Earlier quoted context omitted.
That's a bit callous of you, not to mention shortsighted. If the Baby Boomer generation loses financial security, they will as a group A) tighten their spending habits and B) not retire. Either of these effects on their own would hurt the younger generations, and together would make the already slow wealth building hit a brick wall. (I'm 25, for the record, and I don't expect to be debt-free or a homeowner until well…
It’s really not callous. If a boomer’s 401(k) is still heavy on stocks they’re being greedy! De-risk, people. I don’t want to let inflation tank my economy to protect a generation of greedy grandparents.
US Federal Reserve raises interest rates for first time since 2018
241–250 of 693 posts
Re: US Federal Reserve raises interest rates for first time since 2018
#242An 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…
Re: US Federal Reserve raises interest rates for first time since 2018
#243Earlier quoted context omitted.
There's no evidence at all for this. The exotic mortgage products (e.g. reverse ARMs) have essentially disappeared, people's homes are well capitalized, lending standards are much higher than they were, there's very low levels of home equity debt, overall debt payments as a percent of household income are at very low levels. The people waiting for a housing crash are going to wait a long time. This one chart sums it…
Yeah but that's an overall lowering of debt servicing as a percent of disposable income. The only part that hasn't dropped much is consumer debt. Plus while reverse amortization might be less common, ARMs generally are still very popular and you'll see a hike in overall debt service associated with rising interest rates. I don't know what's gonna happen with the housing market and I don't think it'll crash either but…
And metrics like credit card delinquencies are at historic lows: https://fred.stlouisfed.org/series/DRCCLACBS
ARMs actually aren't very popular - fewer than 15% of new mortgages are ARM.
> BlackRock bought what, 10-15% of the houses sold in 2020?
People vastly overestimate how large players like Blackrock are. There are something like 80 million single-family homes in the US. Of these, Blackrock owns 80 thousand. If they bought every one of those homes in 2020 (they didn't) - it would represent more like 1% of homes sold that year. And of course there are millions of condos not figured into my denominator. They're huge, but way under 1% of purchases.
Re: US Federal Reserve raises interest rates for first time since 2018
#244Earlier quoted context omitted.
First I have heard of this and quite interesting to learn. Could you explain the difference ? Does this mean they are going to implement the rate increase some point in future ala target ?
The FOMC(Federal Open Market Committee) is the policy arm of the Fed. They can not and do not set interest rates directly. What they do is adjust the money supply to try to influence interest rates towards a target range. One of the tools they have to do this is the the federal funds rate which is the rate that banks charge each other to borrow money overnight in order to meet their reserve requirements. The Fed Fund…
Re: US Federal Reserve raises interest rates for first time since 2018
#245They did the absolute minimum to appear to be able to say they are dong something. With official inflation nearing 8%, this is nowhere near enough. SO far equity markets agree this is effectively nothing
The Fed said to expect up to 7 increases this year.
Re: US Federal Reserve raises interest rates for first time since 2018
#246Re: US Federal Reserve raises interest rates for first time since 2018
#247Earlier quoted context omitted.
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…
Re: US Federal Reserve raises interest rates for first time since 2018
#248Earlier quoted context omitted.
Oh no! Boomers will lose 401(k) value! The horror!
We can always just bring in more immigrants since that seems to be the solution to every problem like this. /s
On the other hand, as there’s effectively no border enforcement during this administration, I guess they’re already accomplishing their goals without needing the media to ram “Americans can’t/won’t do the jobs” down your throat.
Re: US Federal Reserve raises interest rates for first time since 2018
#249Earlier quoted context omitted.
> "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…
I have no idea how anybody looks at Japan without realizing that the MMT people got it right. Thought experiment: If the government printed money to send unemployed people to uninhabited farmland to start cultivating it (in complete isolation from the rest of the economy) would it cause inflation for the rest of us who aren't connected? If that community was then connected to the rest of the world, would the economic…
First, this never happens, and certainly is not what's been happening for decades now in the US with the Fed printing money, so it's not a very relevant thought experiment.
Second, taking your scenario as given for the sake of argument, what was stopping the unemployed people from cultivating the uninhabited farmland before? Was it the absence of money, or the fact that they didn't own the farmland?
In other words, the real operative point in your thought experiment is not the government printing money, but the government giving tangible resources (uninhabited farmland) to a group of unemployed people, so that they will produce something of value from it. The money is really incidental: once they start producing more food than they can consume themselves, they will be able to acquire their own money by selling the excess. The initial printed money is really more like a one-time grant of working capital, so they can buy enough initial supplies to get the operation going. And money doesn't even have to be printed for that: the government could just allocate some tax revenue to it.
Third, in our actual system as it actually works, who does get newly printed money? Is it unemployed people who could be doing productive work but aren't? That was perhaps true for COVID relief checks--although those didn't really enable anyone to go back to work, they enabled people to stay out of work, not producing anything, for longer--but in any case those don't actually add up to a lot in terms of the total US money supply. The vast majority of the money the Fed prints goes to financial institutions, and the only thing whose "production" is increased by that printed money is loans. Those loans, since they are mostly mortgages, will certainly redirect productive capacity in the economy (so we build more McMansions and commercial office buildings that sit empty for years after being built, while our roads, bridges, drainage systems, electrical power grid, and other infrastructure deteriorate), but they don't increase productive capacity overall. In other words, they're just redistribution--and almost always (with the COVID relief checks being the only possible exception I can see) from the poor to the rich, since that's who the newly printed money goes to (financial institutions).
> You can clearly see that the limitation on printing money is unutilized resources in the economy.
No, we can clearly see that the limitation on printing money is how much redistribution from the poor to the rich the rich think they can get away with. Remember that the Fed was initially advocated to the US government by rich bankers who were tired of the government coming to them for bailouts whenever there was a financial panic due to stupid government interventions (the Panic of 1907 was the specific one that prompted the legislation that became the Federal Reserve Act), so they decided to put a system in place that would make it so the costs of the bailouts ended up being paid by ordinary citizens (who wouldn't get any of the money the Fed would print) instead of them.
Re: US Federal Reserve raises interest rates for first time since 2018
#250Earlier quoted context omitted.
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.