD rates >10% in the '80s. I know I had a CD paying >6% as late as the mid '90s. This world where basic banking investments are pointless and pay ~0% is a historic anomaly.

Re: US Federal Reserve raises interest rates for first time since 2018

#179

Post by InitialLastName »

throwaway0a5e wrote: post #135
InitialLastName wrote: post #45

Earlier quoted context omitted.

We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of advice before Covid when things were good (it's hard to remember now how hot the economy was in 2016-2019, but it was really hot), by cutting taxes and continuing to print money and keep the rates low to cover it. As the tax cut detractors correctly predicted, th…

I don't see how tax policy matters in this case. That money still sloshes around. The only difference is who's nominally in control of it.

a) higher taxes enable the government to apply deflationary pressure on the economy (by removing currency from circulation)

b) Reducing taxes without cutting spending (because it will "pay for itself in growth") leads to a larger deficit, which requires increased debt to cover, which triggers the money-printers.

Re: US Federal Reserve raises interest rates for first time since 2018

#180

Post by hn_throwaway_99 »

andreyk wrote: post #137

An interesting aspect of this is that the endless printing of money in the last few years was a sort of stress test of modern monetary theory, which has been seeing lots of discussion in those same years. I never quite understood how this theory would work while avoiding inflation, and what's happening now seems to at least be related - https://www.nytimes.com/2022/02/06/business/economy/modern-m... Conceptually the…

Here are the first two paragraphs on the MMT Wikipedia article:

> Modern Monetary Theory or Modern Money Theory (MMT) is a heterodox[1] macroeconomic theory that describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.[2][3] MMT is opposed to the mainstream understanding of macroeconomic theory, and has been criticized by many mainstream economists.[4][5][6]

> MMT says that governments create new money by using fiscal policy and that the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector.[7] MMT is debated with active dialogues about its theoretical integrity,[8] the implications of the policy recommendations of its proponents, and the extent to which it is actually divergent from orthodox macroeconomics.[9]

Regarding this being a "test" of MMT, I don't see why. The first part of the first sentence of that second paragraph, MMT says that governments create new money by using fiscal policy and that the primary risk once the economy reaches full employment is inflation, which seems to be precisely what has happened, no?

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