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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

#331

Post by causalmodels »

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…

I am by no means a fan of mmt, but I think looking at government spending as a share of GDP misses the point mmt proponents attempt and often fail to make; which is that financial constraints are should not be the limiting factor of the economy.

A better indicator would be the price of labor and commodities since they better reflect the constraints of the real economy. Unfortunately for the mmt people, the prices are going nuts because we are actually dealing with real resource constraints now.

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

#332

Post by [deleted] »

IncRnd wrote: post #321
drexlspivey wrote: post #294

Earlier quoted context omitted.

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.

[deleted]

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

#333

Post by cm2187 »

afterburner wrote: post #323
cm2187 wrote: post #312

Earlier quoted context omitted.

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.

It has been high for a year already and everything points to it worsening (the 8% doesn't include Ukraine, which will push both energy and food prices up). It is because it is not temporary anymore than the Fed is forced to act now.

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

#334

Post by AceJohnny2 »

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

How is "unemployment" defined in the US? Take those numbers with a grain of salt.

In France, you were counted as "unemployed" if you were registered with the national employment agency and actively looking for employment according to their criteria.

If you didn't find anything (for example because the opportunities on offer were too far away, or various other reasonably human reasons) after a certain time, the agency dropped you, and you were no longer part of the "unemployed" statistic. Unemployment went down!

I've also seen the government there change their criteria for unemployment (for example dropping you after 9 months instead of 12), to make it seem like unemployment went down.

(I'm a big believer in statistics-driven policies, but statistics, like anything involving humans, can be corrupted)

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

#335

Post by drexlspivey »

voisin wrote: post #250
mikaeluman wrote: post #229

Earlier quoted context omitted.

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.

Federal Reserve receives but the payments are made as a share of the government’s budget, no? So the Fed is trying to balance inflation with effectively defunding the governments non-debt servicing initiatives.

The coupon payments in the government’s existing debt are fixed and as such they are not effected by any changes. It will only affect newly issued debt while the debt is being rolled over which will take some time (the average maturity is around 5 years)

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

#336

Post by germinalphrase »

hn_throwaway_99 wrote: post #180
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…

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…

Wouldn’t it also suggest that the prescribed inflation antidote - raising taxes - would be impractical due to political opposition. Seems like a double win: stand strong against raising taxes (which is the heterodox position) while showing MMT “doesn’t work”.

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

#337

Post by datavirtue »

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…

You can expect inflation as you grow the money supply. Inflation is good. Runaway, uncontrolled inflation is not. We have not had, nor do we have now, runaway inflation. You have to grow the money supply as the population and productivity increases. Most of the talk and reporting on inflation is just silly.

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

#338

Post by solveit »

seizethecheese wrote: post #305
jcadam wrote: post #255

Got my mortgage at 2.75% late last year. Woooooo.....

What do you think is going to happen to your home price is interest rates go up to 5% and then people can’t afford huge mortgages anymore?

Shouldn't be too relevant if they're planning on living in the house for the next ~30 years.

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

#339

Post by IncRnd »

AceJohnny2 wrote: post #334
drexlspivey wrote: post #294

Earlier quoted context omitted.

Unemployment unemployed work force

How is "unemployment" defined in the US? Take those numbers with a grain of salt. In France, you were counted as "unemployed" if you were registered with the national employment agency and actively looking for employment according to their criteria . If you didn't find anything (for example because the opportunities on offer were too far away, or various other reasonably human reasons) after a certain time, the agenc…

That's very astute of you. The GP was talking about a rate called U-3, but the U-6 rate is far more descriptive. U-3 is what is generally used as the quoted rate, because it severely minimizes actual unemployment, allowing the Federal Government to use false statistics. [1]

[1] https://www.bls.gov/news.release/pdf/empsit.pdf

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

#340

Post by hn_throwaway_99 »

IncRnd wrote: post #321
drexlspivey wrote: post #294

Earlier quoted context omitted.

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.

Your argument is a non sequitur to me:

> Plus there are a record number of unfilled job openings.

Yes, which would basically imply that it's incredibly easy for anyone who wants a job to get one.

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