Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

US Federal Reserve raises interest rates for first time since 2018

theguardian.com

Post reply on HN
Print view View original

461–470 of 693 posts

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

#461

Post by nebula8804 »

lotsofpulp wrote: post #440
nebula8804 wrote: post #439

Earlier quoted context omitted.

Biden has attempted to cut social security numerous times. The elite will eventually get their way because it represents such a vast source of untapped value to extract from. Will it be in my lifetime? (im in my 30s). That I don't know but I do know that they are gunning for it as well as Medicare and Medicaid and if a US bankruptcy does not wipe it out then eventually they will find a way to take it. [1]: https://ww…

If the federal US government is borrowing in a currency they control, I do not see why US leaders would choose to go bankrupt over simply issuing new money to meet debt obligations? And Social Security and other government benefits/services are continuously cut, at least where I live as far as I am concerned since they never keep up with price increases for the things I buy.

>If the federal US government is borrowing in a currency they control, I do not see why US leaders would choose to go bankrupt over simply issuing new money to meet debt obligations?

To be clear I do not expect a bankruptcy to be a likely outcome. I just consider it a non-impossible possibility. The only scenario I can think of is if some event moves so quickly that the government cannot respond in time before its too late. Even then, I still feel they probably have options.

>And Social Security and other government benefits/services are continuously cut, at least where I live as far as I am concerned since they never keep up with price increases for the things I buy.

Yes they are being devalued and thats the constant battle that is being fought. While the US continues to print money to give to the rich, they sneak things in such as small cuts here and there as well as further taxes on the poor (ie. You now have to pay an additional tax on more than 600$ worth of ebay sales. This was snuck into the relief bill.)

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

#462

Post by eigenvalue »

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"

Huh, why is that the answer? Why wouldn't the conceptual answer be "do the opposite", i.e. sop up the excess liquidity by removing money from the money supply, by doing things like raising interest rates, increasing bank reserve ratios, and selling some of the trillions of dollars of securities already on the Fed's balance sheet? The last thing anyone should want is the government to take a lot more in taxes so it can be squandered on foolish projects. Also, once government programs start up and build/lease buildings and hire a bunch of people, they are almost impossible to get rid of (the process of terminating a Federal employee is a Kafkaesque nightmare).

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

#463

Post by nickles »

monktastic1 wrote: post #434
nickles wrote: post #406

Earlier quoted context omitted.

> The Fed (not FED, BTW) doesn't "set" the rates, but has policies (including IORB, or what you call the federal reserve rate) The Fed does explicitly set certain interest rates. IORB is an interest rate that gets paid out every single day to market participants. “Federal reserve rate” does not exist; what you’re probably referring to is the fed funds rate . The Fed sets a target range for this, and, if the effective…

"Federal reserve rate" is not my term. My parent comment coined it and defined it as "the interaste (sic) rate paid to banks every day for their deposits with the FED", which is the IORB. I appreciate the thorough and accurate response you gave (and which I learned from). The distinction I've been trying to make is that the Fed has no mechanism to enforce the rate banks offer to each other or to consumers -- as in, t…

I apologize for my brusque response, it wasn’t constructive.

> the Fed has no mechanism to enforce the rate banks offer to each other or to consumers -- as in, there's no legal enforcement anywhere

The Fed can affect rates directly by transacting directly with the market (open market operations). Ultimately, all bond prices (and correspondingly yields) are driven by supply and demand. The Fed has unlimited capacity to purchase bonds (driving yields down) and currently has about $9T of bonds that it can sell (pushing rates up). The Fed doesn’t need to force any market participant to change yields, it can do it mechanically. The Bank of Japan explicitly does this.

The Fed also has regulatory authority over US banks, which conceivably can impact rates (think RRR and stress tests). It (along with other regulators like FDIC) can even specify the composition of bank portfolios (which determines where flows go).

