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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

#211

Post by Manuel_D »

throw0101a wrote: post #162
cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) Japan money supply: * https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Money supply ≠ inflation. > As we all should know, in the US, on 6/5/1933 FDR took…

Inflation is money supply relative to the amount of goods and services. E.g. I have 500 cars in the economy and $1000 in circulation. Over time I grow the economy, and now I have 1000 cars, and I still only have $1000 in circulation. In this scenario we'd have deflation. To maintain an equilibrium I'd need to increase the money supply commensurately, to $2000. If I increased supply to $4000 I'd have inflation.

Japan's money supply growth is actually pretty constrained. From 2007 to 2017 it want from 713 trillion to 960 trillion as per the chart you linked. For the USA [1], money supply in circulation went from 7 trillion to 13.3 trillion and inflation is correspondingly higher [2]. Granted, this source doesn't include recent data around the pandemic, so it's of limited use for analysis existing inflation trends.

1. https://fred.stlouisfed.org/series/MYAGM2USM052S

2. https://fred.stlouisfed.org/series/FPCPITOTLZGUSA

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

#212

Post by izend »

throw0101a wrote: post #162
cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) Japan money supply: * https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Money supply ≠ inflation. > As we all should know, in the US, on 6/5/1933 FDR took…

Compare the US M3 growth vs the Japanese M3 growth from 1990:

---------------------------

US JAN 1990 M3: $3.166T

US JAN 2022 M3: $21.8T

---------------------------

JPN JAN 1990 M3: ¥708T

JPN JAN 2022 M3: ¥1536T

---------------------------

US nearly 7x

JPN just over 2x

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

#213

Post by hgomersall »

jldugger wrote: post #184
cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> Inflation is almost 100% caused by "too much money" chasing "too few goods". I find it baffling that the "always and everywhere a monetary phenomenon" crowd never inspects velocity.

Worth a read https://new-wayland.com/blog/too-much-money/ and also https://economicsfromthetopdown.com/2021/11/24/the-truth-abo...

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

#214

Post by pdonis »

throw0101a wrote: post #162
cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) Japan money supply: * https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Money supply ≠ inflation. > As we all should know, in the US, on 6/5/1933 FDR took…

> Except for the multiple decades post-WW2 with Bretton Woods.

Um, what? The Bretton Woods agreement was part of "the fiat currency situation we now find ourselves in" (just an earlier stage of it where the government was still trying to pretend to some sort of "linkage" with gold, instead of just dropping the pretense altogether as was done in the early 1970s when Bretton Woods fell apart). No US money was backed by gold at all (not even United States Notes, which were still in circulation) after the FDR administration confiscated all private gold holdings and suspended redemption indefinitely in 1933.

> being on the gold standard didn't seem to help with inflation in the US during the 1920s

To call the monetary regime in place in the 1920s "the gold standard" is a serious misnomer. The Federal Reserve was created and authorized to print money (Federal Reserve Notes, not backed by gold or anything else) in 1913. A significant amount of that money was in circulation in the 1920s. Plus, even United States Notes, which were notionally backed by US gold reserves, were not expected to be redeemed for gold in any great quantities, since paper money was so much more convenient than gold for transactions; so the fact that those notes were notionally backed by gold did not have much practical effect on their exchange value. What did have a practical effect was the fact that United States Notes and Federal Reserve Notes exchanged at par (one dollar of each was required to have the same exchange value), so as more Federal Reserve Notes were printed, the exchange value of United States Notes dropped.

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

#215

Post by deutschew »

dustingetz wrote: post #202
deutschew wrote: post #192

Earlier quoted context omitted.

They've printed their way out of a recession since '08 by kicking the can down the road, and we can't kick it any further without creating a large number of losers. IMHO, it's a sign that American innovation has peaked. It's also reflected by the markedly decrease in intellectualism (as if American culture wasn't anti-intellectual to begin with). When I see young students from other countries and compare them to Amer…

A lot of the problems of focusing on equality can be connected to internet media making visible a tremendous amount of previously hidden inequity, (literacy rates are highest ever right?), I don't see what it has to do with interest rates I do see a separate parallel problem of too much dumb capital chasing returns that are in the past not the future, but that can also be connected to the maturation of internet/web p…

My point was that wealth gap increased due to QE and a class war masked as racial equity is being waged amongst the 99% as a result (without any net benefit to society since the 1. source of wealth come from excess supply of money which makes debt cheap for those in position to take advantage of it vs those who are oppressed by it 2. increasingly diminishing to non-existent value added widgets and services being sold, see my coinbase example above), not between the actual winners or losers of the system but rather the professional advocates from both ends who are seizing the narrative to push their political views in all spectrum of American society, culture and individuals through that tiny screen we carry in our pockets.

