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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

#261

Post by jmalicki »

cjsplat wrote: post #235
simpthrown8id wrote: post #159

Earlier quoted context omitted.

>>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…

I can't repro the 45% number. BEA says 2021 US GDP is nearly $23T, CBO says total 2021 budget is $6.8T.

Federal budget is $6.8T, the 45% includes state and local government spending as well.

https://fred.stlouisfed.org/graph/?g=8fX https://en.wikipedia.org/wiki/Government_spending_in_the_Uni....

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

#262

Post by colechristensen »

jeffalbertson wrote: post #186

so 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 fed was able to maintain a functioning economy without major disruption in essentials (i.e. there weren't major shocks in being able to buy food or maintain housing) despite shutting down or significantly modifying large sections of the economy for a significant time.

They aren't "trapped" this is the natural and expected consequence of creating a lot more money to sidestep a temporary condition. Considering the US is the strongest-ish economy in the world and the rest of the world had to do the same thing, there shouldn't be terrible consequences as long as nobody does anything really stupid.

Bitcoin, gold, and anti-fed fanboys have a tendency to have a poor understanding at best of global economics with very basic misunderstandings like thinking that bumping the rate bumps the rates of all previous bonds.

Some people who do advocate for those things do know what they are talking about and can argue valid points which are up for discussion, but you don't actually see those very often.

Monetary policy in the US has made major mistakes, but it has been doing a pretty good job, and importantly has avoided the worst kinds of disaster for a long time. What it did during covid was essentially the only option, what a gold standard economy would have been able to do would have led to much worse outcomes.

People will complain about anything. The HN crowd generally overestimates its expertise in matters not related to startup tech (i.e. physics, engineering, economics posts often have pretty awful comments)

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

#263

Post by athrowaway3z »

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…

I keep these things in the back of my mind when talking about economic theories:

- an economist is someone who can tell you today why he was wrong yesterday.

- the central bank of Sweden made up an award in the honor of Nobel. Twice the recipient made a point to remind people economic theory is not an exact science.

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

#264

Post by boppo1 »

tw600040 wrote: post #132
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…

//On the one hand, retirees bring nothing of real value to the economy Not true. If retirees have money, that's money they got paid for doing actual contribution. If you devalue that money that's devaluing their life's work and contributions. Not an advocate for crypto etc, but it feels wrong that a bunch of folks like Powell etc get to decide the fate of whole generation's peaceful retirement.

>feels wrong

Because it is. Why did we start interest rate interventions again?

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

#265

Post by r00fus »

yalogin wrote: post #254

We did waste the 3 yrs before Covid hit by not increasing interest rates and not reducing Fed's money printing. I don't know if it's the fed or if the government pushing to win elections, but feels like we didn't take care of the house in good times and we have led ourselves into this cycle.

Hmm - I wonder who appointed the current Fed chair?

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

#266

Post by colechristensen »

tamaharbor wrote: post #28

We had soaring inflation in the early 80’s, but at that time loan interest rates and certificate of deposit rates were much higher than they are now. Does anyone know why the difference?

Lag, it just hasn't happened yet.

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

#267

Post by voisin »

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.

Velocity always seems to be treated as independent. When velocity plummets, Fed increases money supply. When velocity recovers, the money supply never shrinks. It is a one-way ratchet. Why is that?

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

#269

Post by Scarblac »

tarsinge wrote: post #242
simpthrown8id wrote: post #159

Earlier quoted context omitted.

>>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…

As I understand it taxes in MMT are just destruction of money, it's the essential counterpart of money creation used to balance supply. It's irrelevant to GDP and spending in that model, since in MMT the government doesn't need taxes to spend, it just print what it needs, that's the core idea.

I seem to recall that France used to do this -- create money for government spending, taxed money ceases to exist, no need for government debt. But I can't find anything about it, and I don't know if I'm just not using the right search terms.

Has this been put into practice in large countries before?

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