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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

#491

Post by soVeryTired »

nickles wrote: post #406
monktastic1 wrote: post #378

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) which guide the markets to arrive at their target. Maybe that's a small distinction, but I think it helps OP, because I labored under the same confusion for a while.

> 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…

You're talking past each other, specifically on what it means to "set interest rates".

GP is correct in that the fed funds rate (the one that makes headlines and is used for policy) isn't literally _set_ by fiat: the Fed just intervenes in the interbank money market to ensure it stays in a specified range. It has near unlimited capacity to intervene so the fed funds rate only ever strays a tiny amount outside that range, and even then it's an exceptional circumstance.

On the other hand the parent is correct in that the Fed literally sets a lot of other rates that are used for financial plumbing.

Nickles I'm sure you know this already but I'm trying to clarify so that others don't get confused by an already confusing topic.

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

#492

Post by nickles »

soVeryTired wrote: post #491
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…

You're talking past each other, specifically on what it means to "set interest rates". GP is correct in that the fed funds rate (the one that makes headlines and is used for policy) isn't literally _set_ by fiat: the Fed just intervenes in the interbank money market to ensure it stays in a specified range. It has near unlimited capacity to intervene so the fed funds rate only ever strays a tiny amount outside that ra…

Thanks, the more clarification the better. There are so many moving parts, many of which aren’t understood well, that it can be very difficult to explain exactly how everything fits together.

I always recommend the book Floored! by George Selgin for those who want to understand current Fed policy. It’s a few years old at this point but does a fantastic job explaining things.

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

#493

Post by mikeyouse »

boppo1 wrote: post #292
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…

> BlackRock bought what, 10-15% of the houses sold in 2020 Is this official somewhere? I've seen it in headlines and heard it in soundbytes but did they disclose it in their 10k or something?

It's been debunked over and over again, but it's an attractive sound bite with a clear bogeyman, so of course it "sticks".

https://www.vox.com/22524829/wall-street-housing-market-blac...

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

#494

Post by chimeracoder »

standeven wrote: post #291
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.

How do you define full employment? The unemployment rate in the USA is currently 3.8%.

> How do you define full employment? The unemployment rate in the USA is currently 3.8%.

3.8% is near historic lows.

More importantly: "full employment" doesn't mean unemployment is literally 0% - in fact, an unemployment rate of 0% would be actively bad, because it indicates that people are unable to leave their jobs (even temporarily) to seek better opportunities or life changes - usually because inflation is too high.

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

#495

Post by nebula8804 »

lotsofpulp wrote: post #488
nebula8804 wrote: post #461

Earlier quoted context omitted.

>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 to…

> (ie. You now have to pay an additional tax on more than 600$ worth of ebay sales. This was snuck into the relief bill.) No, that is not a recent addition to tax liabilities. You have always had to pay tax on income. The only difference is eBay (and other facilitators) are required to report it now.

Its still closing a unofficial loophole that lower income people relied on. That counts as part of the war to extract every last penny on the poor.

There are a lot of other nefarious things in the bill such as requiring manufacturers to install a device to monitor the driver if they are impaired(beyond 2026). This will lead to fines that will lead to further eroding of what little wealth the poor already have left. Was very smart of them to introduce it far off into the future so it can be slowly integrated into people new car purchases. This is why I believe the addition of the 600$ reporting requirement was no innocent ploy to just shore up this revenue stream. It was purposely introduced at an opportune time.

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

#496

Post by mjevans »

SkyMarshal wrote: post #453
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…

Yeah, happened with both monetary policy as you observe, and with Keynesian fiscal policy - deficit spend to cushion and shorten downturns, then contract govt spending and pay down the debt during good times, so that you can afford to deficit spend again in the next downturn. Makes sense in theory, but the second half doesn't always happen b/c politicians like buying votes with govt spending (either via under-taxatio…

Or alternately raise taxes in the good times (rather than interest rates) and pay down that debt... which at least in the US we've got one political party dead set against at all costs.

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

#497

Post by thehappypm »

nly wrote: post #485
notch656a wrote: post #369

Earlier quoted context omitted.

Median household wealth is over $100k. Not only is it true far more than the slightest, it's true of the majority of American households.

This _ includes _ property. The following source does indeed show a 50th percentile (median) household wealth of $100K, but if you read the damn thing it shows the median contribution from property is $120K, which presumably means, if you were to exclude property owners, the average would be MUCH closer to 0. It also shows that 30% is contributed overall from property and another 30% from retirement accounts... Which…

What’s the problem with including property? Ever heard of a cash-out refinance?

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

#498

Post by lazide »

e4e78a06 wrote: post #489
lazide wrote: post #483

Earlier quoted context omitted.

Compared to a Great Depression type cycle in the middle of the pandemic, what is the other alternative?

Well I think a big contributor to the current inflation problem was the last round of stimulus passed right as the pandemic was starting to wind down. At that point unemployment numbers had almost gotten back to normal and most revenue numbers for things like restaurants, travel, etc. had recovered to at least 70% of pre-pandemic levels. And then some states like California dumped even more money into the economy thr…

I expect it's years of money printing to avoid a dip in the middle of the largest demand drop we've had in a very long time, following by a resurgence in demand as folks get out and try to get moving again (resulting in them spending a bunch of that money all the sudden).

It's pretty predictable IMO.

Either we'd have to drop the economy during the demand slackening during COVID (which would have caused a severe recession, because it WAS a recession in activity, and then there would be a bunch of panicked people in the middle of a pandemic who also lost all their income running around and maybe setting even MORE things on fire), or inflate our way out of it.

Hopefully we don't see some crazy 25% inflation like the 80's, but I wouldn't rule it out.

I'd expect that in a few years it'll flatten out though.

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

#499

Post by [deleted] »

mjevans wrote: post #496
SkyMarshal wrote: post #453

Earlier quoted context omitted.

Yeah, happened with both monetary policy as you observe, and with Keynesian fiscal policy - deficit spend to cushion and shorten downturns, then contract govt spending and pay down the debt during good times, so that you can afford to deficit spend again in the next downturn. Makes sense in theory, but the second half doesn't always happen b/c politicians like buying votes with govt spending (either via under-taxatio…

Or alternately raise taxes in the good times (rather than interest rates) and pay down that debt... which at least in the US we've got one political party dead set against at all costs.

[deleted]

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

#500

Post by diognesofsinope »

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…

> we printed money and it helped.

I mean, did it? What evidence do you have for this claim?

Vaccines absolutely helped. But now everyone's wages are going down -- it was basically ~$3k stimulus checks that were actually loans with a 400% interest rate.

Real workers wages are falling. Inflation fundamentally increases inequality, i.e. people who own assets watch the value of those assets increase while people who work for income watch their income fall.

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