This was expected since at least December. The market is pricing in 6 more rate increases throughout the year. They simply can't afford to lag behind inflation too much for too long.
US Federal Reserve raises interest rates for first time since 2018
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Re: US Federal Reserve raises interest rates for first time since 2018
#222so many people in this thread will play the common HN intellectual and exclaim how the fed is obviously trapped, or what they did wrong to do get us here. And in a different thread will trash bitcoin only focusing on its energy consumption and not its potential sound money properties. If Bitcoin is bad, and the Fed (and every government ever) created a situation which will only lead to poverty & widening wealth gap,…
i don't think bitcoin is the saviour it claims, especially now it's being used and swayed by all the usual suspects of the old monetary system. It's now just another bucket within sea of capital. Used to adjust and move capital around, ended up to be just another instrument....
Re: US Federal Reserve raises interest rates for first time since 2018
#223so many people in this thread will play the common HN intellectual and exclaim how the fed is obviously trapped, or what they did wrong to do get us here. And in a different thread will trash bitcoin only focusing on its energy consumption and not its potential sound money properties. If Bitcoin is bad, and the Fed (and every government ever) created a situation which will only lead to poverty & widening wealth gap,…
The solution to bad governance is better governance, not utopianism. Problems like this are the entire reason that democratic countries have elections and peaceful transfers of power. Does it always work? No. But looking for a technical solution (short of all powerful general AI) to a human problem will only lead to pain when the human problems start creeping back in to whatever technical solution was designed.
Re: US Federal Reserve raises interest rates for first time since 2018
#224Earlier quoted context omitted.
Yes, because it increases the money supply. We are supposed to tighten when things are good by raising rates. At this point they need to raise rates to pull money out of the system. Because with covid, not only did we cut rates, we put in a HUGE amount of money and that was really irresponsible. And now we are seeing the repercussions with inflation lowering the value of the dollar.
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…
The Fed raised interest rates into Trump's first two years in office.
Re: US Federal Reserve raises interest rates for first time since 2018
#225Good thing I didn't come here for informed economic commentary. Now back to the blogosphere.
The only thing that everyone agreed on here is how equally uninformed they themselves are.
Which is a breath of fresh air compared to certain places where everyone believes they are the best informed and most well thought out.
Re: US Federal Reserve raises interest rates for first time since 2018
#226This was expected since at least December. The market is pricing in 6 more rate increases throughout the year. They simply can't afford to lag behind inflation too much for too long.
Am I incorrect in thinking they also can’t afford to let rates rise too much as they can’t afford the interest payments?
Re: US Federal Reserve raises interest rates for first time since 2018
#227Inflation 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…
> I'm quite surprised that price inflation isn't significantly worse.
The one benefit of wealth disparity in the US and around the world.
I agree that if all that new money had been evenly distributed, then it would have most likely caused crazy inflation. But it wasn't. It went directly into the coffers of large banks, corporations and arms manufacturers, and eventually into the accounts of the 0.001%.
The supply of money has to be available to spend in order for it to affect the economy. With the top 1% owning 40% of the wealth, it means all that money is essentially locked away from the general public.
Re: US Federal Reserve raises interest rates for first time since 2018
#228here begins the process of the fed sllowwwwly raising rates, well behind the rate of inflation. Either buy stocks or lose $ due to inflation. NO way out
Which isn't what's happening. It's been months now that this was being floated, and the stock market has been volatile the last half year, an outright bear market in some sectors. Trillions in equity have evaporated already, and that's not even taking into account the wealth erosion of high inflation.
Now's the time to be skilled, but not the time to be a rentier.
Re: US Federal Reserve raises interest rates for first time since 2018
#229This was expected since at least December. The market is pricing in 6 more rate increases throughout the year. They simply can't afford to lag behind inflation too much for too long.
Am I incorrect in thinking they also can’t afford to let rates rise too much as they can’t afford the interest payments?
The FED receive interest payments. They don't make them.
But yes, raising too much too fast will cause stress and defaults, and nobody wants that unless it's absolutely necessary.
Re: US Federal Reserve raises interest rates for first time since 2018
#230Earlier quoted context omitted.
It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?
Lowering interest rates makes capital cheaper, which does spur investment and thus economic development, so, it can certainly have that effect given the right circumstances. But keep it too low, too long, and you see money start flying around too quickly, getting a little too loose because everyone wants to get theirs, and then they start inventing things like mortgage-backed securities and everyone starts over-lever…
> Lowering interest rates makes capital cheaper, which does spur investment and thus economic development
There are diminishing marginal returns to this, and when rates were already close to zero it is hard to imagine going to zero spurred much more than meme stocks and YOLO gambles.