US Federal Reserve raises interest rates for first time since 2018 • Hacker News Board

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

#561

Post by gruez » Thu, Mar 17, 2022, 4:09 AM UTC

lumost wrote: post #502

mjevans wrote: post #496

Earlier quoted context omitted.

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.

A generation ago, progressive cycles of deficit spending and taxation had put the top tax bracket in the US at 90%. Still, there was persistent inflation - and worse high unemployment. The belief was that the Federal Government had grown too large in the economy and needed to be "starved". To what extent government austerity vs. new monetary policy moved the needle for the US economy is unknowable. However many Ameri…

> A generation ago, progressive cycles of deficit spending and taxation had put the top tax bracket in the US at 90%. Still, there was persistent inflation - and worse high unemployment.

AFAIK the "90%" rate is highly misleading because at the time there were a lot of deductions that bring the effective rate much closer to today's levels. We can see this in the federal tax receipts as % of GDP, which remained mostly flat despite the top bracket dropping from "90%" to 37%

https://fred.stlouisfed.org/series/FYFRGDA188S

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

#562

Post by MisterMower » Thu, Mar 17, 2022, 4:13 AM UTC

SantalBlush wrote: post #542

MisterMower wrote: post #538

Earlier quoted context omitted.

“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.” Well, let’s see: 1. I got maybe $3k from the government due to all that printing. 2. The price level is easily up 25% for things I need to buy, like food, fuel, computing equipment, and vehicles. 3. And I still got Covid, as did literally everyone else I know. My brother still can’t…

I did, in fact, laugh out loud at this. Did you think those personal checks were meant to prevent you from getting COVID?

No, but the guy who made the comment I responded to does. I’m explaining why he is wrong.

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

#563

Post by umeshunni » Thu, Mar 17, 2022, 4:15 AM UTC

MuffinFlavored wrote: post #405

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.

Have you peeled back the categories measured by the 8% inflation? This is stupid for me to say but, for example... Used car prices factor into that 8% number. But if you aren't shopping for a used car... it doesn't really affect you, right? Housing affects mostly everybody. Same with energy. I don't truly understand the weighting or everything that goes into the 8% CPI getting tossed around and I understand that it c…

> Housing affects mostly everybody.

Housing mostly only affects renters (~40% of the market) and is also not evenly distributed geographically. While rents in Miami might spike 40% in a year, that affects only (0.4 * 900K)/100M of households in the US.

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

#564

Post by gruez » Thu, Mar 17, 2022, 4:19 AM UTC

adam_arthur wrote: post #460

MuffinFlavored wrote: post #405

Earlier quoted context omitted.

Have you peeled back the categories measured by the 8% inflation? This is stupid for me to say but, for example... Used car prices factor into that 8% number. But if you aren't shopping for a used car... it doesn't really affect you, right? Housing affects mostly everybody. Same with energy. I don't truly understand the weighting or everything that goes into the 8% CPI getting tossed around and I understand that it c…

National market rents are up ~20% https://www.apartmentlist.com/research/national-rent-data Miami is up something absurd like 40% https://theshaderoom.com/major-u-s-cities-experience-drastic... CPI only shows 5%, due to the lag induced by their rent counting methodology. So inflation as measured by CPI is understated if anything, not overstated. Using the same formula as was used in the 70s would produce double digit…

>CPI only shows 5%, due to the lag induced by their rent counting methodology. So inflation as measured by CPI is understated if anything, not overstated.

>Using the same formula as was used in the 70s would produce double digit numbers.

Can you elaborate on this? When and what was the methodology changed?

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

#565

Post by gruez » Thu, Mar 17, 2022, 4:23 AM UTC

MisterMower wrote: post #554

HeavenFox wrote: post #403

Earlier quoted context omitted.

Presumably inflation is not going to stay at 8% over the next 30 years. In fact the current 30-year expected inflation is only at 2.2%: https://fred.stlouisfed.org/series/EXPINF30YR

What was the Fed’s outlook a year ago? Was anybody predicting 8% inflation? Forgive me for my skepticism, but these guys are at best guessing. Most likely they are straight up lying.

>Their estimates are calculated with a model that uses Treasury yields, inflation data, inflation swaps, and survey-based measures of inflation expectations.

