Federal Reserve raises rates by 0.75% • Hacker News Board

Re: Federal Reserve raises rates by 0.75%

#121

Post by bborud » Wed, Jun 15, 2022, 7:08 PM UTC

darth_avocado wrote: post #82

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.

Here's another perspective to this. An induced recession at a time when most people and businesses are recovering from historic losses that came about in the pandemic, is the worst. In a recession, spending from the top 10% of the population slows down, which in turn stops the trickle down economics, and hits the lower 90% of the society the hardest. And when that happens after a 2 year long period where they were al…

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Re: Federal Reserve raises rates by 0.75%

#122

Post by johnbellone » Wed, Jun 15, 2022, 7:08 PM UTC

jejeyyy77 wrote: post #81

nostromo wrote: post #4

It seems the Fed is stuck in a state of overreaction. First they overshoot on money printing, then they disregard early signs of inflation, and now they're in a panic in the opposite direction. Seeing the news this week that Bernanke said that the Fed should be able to pull off a soft-landing now in 2022 gave me an uncomfortable déjà vu -- he said the same in 2006 and 2007, right before he raised rates enough to kick…

This. Even in today's announcement, they seemed behind again claiming "American companies are in a strong position to weather through" - but we are already seeing mass layoffs and hiring freezes.

I'd argue that a hiring freeze is an appropriate way of weathering an economic crisis. We have really only seen mass layoffs in a small handful of companies. The most recent one went on a hiring spree without any real plan to execute, e.g. new revenue.

Re: Federal Reserve raises rates by 0.75%

#123

Post by omegaworks » Wed, Jun 15, 2022, 7:09 PM UTC

toomuchtodo wrote: post #83

Someone1234 wrote: post #79

Earlier quoted context omitted.

Inflation is largely being driven by import problems and oil prices, therefore, it is unclear if a recession is a golden key to lower inflation. Keep in mind that oil is internationally expensive, and even a reduction in the US may not bring down prices significantly . So we could see recession AND inflation at the same time. Then tack on higher interest rates, and everything goes squish.

The Fed can only manage monetary policy. If Congress wants to fix the petroleum energy crisis with policy, it has the tools to do so.

It's true that economic policy is structured such that Congress has effective control over the non-monetary levers.

The problem is that Congress is functionally ineffective at responding to popular demand, intentionally. The Senate is structurally allowed to act anti-democratically against the will of the populace: two representatives for fifty arbitrarily defined land areas are allowed to override proportionally elected representatives, and the filibuster allows only a third of them to block any action.

We are at a political impasse. Things will get worse because it does not look good to the minority party for the majority party to enact real economic wins.

If only the majority party were willing to wrestle a tiny speck of that anti-democratic power away from the Senate by overriding extreme rules like the filibuster...

Re: Federal Reserve raises rates by 0.75%

#124

Post by mullingitover » Wed, Jun 15, 2022, 7:09 PM UTC

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.

...and the lower classes hold a lot of debt, which under high inflation would start to vaporize. It would effectively transfer a lot of wealth from those who hold a lot of cash to those who don't.

Can't have that.

Re: Federal Reserve raises rates by 0.75%

#125

Post by whatevenisthat » Wed, Jun 15, 2022, 7:09 PM UTC

beezle wrote: post #115

Ridiculous that the Fed doesn't just raise 200bp and be done. They could have done this six months ago (call it 250bp then) if they truly believe that the level of interest rates will have a material effect on the inflation rate. The piece meal, drip drip increases just raises uncertainty for consumers and businesses while ensuring they are "behind the curve"

Too many dollars are chasing too few goods because of supply chain issues caused by these governments locking everyone down when they overreacted. You can't reduce inflation this way except by affecting tens of millions of innocent people who now have austerity measures imposed on them from on high courtesy of Janet Yellen and her posse.

They should have avoided the steep lockdowns and given cash directly to households instead of the giant infusion/bailout to failing states and companies that didn't even need the money.

Re: Federal Reserve raises rates by 0.75%

#126

Post by afterburner » Wed, Jun 15, 2022, 7:09 PM UTC

paulpauper wrote: post #75

The fed is aggressively raising rates as the economy goes into recession. The last time something similar to this happened was in 1980. A very bad unusual situation, but on the other hand, the worst may be over. I think Google, Microsoft, Facebook, Amazon, and other large cap tech stocks are good buys at these levels and are more immune to macro factors (compared to other sectors ) and can hedge inflation by raising…

> The fed is aggressively raising rates as the economy goes into recession

The fed raising rates is what is causing fears of a recession in the first place. Cooling off the economy is the entire point, that's how you control inflation.

The fed is trying NOT to cause an actual recession, but still cool the economy enough to reduce inflation.

Re: Federal Reserve raises rates by 0.75%

#127

Post by paulpauper » Wed, Jun 15, 2022, 7:10 PM UTC

blip54321 wrote: post #108

paulpauper wrote: post #75

The fed is aggressively raising rates as the economy goes into recession. The last time something similar to this happened was in 1980. A very bad unusual situation, but on the other hand, the worst may be over. I think Google, Microsoft, Facebook, Amazon, and other large cap tech stocks are good buys at these levels and are more immune to macro factors (compared to other sectors ) and can hedge inflation by raising…

I have mixed feelings on tech stocks. I feel like the general competence has gone down, and that makes them vulnerable. Google is a shitshow right now. I don't think they can do B2B. Chrome Extensions. GSuite Free. Google Workspace App security audits. I can list of dozens of other disruptions like that. No one trusts them. At the same time, cost structure is astronomical; employee count has grown exponentially, to m…

Google and Facebook make insane profits. Advertisers are paying huge $ per click or for YouTube views. Maybe Google management is suboptimal, but the company generates cash like no other.

Re: Federal Reserve raises rates by 0.75%

#128

Post by Ticklee » Wed, Jun 15, 2022, 7:10 PM UTC

manfre wrote: post #76

QuarterReptile wrote: post #57

Earlier quoted context omitted.

I think you would need monarchy (or something more tyrannical) to get that. Democracies seem reliably short-sighted. The personal responsibility of taking on debt is so thoroughly attenuated in a democracy that piling on ($90k per citizen and counting, in the US) debt is the expedient thing to do, and it's seemingly impossible to overcome the electoral price paid for trying to reject that expedient option.

The US effectively had that with the executive and legislative acting the way they did the years before COVID.

I think you could argue the same took place during COVID, what with mask mandates, essentially forced vaccinations and businesses being forced closed.

Re: Federal Reserve raises rates by 0.75%

#129

Post by johnbellone » Wed, Jun 15, 2022, 7:10 PM UTC

mark_l_watson wrote: post #28

twblalock wrote: post #13

Earlier quoted context omitted.

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!

Thanks you, +1. If we don't take responsibility for our own problems, to me that spells trouble. I don't intend to pile on against President Biden, but his recent speech before the labor union sounded like a kid blaiming the dog for eating his homework, when he never did his homework. I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Putting Wall Street's…

> I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties.

Anyone who can't agree with that statement isn't living in reality.

Re: Federal Reserve raises rates by 0.75%

#130

Post by kerblang » Wed, Jun 15, 2022, 7:10 PM UTC

Dang. Well if it's enough to pop the various housing/cryptocurrency/startup bubbles, good. They were already pretty squishy but only for a threat that had to be carried out.

It can always be walked back, and probably will be in year...