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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

#321

Post by IncRnd »

drexlspivey wrote: post #294
IncRnd wrote: post #274

Earlier quoted context omitted.

> ...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

That's U-3. U-6 is at 7.2%. In general the claim that many people are not returning to work after COVID lockdowns is true. The reasons are up for debate, but that's not the point. The U-3 rate is an artificial rate to claim as the truth. That's moving the goal posts in order to get the win.

Plus there are a record number of unfilled job openings.

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

#322

Post by somewhereoutth »

dragonwriter wrote: post #216
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…

The great thing about fiscal policy is that it can be targeted, unlike monetary policy, for example to address wealth imbalance.

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

#323

Post by afterburner »

cm2187 wrote: post #312
afterburner wrote: post #310

Earlier quoted context omitted.

They are saying they will raise it several more times this year. Inflation isn't the worst economic problem you can have, unemployment and deflation are. And raising interest rates risks raising unemployment, and even causing a recession if you're too aggressive. The inflation could still be a temporary effect of the COVID years, so if you overdo it, you'll risk dampening economic activity too much when it was going…

even if you add the subsequent increases, they add up to 1.5%. That won't do anything to an inflation of 8% raging right now.

If the inflation falls later on, that 1.5 won't look so bad. No reason risk to crash the economy right when it's just starting to recover. Overcorrecting is bad.

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

#324

Post by drexlspivey »

monktastic1 wrote: post #126
qwertyuiop_ wrote: post #50

Earlier 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 ?

As another reply indicated, the Fed doesn't actually set interest rates. That's a common misconception. Instead they purchase and sell treasuries to member banks, such that those banks' balance sheets change in such a way as to make money more or less expensive to trade amongst themselves, which has knock-on effects for consumers. On the other hand, since there's no longer a reserve requirement since the start of cov…

> As another reply indicated, the Fed doesn't actually set interest rates. That's a common misconception.

The FED absolutely sets the interest rates by controlling the federal reserve rate which is the interaste rate paid to banks every day for their deposits with the FED

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

#326

Post by afterburner »

jorblumesea wrote: post #300
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.

They're also used to dealing with things that are entirely within their control and all variables are known.

That's so far off the mark for macroeconomics it's not even funny.

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

#327

Post by solveit »

athrowaway3z wrote: post #263
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.

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

Which puts them near the bottom as a hard science, but near the top of the social sciences. (I'm agreeing with you, but the valence of your observation depends on what reference class you have in mind for economics)

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

#328

Post by spaetzleesser »

whoseonthat wrote: post #7
nickff wrote: post #2

It's worth taking a look at the effective federal funds rate over time, which clearly shows how low it's been recently: https://www.macrotrends.net/2015/fed-funds-rate-historical-c...

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?

"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?"

It used to be that you could lower interest rates and run up deficits during bad times with the intent of going back to normal when things are better. We now have kept low interest rates and record deficits during good times. When things blow up (as they always do after a while) there is almost nothing left that can be done to counter a recession. In the past going to war helped....

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

#329

Post by andreilys »

jorblumesea wrote: post #300
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.

Macroeconomics is largely narrative driven with very limited evidence behind it.

I would argue a theoretical physicist could produce more macro-economically sound models than a tenured professor of macro-economics.

The former at least would have a deeper understanding/appreciation of the math.

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

#330

Post by syshum »

throw0101a wrote: post #146
rndphs wrote: post #63

Earlier quoted context omitted.

The amount of money being circulated absolutely does affect inflation (almost by definition). The Fed interest rate affects the amount of money in circulation because the Fed credit money is simply printed. This printed credit money gets spent and ends up circulating. The lower the interest rate, the easier it is to borrow, the more borrowing gets done, the more money is printed and enters circulation, which leads to…

> The amount of money being circulated absolutely does affect inflation (almost by definition). No, money supply ≠ inflation. E.g., Japan M2: * https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Why do Friedman-esqe Monetarists continue to ignore velocity? * https://fred.stlouisfed.org/series/M2V I personally like Cullen Roche's analogy: > But this is…

This is the thing, the entire fiat currency system will at some point likely be recorded in history as the largest fraud ever perpetuated in civilization.

Moves like removing reserves completely just move us further over the ledge into the clear ponzi scheme that it is

If any private actor attempted to do what central banks do, they would be rightfully jailed. We should not allow central banks to do things private actors can not do

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