> Instead, they have various levers that predictably cause rational actors to voluntarily change their own rates

Certainly rational actors respond to Fed actions of their own volition, but don’t underestimate the mechanical aspects of markets (e.g. dealers need to hedge risk and changes in rates change duration, risk parity funds and CTAs have mandates to follow, etc.)

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

#464

Post by adam_arthur »

jbkiv wrote: post #441

Wait, am I missing something here? The ONLY way for any government to escape their massive debt is inflation. The US is no different from other countries that used the pandemic as an excuse to prop all kind of businesses. This is no different that real estate. If you have bought property at a fixed rate, then high inflation (= higher salaries) will make your loan look smaller year after year. Of course the collateral…

Problem is that all central banks acted in coordination to print massively. So even if USD loses value in absolute terms, it doesn't in relative term.

You're right though, modern age monetary policy has been about inflating assets and monetizing fiscal deficit spending.

It's basically a big transfer of wealth from the younger generation to the older one (if you look at how lower interest rates pull forward valuations). When people talk about cheap housing or college in the 70s/80s, it was because the interest rate was over 10%. In modern society the best "mathematical" move tends to be to finance every purchase and pay them off as slowly as possible. I'd rather be debt free for peace of mind, personally, even if the math proves it to be the worse option.

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

#465

Post by tvanantwerp »

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…

Any theory of economics that only works if you can depend on an elected body to take quick and reasonable steps—like raising taxes—is one doomed to failure, and ought not be tried.

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

#466

Post by ayngg »

nickles wrote: post #429
ayngg wrote: post #32

Earlier quoted context omitted.

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…

Ah ok, thanks for the clarification!

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

#467

Post by analyte123 »

mikeyouse wrote: post #243
ameister14 wrote: post #136

Earlier quoted context omitted.

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…

Consumer debt is also low; https://fred.stlouisfed.org/series/CDSP And metrics like credit card delinquencies are at historic lows: https://fred.stlouisfed.org/series/DRCCLACBS ARMs actually aren't very popular - fewer than 15% of new mortgages are ARM. > BlackRock bought what, 10-15% of the houses sold in 2020? People vastly overestimate how large players like Blackrock are. There are something like 80 million singl…

Good point but it works against your overall argument - the investors who buy 10-20% of houses are far less sophisticated than Blackrock and far more likely to start panic selling when their Airbnb income can’t pay their bills.

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

#468

Post by adam_arthur »

jcadam wrote: post #372
seizethecheese wrote: post #305

Earlier quoted context omitted.

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?

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.

The inflation in the 2000s was the needle that popped the housing bubble. It wasn't comparable to current levels, but it was high and the Fed tightened aggressively to fight it.

There were a lot of structural problems as well, but rising rates leading to foreclosures set off the chain of events.

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

#469

Post by CPLX »

roenxi wrote: post #303
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…

An important point to keep in mind when talking about MMT in a policy setting is that the people who will implement it don't care about theory and will make a series of short-term politically expedient and/or vaguely corrupt decisions. If they implement MMT, there are good odds that it will just look like money printing. It doesn't really matter what the academic plan is, the policy isn't going to follow it. Much lik…

I mean it did make everyone better. The COVID pandemic could have really wiped out a lot of people and we printed money and it helped.

It’s the austerity people that have never cared about anything but their ideology. Austerity for austerity’s sake has caused unfathomable human misery in the globalization era.

Right now the labor market is good for workers. That is good. Getting there has always opposed by the ruling class interests though which is why we haven’t pursued it.

MMT at it’s heart is just an increasingly large number of voices screaming out “fucking STOP” and actually try to get to a relatively tight labor market, because on the whole doing so is better for most people.

Yeah sure inflation is an issue but as we are seeing now it’s always been something that can be addressed by putting on the brakes a little.

And for the record I have a degree in economics. I get the other side of the argument. My point of view is that the other side of the argument and elite economists have been fundamentally corrupt in their analysis for decades.

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

#470

Post by danielmarkbruce »

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.

They did raise rates.
Post reply on HN