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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

#471

Post by Auracle »

mikeyouse wrote: post #85
phkahler wrote: post #34

Earlier quoted context omitted.

In particular a bursting of the housing bubble that has been reinflated (and then some) since the last time it popped in '08.

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…

I would think a lot of people might be rushing to get a mortgage before rates go up.

Whatever the reasons, home prices are ridiculously inflated right now. They’ll need to go down for first time home buyers to have a chance, so at some point there will be pressure for home prices to drop. For what it’s worth I’m in a rural part of the country and it’s not just a city problem.

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

#472

Post by adam_arthur »

voisin wrote: post #226
mikaeluman wrote: post #221

This was expected since at least December. The market is pricing in 6 more rate increases throughout the year. They simply can't afford to lag behind inflation too much for too long.

Am I incorrect in thinking they also can’t afford to let rates rise too much as they can’t afford the interest payments?

If you consider that the Fed should collude with fiscal policy makers, then you're right. The Fed is supposed to act independently, but Powell has thrown that out the window.

Fed tightening would force fiscal side to actually restrain spending which would help alleviate inflation. That's the whole point of tightening to begin with (tightening both public and private credit).

The reason the Fed is supposed to be independent is to avoid a Venezuela type situation where deficit spending is monetized through money creation. Well the Fed has been effectively doing that through QE for two years.

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

#473

Post by lumost »

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'd highly recommend the historical fiction "Red Plenty" which followed the trajectory of Academics in the soviet union trying to compute idealized prices - meanwhile administrators, consultants, and realists had to just make the system work.

At one point a quota increase leads a factory to sabotage it's old equipment, so that they may get a new machine to hit the quota. The administrator in charge of approval determines as much - and arranges for a new machine. Unfortunately a pricing reform introduced by the same plan leads to an inability to build the new piece of equipment as equipment was priced by the ton. Requiring the intervention of "well connected" individuals to solve the problem...

Systems adapt - any reform will introduce exploits, and pathologies. To pretend that MMT based central planning yields a different outcome in the long hall is folly.

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

#474

Post by mikeyouse »

ameister14 wrote: post #442
mikeyouse wrote: post #243

Earlier quoted context omitted.

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…

Of the 80 million single family homes in the US, how many are sold each year? For your math to work (80,000 as 1%) it would have to be 8,000,000 or 10% of the overall supply. I can actually answer for you - roughly 820,000 single family homes were sold in 2020. So if BlackRock bought 80,000 homes then, that'd be about 10%.

You're conflating some figures -- 820k new homes were sold[1] -- along with roughly 5.6 million existing homes[2].

[1] - https://www.housingwire.com/articles/new-home-sales-historic...

[2] - https://cdn.nar.realtor/sites/default/files/documents/ehs-01...

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

#475

Post by karpierz »

dragonwriter wrote: post #444
grey-area wrote: post #393

Earlier quoted context omitted.

Your definition is circular. What proves MMT is in any way ‘factual’. MMT is an old lie, oft repeated, and only discovered as a lie after it is far too late.

> Your definition is circular. No, it's not. > What proves MMT is in any way ‘factual’. Factual is class of statements, opposed to normative statements. > MMT is an old lie It can't be that old, since it only describes the constraints on sovereign finance of entities functioning in their own pure-fiat currencies, which isn't a subject that has been of interest for very long.

> Factual is class of statements, opposed to normative statements.

They're asking for supporting evidence for MMT.

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

#476

Post by e4e78a06 »

CPLX wrote: post #469
roenxi wrote: post #303

Earlier quoted context omitted.

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…

> Right now the labor market is good for workers

It is good _nominally_. Real wages are basically flat. Meanwhile, for everyone who didn't get a raise or can't currently find a new job for whatever reason, they're losing purchasing power. On top of that, the housing market has been completely destroyed by the Fed printing money and shoving it into mortgage backed securities. In many nicer areas of Southern California you used to be able to get a starter home for $600k (manageable for someone in a working class profession like a nurse or mechanic), now nothing on the market is less than $1.2M.

Also you forget that a big reason the labor market is so tight is because a couple million Boomers retired early during the pandemic.

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

#478

Post by adam_arthur »

paulpauper wrote: post #233
trgn wrote: post #228

Earlier quoted context omitted.

Which isn't what's happening. It's been months now that this was being floated, and the stock market has been volatile the last half year, an outright bear market in some sectors. Trillions in equity have evaporated already, and that's not even taking into account the wealth erosion of high inflation. Now's the time to be skilled, but not the time to be a rentier.

Probably half of that selling is due to Ukraine . Also, a few months of weakness does not change the long-standing trend of stocks being a good hedge against inflation. Stocks generated real returns in the 80s, 90s, 2003-2007, 2015-2017 despite the fed raising rates.

Because valuations were low. Inflation is only good for asset pricing once that asset has been valued with an inflation appropriate discount rate.

e.g. a 100 PE stock that implies a 1% return/year logically should fall significantly in a 5%+ inflationary environment. Once bond yields adapt to this environment.

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

#479

Post by onlyrealcuzzo »

tlogan wrote: post #387

We have an inflation which is about 8% while mortage rates on 30 year fixed are just 4.7% (15 year fixed are just 3.8%). So I really do not understand logic here: how can bank give me money at rate 2x times lower than inflation. Seems like free money (and it is no surprise that home prices are going thru the roof). But I’m probably naiive here and do not understand how banking works.

The odds we have an average of 8% inflation (as measured by the Fed) over a 30-year horizon are ridiculously low.

Your spread is high now - but it likely won't be for the entire life of your 30-year fixed mortgage.

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

#480

Post by gscott »

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…

Most of the money printing has been reabsorbed by the Fed... banks would buy the treasury bonds and then loan them back to the Federal Reserve.

It isn't until recently that money was printed, sent out, and actually got out into the economy... (at the same time that China shuts down, etc).

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