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

#216

Post by dragonwriter »

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…

Yeah, MMT basically asserts that the separation between fiscal and monetary policy is artificial, and that the only real constraint on “fiscal” policy (tax and spending) is monetary effects, not the metaphorical limited purse (“fisc”) that must be filled with revenue and borrowing to allow spending.

It is not “Congress can spend willy-nilly” but “Congress needs to stop thinking about fiscal balance and start thinking like the Fed.” (Or, perhaps, “Congress needs to define fiscal policy with movable levers which it gives control of to the Fed or a Fed-like body.”)

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

#217

Post by munificent »

tonguez wrote: post #158
tomc1985 wrote: post #105

Earlier quoted context omitted.

Jesus Christ, work til you die eh? For a lot of people, what is even the point of living if there's no retirement to enjoy? They are an extractive class insofar as their present contributions are net negative. But you are forgetting they likely spent their entire life building up that account, both in terms of an actual retirement and the broader accounting of total life's contributions. Indeed, it is something that…

"For a lot of people, what is even the point of living if there's no retirement to enjoy?" The point is you are supposed to be helping other people in some way. Not just being a useless turd and forcing young functional people pay rent to you so that you can do nothing but sit on your fat ass and shit in your diaper. They also lived in a society that was much more prosperous than any young person ever will. Consideri…

TIL that saving up so that one can afford to pay their own bills after they are too old and infirm to work is "being a self-centered moron".

I guess the alternative is to not have any savings and rely on others to take care of them and that is somehow less self-centered?

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

#218

Post by at-fates-hands »

AviationAtom wrote: post #193
cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

You shared my exact sentiment. 0.25% is far too small. The reason we even discussed negative rates when COVID hit was because the Fed was too afraid hike rates more rapidly, hence we hadn't gotten to a reasonable rate, before it called for being dialed back. This left very little "powder in the keg." At the pace we are going now I fear it's only a matter of time before the next 2008 hits, and we have nothing left to…

>> You shared my exact sentiment. 0.25% is far too small.

Most reports were doubling the rate to 4% or greater. I think after the talk of moving it up that fast and that drastically, a lot of investors started getting the jitters:

https://www.cnbc.com/2022/02/23/the-market-has-adjusted-its-...

That change came after traders had been pricing a move double that size at the March 15-16 Federal Open Market Committee meeting. Central bankers have been dousing the idea of needing to go up 50 basis points at the meeting, with New York Fed President John Williams saying last week that there is “no compelling argument” for the move.

Still, it hasn’t made investors any less nervous about what the path ahead will look like.

“I’m not so worried about whether they do 50 [basis] points out of the gate or not. But I also think they shouldn’t overdo it here,” said Jim Paulsen, chief investment strategist at the Leuthold Group. “You can do 25, and if you want to do another one soon, you can do it, rather than add additional disruption or uncertainty.”

I can understand the idea of going slowly and evaluating the effect on the current markets with inflation still going on. I like the cautious approach considering the massive fallout if it did suddenly jump up to 4%, you'd see a ton of money get pulled out of the market which could be disastrous.

But like you said, either way could lead to another staggering recession so I'm not 100% confident in either approach.

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

#219

Post by avrionov »

mtremsal wrote: post #87
avrionov wrote: post #17

Not only that they increased the rate, but also they'll reduce the buying of securities: "In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting." Which may have a bigger effect.

> Which may have a bigger effect. Could you please explain? Isn't that just a way to "enforce" the target rate in auctions to the primary market?

Here is a good explanation: https://www.brookings.edu/blog/up-front/2021/07/15/what-does...

The federal reserves buys bonds / treasures and mortgage backed securities.

It has an effect on long term interest rates and mortgages (keeping the interests low).

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

#220

Post by throwawayboise »

joshkrycerick wrote: post #144
throwawayboise wrote: post #104

Earlier quoted context omitted.

Most "boomers" have a house maybe worth a few 100K, if they even own their own home. Very few live in million dollar homes.

California would like a word.

That's a small segment of "boomers"
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