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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#411

Post by erichocean »

eftychis wrote: post #248

Savings are low. We have supply issues -- just not enough stuff, including food, even if you had all the money in the world. It is a joke now that people complained about babyfood and government said it will give money; only to get a reply of: no there just isn't any baby food delivered. Increasing rates will likely have the opposite result. The goal of the Fed is to break the backs of people with low means. I am not…

> right now U.S. oil companies are simply not improving supply to even pre pandemic levels

Supply will continue to decrease in the US, both for raw inputs and refined outputs. It has nothing to do with the pandemic or the war in Ukraine and everything to do with the world moving off of fossil fuels, making any kind of long-term investment foolish. We will continue to exploit our existing infrastructure and…that's it.

The main reason things are going offline earlier than expected is because of supply change issues related to parts (i.e. if things can't be repaired, they go offline earlier than scheduled).

Re: Federal Reserve raises rates by 0.75%

#412

Post by dcchambers »

The housing bubble really interests me because conditions are so different than 2007/8/9.

Common sense says that prices should be falling with interest rates going up, but...

- Supply is still insanely low and demand is high. Americans want to own single family homes, end of story.

- New home prices are at an all time high because the cost of materials and labor is so high. That, and people just don't want to build small/reasonable new homes any more. Everything needs to be 3000+ sqft and have luxury appliances and finishes.

- So many people are locked into a 30 or 15 year fixed-rate mortgage with only 2.5%-3.5% interest. Even if you didn't move/buy a home in the last two years, virtually every homeowner I know refinanced their mortgage to these historically low rates. Even if they could sell their house and make a nice profit, who is going to want to do that when they're then staring down the prospect of a 7%+ interest rate on their next mortgage? This also keeps supply down and, thus, prices up.

Re: Federal Reserve raises rates by 0.75%

#413

Post by dpweb »

jmyeet wrote: post #251

The returns that capital demands (and the government obliges to) are ultimately unsustainable. That's the core problem here. Rising wages? There has been no meaningful real increase in wages in 40 years despite a massive increase in productivity. Profits keep going up and up. The expectations for profits keep going up. The problem here is that the people who make companies possible don't get to share in the proceeds…

Money drives the political process. We refuse to change it. Stockholm syndrome.

Just getting corporations and billionaire individuals to pay some taxes would be a nice start.

Re: Federal Reserve raises rates by 0.75%

#414

Post by coryfklein »

lend000 wrote: post #375

Predictably, the Fed's quantitative easing combined with stimulus created inflation. You can make a decent argument that the initial policy was the right thing to do. I mean, if you're going to force people not to work because of a pandemic, you have to give them some money. Whether there was (or is ever) a need to prop up the stock market as well is less obvious. But where they VERY clearly f'ed up is labeling the i…

A much greater proportion of this inflation is due to supply side shocks, and very little (if any at all) has to do with QE. COVID simultaneously destroyed supply chains while shifting consumer from spending on services to spending on goods which, by the laws of supply and demand, meant prices for goods went up: inflation.

Energy and locomotion are core aspects of the US economy that factor into just about everything including – you guessed it – the price of goods! And just as the impacts of the pandemic were easing in the US, one of the world's largest oil producers started a war and then was subject to sanctions and embargos by the US and Europe. And so, surprise, the price at the pump has skyrocketed! Again, no connection to QE.

The stimulus, on the other hand, I would agree with you; those checks increased the purchasing power of individuals right as supply chain issues cut the supply of goods. I imagine the alternative world where the stimulus hadn't happened might have been more structurally worse, albeit with lower inflation.

Re: Federal Reserve raises rates by 0.75%

#415

Post by datadata »

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…

A good chunk of the debt (~9 trillion) is owned by the Fed itself. When the bank finances a mortgage for example, because it is a fractional reserve system the bank is lending only a small fraction of its own capital. The bank simply borrows from the fed either directly or indirectly by selling. The bank's profit is that the mortgage interest rate on the mortgage (and risk) is higher than that of the risk free borrow rate.

Re: Federal Reserve raises rates by 0.75%

#416

Post by gizmondo »

jmyeet wrote: post #251

The returns that capital demands (and the government obliges to) are ultimately unsustainable. That's the core problem here. Rising wages? There has been no meaningful real increase in wages in 40 years despite a massive increase in productivity. Profits keep going up and up. The expectations for profits keep going up. The problem here is that the people who make companies possible don't get to share in the proceeds…

> The returns that capital demands (and the government obliges to) are ultimately unsustainable.

That's the start of the top comment, really? We're emerging from the era of unprecedentedly low returns on capital. There are trillions in bonds with negative nominal yield ffs.

Re: Federal Reserve raises rates by 0.75%

#417

Post by bombcar »

dont__panic wrote: post #202
nemo44x wrote: post #179

Earlier quoted context omitted.

Yes, Social Security is indexed to inflation. You can also buy a certain amount of I-Bonds that are tied to inflation and are paying very nicely nowadays. Tax free too.

There is a cap of how many you can purchase in a given tax year, though. 8k or something IIRC.

$10k per person though you can supposedly double that with trusts somehow.

Re: Federal Reserve raises rates by 0.75%

#418

Post by skrbjc »

rybosworld wrote: post #351
everdrive wrote: post #320

At what point does my savings account at my bank make money?

That could take a long time. Banks are only going to raise the rates when they want/need more deposits. Right now the excess reserves are near all time highs. So banks already have more liquidity than they know what to do with.

And with rising interest rates, more and more will be priced out of the housing market, meaning lending will fall, which is one of the biggest reasons banks need cash in the first place.

Re: Federal Reserve raises rates by 0.75%

#419

Post by ugl »

bombcar wrote: post #392
jmyeet wrote: post #319

Earlier quoted context omitted.

Brick kilns in Pakistan (and also Bangladesh and possibly other places) are a form of neoslavery [1]. What happens is that depserate people are forced to take a job but as part of that job they go into debt. The company provides housing? You'll have to pay that back. They provide food too. You'll have to pay that back. That's the point. For most there is absolutely no escaping that debt so they can't possibly get out…

The railway heyday in the US was famous for this, extremely high wages at the time, but company town, company store, and miles and miles from anywhere. Few were able to come out the other end much better off. You load 16 tons, what do you get? Another day older and deeper in debt St. Peter, don't you call me 'cause I can't go I owe my soul to the company store

Coal also. Lead to things like Blair mountain[0], where poison gas bombs from WWI were dropped on American workers, in America.

There's four boxes.

[0]https://en.wikipedia.org/wiki/Battle_of_Blair_Mountain

Re: Federal Reserve raises rates by 0.75%

#420

Post by copenja »

coryfklein wrote: post #396
bko wrote: post #203

Earlier quoted context omitted.

> 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

No! And in fact most economists consider this to be an extremist fringe theory. A quick counterfactual here is, if the US's inflation is caused by its "money printing" (a term that is used quite loosely here, the vast majority of this money never makes it out to the general economy), then how does one explain the inflation experienced in other nations at the same time where no money was printed?

I don't think the stimulus being one of the drivers of inflation is an 'extremist fringe theory' at all. I thought the consensus was it was one of many factors, and the exact contribution of the different factors (stimulus, supply issues, etc) was up for debate.

US inflation is higher than other wealthy nations and the US also did a larger stimulus. So there is evidence that the additional stimulus may have created greater inflation in the US. Scope this paper here: [0]

As far as the consensus for the cause of inflation being unclear among experts, scope this article in left leaning VOX: [1].

[0] https://www.frbsf.org/economic-research/publications/economi...

[1] https://www.vox.com/23036340/biden-american-rescue-plan-infl...

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