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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#261

Post by symlinkk »

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…

Through their actions they’re revealing that all of the excuses thus far were a lie. “Chip shortage”, “wood shortage”, “salmon shortage”, were all fake and overblown, and the real problem was too much money the whole time.

Re: Federal Reserve raises rates by 0.75%

#262

Post by deeg »

hunterb123 wrote: post #113
hindsightbias wrote: post #109

Earlier quoted context omitted.

The administration did not cut production. Covid did. The oil industry is dragging their feet.

We were net exporters during covid under the last admin. This is the policy the current admin enacted that cut our production: https://www.csis.org/analysis/biden-makes-sweeping-changes-o... Please point to something that supports your theory that "covid did it" and oil companies are "dragging their feet". - edit, at my post limit - @vel0city: Banning new leases two years ago hurt our production output. Banning new s…

That article clearly states that Biden's actions aren't expected to have much effect on oil production for ten years.

Re: Federal Reserve raises rates by 0.75%

#263

Post by hristov »

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.

Actually higher inflation may help the poor and the middle class. If the inflation is caused by higher wages it is of great advantage of the poor and middle class. As well as a lot of the upper class (i.e., those of them that work for a living).

The present inflation is a bit of a mixed bag. It is partially caused by higher wages, but it is mostly caused by high oil prices, disturbances in grain and fertilizer sales caused by the war in ukraine and various covid related supply chain screwups.

I think the solution is to continue to address the things that can be addressed, like the covid supply chain screwups, low refining capacity, etc. Triggering a recession on purpose is really dumb.

Re: Federal Reserve raises rates by 0.75%

#264

Post by bryanlarsen »

bko wrote: post #203
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…

> If those are the principal drivers of inflation, tightening could depress non-energy demand in a way that causes a recession without alleviating inflation You don't think the inflation has anything to do with printing $14 trillion out of thin air, or increasing the M1 money supply from ~4tn in march 2020 to over $20tn today? https://www.covidmoneytracker.org/ https://fred.stlouisfed.org/series/M1SL

Why not both? Countries that didn't do significant QE are experiencing inflation, which argues that there is a significant supply side issue. Countries that did do significant QE have more inflation, which argues that QE also contributed. It appears that we're getting roughly 4% from each component.

So hopefully the Fed stops raising interest rates when inflation drops to around 4%.

Re: Federal Reserve raises rates by 0.75%

#265

Post by beezle »

afterburner wrote: post #165
misiti3780 wrote: post #159

Earlier quoted context omitted.

that happened.

It could have been worse, that's the point. It is also unknown exactly how much of a total raise is needed, hence the iterative approach to ensure no over-correction. The world economy has many moving parts, you can't panic when trying to manipulate it.

The dot plot indicates they want the funds rate around 3.75% by end of 2023 and over 3% by start of 2023. There is absolutely no reason to do 75 today, 75 next month and 50s the rest of the 2022. That pattern is actually more shocking than just a one and done hike. An analogy would be a bad tasting medicine - I don't know anyone who prefers sipping to just down the hatch.

There is also nothing to say they can't lower the funds rate should conditions warrant, as unlikely as that may be.

Perhaps a reminder to those who are younger - the past 10 years have been an aberration and not the norm when it comes to interest rates. The US and world economies have had long periods of growth with 10 year rates of 6% or higher. The current moves are as much about current inflation as they are cover for a Fed that has been looking for a way to end the mistake of ZIRP without actually saying it was a bad idea.

Re: Federal Reserve raises rates by 0.75%

#266

Post by paulpauper »

bamboozled wrote: post #174
paulpauper wrote: post #127

Earlier quoted context omitted.

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.

Generating cash doesn’t immediately ensure longevity.

bigger profit margins offer more cushion in bad econ environments compared to other businesses

Re: Federal Reserve raises rates by 0.75%

#267

Post by scoofy »

acd wrote: post #243

Prediction higher interest rates will reverse the following trends: * Private car leases at near zero interest rate will stop. At one point it was sometime cheaper to lease than to buy a car for cash * Housing bubble. Near zero central bank/bank interest rates has inflated a housing bubble. Higher interest rates will decrease housing prices since fewer buyers will be able to afford higher interest mortages. * Tech bu…

I generally agree with all of this, though, i think two of the points may see counter-intuitive outcomes:

>* Housing bubble. Near zero central bank/bank interest rates has inflated a housing bubble. Higher interest rates will decrease housing prices since fewer buyers will be able to afford higher interest mortages.

Ehh... we should expect this, but supply may meet demand, instead of the other way around. We could see an unprecedented ramp down in the already unprecedentedly low inventory.

>* Less investment companies buying up farmland. It will be more expensive to finance these deals

I would be skeptical of this. There will be fewer financed deals, but there are likely firms out there betting on these rate hikes failing, which still make farmland a safe bet against inflation.

Re: Federal Reserve raises rates by 0.75%

#268

Post by tootie »

mirntyfirty wrote: post #239
paulpauper wrote: post #60

Earlier quoted context omitted.

will continue? it's been strait down all year i would like to see it recover

Overall it’s gone down but seems as though a lot of the big drops are followed by smaller surges of buying.

Yeah, that's what they call the "Dead Cat Bounce" that I referred to.

https://en.wikipedia.org/wiki/Dead_cat_bounce

Re: Federal Reserve raises rates by 0.75%

#269

Post by TimTheTinker »

laputan_machine wrote: post #231
susanasj wrote: post #200

remarkable how many people in this thread are assuming the bottom of the income distribution is hurt the most by inflation. Think about who has debt (mortgage, student, medical expenses, car payments) and who that debt is owed to (banks, corporations) and what happens to that debt in real dollars when inflation is happening. The debt becomes less meaningful. Wages rise (they have in fact been rising), and the payment…

Inflation affects the poor more than the wealthy. Food, energy, shelter all become less attainable for the poor. They will always be attainable for the rich. In absolute terms the rich will "lose" more money, or not gain as much, but this isn't the concern. The concern is the inevitable increase of absolute poverty that will happen, and that is because the poor will be worse affected. Rich people aren't going to stru…

Any change at all from the ideal will disproportionately negatively affect the poor, marginalized, disadvantaged, etc. This is true in any sphere of life, not just economics.

That's why "love your neighbor as yourself" is indispensable. No policy or variable tweaking can take the place of simply caring for others.

Re: Federal Reserve raises rates by 0.75%

#270

Post by eftychis »

gw67 wrote: post #253

Why the market went up after the FED raised interest rate? Shouldn’t raising rates bad for stocks?

Funds pulled to see what would happen, now reallocated back. Is when everyone is screaming something bad is going to happen, something happens and people realize it was OK they can go back into the room.
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