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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

#421

Post by jppittma »

nostrademons wrote: post #391
jppittma wrote: post #201

Earlier quoted context omitted.

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…

Then the unemployed people on uninhabited farmland move back to their home cities with all this extra money and buy a house for a couple million, sending prices skyrocketing. This is literally what's been happening to the economy for the last decade. All the money that went into the economy from 2008 onwards ended up in the financial & tech sectors in NYC, Seattle & the Bay Area. As long as it stayed there, it only i…

As long as the value of the money that was created was less than the value of the goods that its investment provided, you're in the clear.

Sure, home prices have gone up, but what would the phone in your pocket (and all the software that powers it) have been worth in '08?

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

#422

Post by Amfy »

MuffinFlavored wrote: post #398
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…

How did "printing lots of money" https://fred.stlouisfed.org/series/CURRCIR not spike USD to EUR? did EUR also print lots of money? https://finance.yahoo.com/quote/USDEUR=X/ basically unchanged 5 years ago -> now

EUR has negative interest. You pay to deposit money at banks. Yes, EUR has been printing a lot as well.

Also, from my understanding, EURUSD goes up/down mostly based on their difference in interest rates.

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

#423

Post by jppittma »

Manuel_D wrote: post #308
jppittma wrote: post #201

Earlier quoted context omitted.

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…

Quite the contrary. Japan's money supply has grown considerably more slowly than other countries - reinforcing the relationship between money supply, economic growth, and inflation. > 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 co…

You're missing the point.

The government can and should print money to turn unutilized resources in the economy into utilized resources. What's best for the economy is for every capable person in it to be generating stuff. Everything else is an abstraction around that end.

In my thought experiment, there's simply more stuff in the economy because the government printed the money, and the whole is more prosperous for it.

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

#424

Post by yalogin »

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 has been increasing since 2008, without Covid the same graph would look very different. Its just that the fed just increased the scale so much that the previous level seems puny now, even though the y axis is 1000s of Billions of dollars.

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

#425

Post by jcadam »

nwmcsween wrote: post #404
jcadam wrote: post #372

Earlier quoted context omitted.

We'll see. we didn't have inflation like this during the last big downturn in 2008. I also don't think the Fed is going to be able to raise rates as high as they did back in the early 80s.

We currently have runaway inflation, if you look at how inflation was calculated in 1980s compared to now it would be between 12-16%.

Don't worry, when inflation really gets out of control the Fed will step in with a new currency (CBDC) and save us.

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

#426

Post by alphabettsy »

landemva wrote: post #224
InitialLastName wrote: post #45

Earlier quoted context omitted.

We should recall that not only did the US cut rates and spend a lot of money through the covid recession, when things were bad, it ignored that first bit of advice before Covid when things were good (it's hard to remember now how hot the economy was in 2016-2019, but it was really hot), by cutting taxes and continuing to print money and keep the rates low to cover it. As the tax cut detractors correctly predicted, th…

The Fed raised interest rates into Trump's first two years in office.

Wasn’t that during Yellen’s term who was replaced by Powell in 2018? The same year the tax cuts went into effect. The following year the rate cuts started and then Covid hit.

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

#427

Post by [deleted] »

bskap wrote: post #357
IncRnd wrote: post #321

Earlier quoted context omitted.

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.

U-6's 7.2% is compared to 7.0% in February 2020 and 8.1% in February 2007. So even that is similar to pre-Covid levels and better the the peak before the last recession.

[deleted]

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

#428

Post by nickjj »

notch656a wrote: post #408
qbasic_forever wrote: post #388

Earlier quoted context omitted.

I'm really trying to understand how you can agree that 56% of people can't find $1k, and yet over 50% of people have $100k in assets. I don't think we're looking at the same ~50% of people here...

I'm skeptical but willing to believe 56% of people can't find $1k on the spot in fiat cash because of the structure of their wealth. However statistically _most_ households have a hundred times over that in net wealth. Carefully reading the study, it becomes apparent the vast majority are able to alter the composition of their wealth or future spending to accommodate the expense. 59% were going to pay outright (if yo…

> I'm skeptical but willing to believe 56% of people can't find $1k on the spot in fiat cash because of the structure of their wealth.

It's not too far fetched.

1. Buy a house in the 80s when they were like 60k-80k.

2. Work a normal'ish non-tech full time job where you make 35k / year.

3. Fail to pay off your original mortgage over 20-30 years and end up getting a 2nd mortgage.

4. Pay your current mortgage, property taxes and other bills every month.

Pretty sure anyone who is single in this position would have nothing left over per month and be living an extremely tight lifestyle with not much to spare a few days before their next pay check.

Throw in a couple of bad decisions over the decades and you could have no savings too. Something tells me a decent percent of 55-70 year old folks fall into this category.

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

#429

Post by nickles »

ayngg wrote: post #32
avrionov wrote: post #17

Not only that they increased the rate, but also they'll reduce the buying of securities: "In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting." Which may have a bigger effect.

IIRC they have already stopped purchasing them as of a week ago I think, they were supposed to announce their plans on quantitative tightening (selling the things they bought) which is what that quote is referring to.

> they have already stopped purchasing them as of a week ago

To clarify, they are still purchasing securities, but at a rate that does not increase the size of their balance sheet. As debt matures, they reinvest the principle in new securities to maintain the size of the balance sheet. When the Fed discusses QT right now, they’re talking about reducing these purchases, so the net impact is a smaller balance sheet.

As an aside, it’s possible to get a sense of how much the Fed intends to reduce the size of the balance sheet this year based on Powell’s comments today. He indicated the impact on financial conditions would be roughly equivalent to an extra rate hike. IIRC every $100B is estimated to shift rates by 3bps. At 25bps a hike, the balance sheet reduction would be roughly $800B.

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