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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#61

Post by readams »

dnadler wrote: post #26

Something I haven’t seen discussed much is the impact of inflation on the existing federal debt. This is actually a positive for taxpayers as the federal debt will become cheaper. Obviously we’re still spending a ton and are issuing debt at higher rates now, so it’s not some kind of magic cure or anything.

Most of the debt is shorter term and must be continually rolled over. So when first moving from low expectations of inflation to high expectations, there is a temporary one-time gain, but after that the government will need to pay higher interest.

And of course when the expectations return to normal there is a period when the government must pay higher than needed rates.

Re: Federal Reserve raises rates by 0.75%

#62

Post by timmg »

dnadler wrote: post #26

Something I haven’t seen discussed much is the impact of inflation on the existing federal debt. This is actually a positive for taxpayers as the federal debt will become cheaper. Obviously we’re still spending a ton and are issuing debt at higher rates now, so it’s not some kind of magic cure or anything.

Related (but different): I'm wondering how much inflation will shift tax payers into higher brackets and increase the overall income for the government from those taxes.

Re: Federal Reserve raises rates by 0.75%

#63

Post by smileysteve »

countvonbalzac wrote: post #55
dnadler wrote: post #26

Something I haven’t seen discussed much is the impact of inflation on the existing federal debt. This is actually a positive for taxpayers as the federal debt will become cheaper. Obviously we’re still spending a ton and are issuing debt at higher rates now, so it’s not some kind of magic cure or anything.

I read something like this actually isn't the panacea it seems like in the long term because inflation reduces real growth long term, or something like that.

That's an odd conclusion; yes real growth is impacted by inflation, but inflation is a reason to seek growth rather than rent.

Re: Federal Reserve raises rates by 0.75%

#64

Post by [deleted] »

JumpCrisscross wrote: post #20
mark_l_watson wrote: post #17

You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.

> personal preference is to trigger a recession and reduce inflation These aren't binary outcomes. Tight money does nothing to ease supply-side bottlenecks. It does little to target demand displaced by rising energy prices. If those are the principal drivers of inflation, tightening could depress non-energy demand in a way that causes a recession without alleviating inflation. Stagflation. (To be clear, we're not at…

[deleted]

Re: Federal Reserve raises rates by 0.75%

#65

Post by francisofascii »

nostromo wrote: post #22
mark_l_watson wrote: post #17

You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.

A key driver to inflation is that wages for lower-income workers was finally starting to rise. Tanking the economy will hurt these people the most. But yes, inflation would flatten.

What good is a higher wage if inflation is worse.

Re: Federal Reserve raises rates by 0.75%

#66

Post by whimsicalism »

kelnos wrote: post #42
hunterb123 wrote: post #11

Earlier quoted context omitted.

then why was the administration dismissing it as temporary before the invasion? inflation was clearly caused by injecting trillions into the economy for "covid" slush funds. as far as energy goes, we were net exporters until the federal restrictions started coming in, only then did we start relying on foreign production. blaming your domestic problems on a foreign adversary is routine, but it's not accurate, helpful,…

I agree that we can't blame this on Putin (though he's not helping), but I think the obvious reason for much of the inflation is right in front of us: people want to buy many many things, but they just aren't available in large enough quantities. The Fed injecting money into the economy is nothing new; speaking of goldfish brain, have we so easily forgotten 2008?

Easy capital means more people with the ability to demand things.

Re: Federal Reserve raises rates by 0.75%

#67

Post by overtonwhy »

twblalock wrote: post #13
rich_sasha wrote: post #6

Earlier quoted context omitted.

In fairness, inflation seems largely driven by energy prices, which in turn are driven by the Russian invasion of Ukraine. Not the top event I'd imagine a bank predicting well.

Get out a calendar. Look at when the inflation started (last fall!). Then look at when the Ukraine war started. Has the Ukraine war made the inflation problem worse? Yes. Did it cause the problem? Absolutely not!

The war in Ukraine started with the 2014 invasion of Crimea.

Re: Federal Reserve raises rates by 0.75%

#68

Post by SketchySeaBeast »

xxpor wrote: post #58
mark_l_watson wrote: post #17

You can argue either side to this, and make a good case. My personal preference is to trigger a recession and reduce inflation. The easy cop-out solution is to say a "big f*ck off" to pensioners, lower middle class, and poor people and let inflation soar, but I believe that long term this would be more destructive to the general economy. Better take the long term view here and not kick the can down the street.

I'm sure the lower middle class people who lose their job will appreciate it.

What's the good play here? Cause a recession or price those lower middle class out of being able to afford the cost of living? Typically they aren't the ones with the best negotiating power.

Re: Federal Reserve raises rates by 0.75%

#69

Post by jgust »

whimsicalism wrote: post #35
roody15 wrote: post #14

Earlier quoted context omitted.

Agree the Russian invasion doesn't help matters... but this is not the primary cause of inflation. The amount of money that the US has simply created and spent in last couple of years in unprecedented. The amount of money inserted into the US economy dwarfs that of the TARPP and related bailouts of 2008 by a factor of 4. You just cannot create and hand out that much cash in an economy and not expect inflation.

Day 212 of HN forgetting that velocity is a thing. [0] [0]: https://fred.stlouisfed.org/series/M2V

What's the ELI5 version of how to interpret this trend line?
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