So the data is partially based on market data (ie. implied inflation rate based on what the yield on TIPS is compared to treasuries). There's another data series for 10 year inflation that only uses market data and it tells a similar story: https://fred.stlouisfed.org/series/T10YIE. Since this is all market data, made by people who have skin in the game (ie. if they get it wrong they lose money), it should be less gamed the previous metric.

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

#566

Post by MisterMower » Thu, Mar 17, 2022, 4:25 AM UTC

SantalBlush wrote: post #556

hervature wrote: post #548

Earlier quoted context omitted.

Do you have so little respect of your fellow man that you think they are incapable of thinking? A big part of the spending was designed to float businesses during lockdowns to “flatten the curve”. The idea being that paying people to stay home would reduce risk of infection. They are pointing out this outcome did not happen.

>Do you have so little respect of your fellow man that you think they are incapable of thinking? Funny, I was thinking the same thing about the above comment I was replying to. >They are pointing out this outcome did not happen. Flattening the curve absolutely does not mean preventing people from getting COVID; it's about lengthening the time horizon in which the population gets infected to reduce strain on the healt…

No post body was provided.

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

#567

Post by mikeyouse » Thu, Mar 17, 2022, 4:27 AM UTC

silisili wrote: post #547

mikeyouse wrote: post #493

Earlier quoted context omitted.

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...

It's not debunked, you're playing with stats. The claim is that investors are buying nearly 20 percent of housing. Your refutal is that they only own 1%. Both can be, and are, true. "A record 18.2 percent of all home purchases were made by investors during the third quarter of 2021, according to a new report by Redfin. That was up from 16.1 percent during the second quarter of 2021 and up 11.2 percent from the third…

I mean sure?

If you change the statement from: "Blackrock bought 10%+ of the homes in the US in 2020"

To: "Various 'investors' (including personal trusts and other tax / estate shielding entities often used for people buying their primary residence) bought 10%+ of the homes if you restrict the data to 40 large cities" then it's mostly true? But that's a different thing than was claimed..

The Redfin data that WaPo is relying on accounts for 494k homes sold in Q3 2021, of which 90k were bought by their definition of investor. But they're missing another ~1 million homes that were sold in the US during that time period outside of the cities that clearly had the most investor interest...

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

#568

Post by alexb_ » Thu, Mar 17, 2022, 4:29 AM UTC

jjoonathan wrote: post #46

phkahler wrote: post #29

Earlier quoted context omitted.

>> Is lowering interest rates a method to overcome a recession? It is claimed to be. The idea is that with lower interest rate, companies and people will be more likely to borrow money to spend and that will boost the economy. I for one do not really believe this to be true. I suspect it's the act of lowering rates that gives a temporary boost until things rebalance. In other words, economic activity has some depende…

> economic activity has some dependence on the derivative of interest rates If interest rates go down, it's easy to roll over old promises and make new ones besides. If interest rates go up, promises must be kept or the business will fold. At the end of every business cycle, interest rates are low and there are lots of unprofitable "zombie companies" that operate by simply rolling over their promises. In order for th…

> unprofitable "zombie companies" that operate by simply rolling over their promises

Many modern tech companies come to mind....

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

#569

Post by alexb_ » Thu, Mar 17, 2022, 4:32 AM UTC

hitpointdrew wrote: post #22

whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

The thinking is that lowering rates will increases spending (why save if you aren't getting much of return, you will find other ways to invest your money rather than have it sit in a bank account). So, if the economy seems to be in a recession central banks will often lower rates to encourage spending. But if you are already at near 0% for a record length of time, and have printed massive amounts of money, well frien…

It's being pushed up because we are not in a recession. We aren't even close to being in a recession. We need it to be raised in times like this so we actually have room to move it should things go south.

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

#570

Post by lupire » Thu, Mar 17, 2022, 4:44 AM UTC

lumost wrote: post #519

jnsie wrote: post #514

Earlier quoted context omitted.

> It's rare that anyone pitches the government as competent outside of military spending Genuine question - do people see military as competent when it comes to spending?

Nope, but the military gets a pass in most years as at least being competent. Most Americans believe that most government agencies are both incompetent and profligate.

The US military hasn't won a war in about 20 years.