US Federal Reserve raises interest rates for first time since 2018 • Hacker News Board

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

#291

Post by standeven » Wed, Mar 16, 2022, 9:33 PM UTC

IncRnd wrote: post #274

hn_throwaway_99 wrote: post #180

Earlier quoted context omitted.

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…

> ...and that the primary risk once the economy reaches full employment is inflation, which seems to be precisely what has happened, no? Certainly, there is inflation. There isn't full employment.

How do you define full employment? The unemployment rate in the USA is currently 3.8%.

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

#292

Post by boppo1 » Wed, Mar 16, 2022, 9:33 PM UTC

ameister14 wrote: post #136

mikeyouse wrote: post #85

Earlier 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…

> BlackRock bought what, 10-15% of the houses sold in 2020

Is this official somewhere? I've seen it in headlines and heard it in soundbytes but did they disclose it in their 10k or something?

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

#293

Post by toyg » Wed, Mar 16, 2022, 9:34 PM UTC

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…

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

Several European countries are well over 50%. There is plenty of room.

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

#294

Post by drexlspivey » Wed, Mar 16, 2022, 9:34 PM UTC

IncRnd wrote: post #274

hn_throwaway_99 wrote: post #180

Earlier quoted context omitted.

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…

> ...and that the primary risk once the economy reaches full employment is inflation, which seems to be precisely what has happened, no? Certainly, there is inflation. There isn't full employment.

Unemployment unemployed work force

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

#295

Post by bduerst » Wed, Mar 16, 2022, 9:34 PM UTC

trustfundbaby wrote: post #286

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.

>We did waste the 3 yrs before Covid hit by not increasing interest rates and not reducing Fed's money printing. Most of the money printing happened in 2020 and after. https://fred.stlouisfed.org/series/M1SL

*Printing money, but in response to covid stagnation in 2020.

Printing and interest rates are separate. There was still a missed opportunity to increase interest rates while the economy was running hot prior to 2020.

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

#296

Post by stjohnswarts » Wed, Mar 16, 2022, 9:34 PM UTC

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…

The problem is all that new wealth created, about 90% goes to the top 1% who can easily store it away in nontaxable assets (at least until said assets are sold) since generally the “buy tax” isn't all that high compared to growth in value of securities and real estate (at least good investments thereof). Just siphoning more money out of the poor and middle class will not fly in the USA you will be voted out and your policy rescinded within a couple of years.

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

#297

Post by OGWhales » Wed, Mar 16, 2022, 9:34 PM UTC

IncRnd wrote: post #274

hn_throwaway_99 wrote: post #180

Earlier quoted context omitted.

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…

> ...and that the primary risk once the economy reaches full employment is inflation, which seems to be precisely what has happened, no? Certainly, there is inflation. There isn't full employment.

MMTers argue that government spending at full employment will cause inflation, not that there must be full employment for there to be inflation.

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

#298

Post by stjohnswarts » Wed, Mar 16, 2022, 9:36 PM UTC

r00fus wrote: post #265

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?

The current Fed chair has basically the same idea on economics as Yellen. Likely not much would have changed if she'd stayed in office.

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

#299

Post by np_tedious » Wed, Mar 16, 2022, 9:36 PM UTC

trustfundbaby wrote: post #286

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.

>We did waste the 3 yrs before Covid hit by not increasing interest rates and not reducing Fed's money printing. Most of the money printing happened in 2020 and after. https://fred.stlouisfed.org/series/M1SL

It's not as dramatic as that looks. They changed the definition of M1.

From the same link:

Before May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately.

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

#300

Post by jorblumesea » Wed, Mar 16, 2022, 9:36 PM UTC

jonnycomputer wrote: post #172

Good thing I didn't come here for informed economic commentary. Now back to the blogosphere.

One of the most annoying thing about engineering (and smart people in general) is how they think because they are good in X field, that somehow translates into Y field with little training.