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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#131

Post by pfisherman »

QuarterReptile wrote: post #57
cjbgkagh wrote: post #21

Earlier quoted context omitted.

I just wish it was done earlier and more cheaply during otherwise good times.

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.

We had someone who was attempting something like tyrannical rule between 2016 - 2020 when the economy was going gangbusters. In his infinite wisdom he passed a ginormous tax cut, and then publicly lambasted the fed chair for modestly raising interest rates.

Not that administration is solely to blame for our predicament. The failure goes back even before the previous administration who had a mandate to make radical changes after the 2008 election cycle, and instead continued business as usual.

Re: Federal Reserve raises rates by 0.75%

#132

Post by deltree7 »

mbfg wrote: post #105
darth_avocado wrote: post #82

Earlier quoted context omitted.

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…

please show where trickle down economics ever worked, anywhere.

An iPhone user in rural India surfing the open internet on $1 / month LTE mobile networks is absolutely an example of Trickle down economics working.

Every single of the thousands of innovation that goes into an iPhone was subsidized by rich venture capitalists and rich early adopters who were willing to plonk large sums of money to a 'gadget' that only showed promises of work.

It wasn't because the Indian Government Taxed the Rich and made a mandate that everyone should have an device-in-their-pocket-that-carries-all-the-worlds-information-and-productivity-tools

Re: Federal Reserve raises rates by 0.75%

#133

Post by its_ethan »

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…

> Amazon is a cesspool of knock-offs, scams, and rip-offs.

I think it's worth pointing out that Amazon is more than it's online retail site - 60% of it's revenue in 2020 came from something other than third party retail. AWS is probably going to take over as their biggest source of revenue soon.

Re: Federal Reserve raises rates by 0.75%

#134

Post by prometheus76 »

timmg wrote: post #62
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.

You probably know this already, but I thought I'd pass on a correction to what is a common misconception. If you start making more money and end up in a higher tax bracket, only the amount of income in the new tax bracket is taxed at the higher rate, not the whole income.

For example: Pretend you currently make $75,000/yr and the next tax bracket is at $80,000. And you get a nice raise to make your salary $85,000 this year. Only $5,000 of your new income (the amount "above the next tax bracket") will be charged at the higher rate.

Re: Federal Reserve raises rates by 0.75%

#135

Post by smartmic »

I know this may sound petty and the wording is regularly found even in the best editorial offices, but the engineer in me resists every time: the correct wording should be "by 0.75%-points" instead of "by 0.75%". Am I the only one who is bothered by this?

Re: Federal Reserve raises rates by 0.75%

#136

Post by afterburner »

wolframhempel wrote: post #99

The really worrying thing to me is our inability to accept that we (as in humankind) are rather rubbish at running complex systems. A good analogy is to think of the economy as a still lake. If you throw a rock into it, you know that it will create concentric circles of waves. You throw a second rock and you know that its waves will interfere with the first. But now the waves create oscillating patterns and now they…

> This sort of FED that we have now that tries to control the overall economy is - to me - at least as hopeless as centralized 5-year plans under communism.

This is a CRAZY comparison. The Fed is barely doing anything, basically trying to keep things stable using two simple tools, and is doing so iteratively and carefully. It is the literal opposite of a Soviet communist 5 year plan that details everything to the n-th degree and damn the consequences.

Re: Federal Reserve raises rates by 0.75%

#137

Post by QuarterReptile »

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.

It's true that we are incrementally getting out of debt commitments by debasing the currency

But as others have pointed out, bonds eventually come to term and then have to be rolled over into the higher prevailing interest rate. With such a high debt burden, that debt service can become a significant portion of all tax receipts, at which point all services are funded from deficit spending.

2021 tax receipts estimate is $3.86trillion [0]. Debt stands at roughly $30.5trillion. Ignoring compounding for simplicity's sake, 12.7% rates would mean 100% of taxes go just to pay for servicing current debt.

When you look into discretionary spending (stuff outside of medicare/medicaid/social security) it's way worse. Subtract that away from the $3.86trillion and you only have $3.86- (1.3+1.1) = $1.46trillion to spend on defense, all services, and debt service from tax receipts. 1.46/30.5 = 4.8%, meaning that no tax receipts cover defense or any discretionary spending (services) if rates hit 4.8% (actually lower because of compounding), and all services are from debt. The most recent White House budget [2] suggests 10-year treasury bills will hit 2.8% by 2028; your faith in that number comprises a major part of your faith in the long-term solvency of the US government.

[0]https://www.whitehouse.gov/wp-content/uploads/2020/02/budget...

[debt, medicare/medicaid, and social security numbers] https://www.usdebtclock.org/

[2] https://www.whitehouse.gov/wp-content/uploads/2021/05/budget...

Edited for sources formatting

Re: Federal Reserve raises rates by 0.75%

#139

Post by lovich »

prepend wrote: post #118
mbfg wrote: post #105

Earlier quoted context omitted.

please show where trickle down economics ever worked, anywhere.

I mean the US economy in the 20th century seems like a pretty good example, right? It “worked” by having the wealthiest realize most gains but also making the US the most powerful economy in the world and still has a large sized middle class with houses, pensions, 401ks, etc.

Funny, I seem to remember a certain president running on trickle down economics that coincided with the decline of worker compensation compared to executive and the shrinking of the middle class, but maybe I have history completely backwards

Edit:also look at the economic system practiced in the United States that led up to the introduction of trickle down economics. That happened in the 80’s and there’s 4/5ths of the 20th century that happened prior to that

Re: Federal Reserve raises rates by 0.75%

#140

Post by ketzo »

Retric wrote: post #90
JumpCrisscross wrote: post #20

Earlier quoted context omitted.

> 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…

It keeps supply side bottlenecks from being inflated with cheap money.

People aren’t buying gas or groceries with “cheap money.”

Housing, business debt — sure. But there’s a long, convoluted path from cheap debt to inflation of consumer goods.

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