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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#141

Post by aisengard »

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.

Sure, maybe in tech, which had been in an unsustainable bubble for a long time. But unless everything changed in the last few weeks, we haven't seen this in the overall labor market, which remains as hot and labor-friendly as ever. Only interest rate bumps will put a dent into this unprecedentedly strong labor market.

Re: Federal Reserve raises rates by 0.75%

#142

Post by dc-programmer »

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…

Is the problem the difficulty of running complex systems or the complete resistance to the idea from politicians and voters that reality is massively complicated. People just want “common sense” solutions and politicians who speak plainly but maybe that’s not what we need.

Re: Federal Reserve raises rates by 0.75%

#143

Post by afterburner »

apienx wrote: post #92

This is a typical overcorrection (the Fed is run by humans after all). US debt is over $23x10^12, so such rates are unsustainable even in the short term (12-24 months). Algorithmic Monetary Policy > Dictated Monetary Policy(TM) IMHO.

Given that a recession hasn't happened (yet?) and inflation is still high and not trending down (yet?), I wouldn't say it's an over-correction (yet?)

Re: Federal Reserve raises rates by 0.75%

#144

Post by gvhst »

cavisne wrote: post #87
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.

Is the debt rate fixed on federal debt? I can’t find much info on this. Ie if the fed funds rate doubles what’s the impact on the interest rate payments the government makes.

Most US Gov debt is fixed rate debt, however the government issues new debt all the time, which is issued at a yield that is set by a Dutch Auction [0]

[0] - https://home.treasury.gov/services/treasury-auctions

Re: Federal Reserve raises rates by 0.75%

#145

Post by mullingitover »

drexlspivey wrote: post #102
apienx wrote: post #92

This is a typical overcorrection (the Fed is run by humans after all). US debt is over $23x10^12, so such rates are unsustainable even in the short term (12-24 months). Algorithmic Monetary Policy > Dictated Monetary Policy(TM) IMHO.

This does not affect existing debt in any way only newly issued debt.

That existing debt gets rolled over, and as it does it rolls into the higher rates.

Re: Federal Reserve raises rates by 0.75%

#146

Post by xwdv »

twblalock wrote: post #40
nostromo wrote: post #22

Earlier quoted context omitted.

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.

I think every possible "tanking the economy" scenario always hurts the poor the most.

Frankly the poor are always going to get hurt no matter what you do. Being poor isn’t a position of strength in the first place. When you’re living hand to mouth you are very sensitive to any changes in the environment.

Re: Federal Reserve raises rates by 0.75%

#147

Post by Supermancho »

bpodgursky wrote: post #112
jcadam wrote: post #45

Earlier quoted context omitted.

Still waiting for inflation to hit my effing salary. I know it won't, because we're entering stagflation territory and unemployment is going to go up. COVID was a massive wealth transfer from the lower and (esp) middle class to the oligarchs.

Have you asked for a raise?

People at my company have, in all-hands meetings. Is the company going to raise our salaries to compensate from the widely acknowledged inflation that's going on, given the company nets billions a year? No comment.

Re: Federal Reserve raises rates by 0.75%

#148

Post by afterburner »

whimsicalism wrote: post #70
tootie wrote: post #3

Stocks rallying a bit. I expect we'll see dead cat bouncing at least until we get the next CPI numbers.

Stocks rallying is just an indication that the Fed under-raised compared to market expectations.

No, today it's probably an indication to traders that the Fed is taking inflation seriously, since all the risky stocks are sensitive to inflation. A lower raise may have cause a further sell off.

Traders' minds can be tricky. They're also reading the news!

Re: Federal Reserve raises rates by 0.75%

#149

Post by johnbellone »

jcadam wrote: post #45
nostromo wrote: post #22

Earlier quoted context omitted.

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.

Still waiting for inflation to hit my effing salary. I know it won't, because we're entering stagflation territory and unemployment is going to go up. COVID was a massive wealth transfer from the lower and (esp) middle class to the oligarchs.

I am hiring, and you look like a perfect fit for my team. Send me a message.

Re: Federal Reserve raises rates by 0.75%

#150

Post by timmg »

prometheus76 wrote: post #134
timmg wrote: post #62

Earlier quoted context omitted.

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 thi…

> 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.

Oh, for sure. But that money that moves into those brackets will be taxed higher.

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