Federal Reserve raises rates by 0.75% • Hacker News Board

Re: Federal Reserve raises rates by 0.75%

#421

Post by hypersoar » Wed, Jun 15, 2022, 9:04 PM UTC

susanasj wrote: post #181

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.

I don't think it's that simple. Lower middle class and poor people have debt, and inflation is good for making debt less valuable in real dollars. Pensioners, maybe, but social security is indexed to inflation if I'm not mistaken? I wouldn't be surprised if many public and private pensions are as well. This is much more a move in favor of the rich that are owed money by the poor imo.

Everywhere I look I see the unexamined assumption that inflation is necessarily bad for everyone. I haven't be enable to find a straight answer on who it actually benefits and who it hurts in the long run. I've found economics studies arguing contradictory conclusions. Wages, costs, debt, cash, stocks, and rent all react differently, and your experience of inflation depends hugely on what balance of these things you have.

Inflation and responses to it affect the distribution of wealth. When I hear an automatic response from "responsible" policymakers explain that some sacrifices will be needed to tame it (mostly not by them, of course), then I strongly suspect that we're headed for yet more accumulation of wealth at the top.

Re: Federal Reserve raises rates by 0.75%

#422

Post by bbddg » Wed, Jun 15, 2022, 9:05 PM UTC

whiplash451 wrote: post #292

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 Norway example is really annoying. It keeps coming back as an example to follow, when everybody knows it is a complete outlier that cannot be reproduced elsewhere. Norway is sitting on a gigantic pile of offshore gas that it uses to generate massive profits that go into a huge fund they don't know what to do with, all of that for a 5M population that drowns into social programs. There is literally no country in t…

Yeah it's too bad the US is such a poor country with no natural resources.

Re: Federal Reserve raises rates by 0.75%

#423

Post by bombcar » Wed, Jun 15, 2022, 9:05 PM UTC

dcchambers wrote: post #412

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 s…

This is the graph to watch: https://fred.stlouisfed.org/series/ACTLISCOUUS but it's delayed by months.

Re: Federal Reserve raises rates by 0.75%

#424

Post by qgin » Wed, Jun 15, 2022, 9:07 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…

I think this is a very HN view of things. To the average person, all of these companies are are a nearly inescapable part of daily life.

Re: Federal Reserve raises rates by 0.75%

#425

Post by jgust » Wed, Jun 15, 2022, 9:07 PM UTC

scoofy wrote: post #267

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 se…

> 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.

This seems likely. As a hypothetical homeowner, I would have very little incentive to sell my house for less than I paid for it AND take the hit borrowing more expensive money unless there exists some external factor for me to move.

Re: Federal Reserve raises rates by 0.75%

#426

Post by coryfklein » Wed, Jun 15, 2022, 9:08 PM UTC

copenja wrote: post #420

coryfklein wrote: post #396

Earlier quoted context omitted.

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 g…

Stimulus checks certainly had an impact on inflation! (A point I argue specifically elsewhere in this thread.)

But not the QE/printing money.

Re: Federal Reserve raises rates by 0.75%

#427

Post by qgin » Wed, Jun 15, 2022, 9:09 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…

You don't have labor and supply-side shortages during a recession. We're pretty far from a recession.

The fed may overly cool things off and cause a recession, but it's not a double-negative situation of recession PLUS raising rates.

Re: Federal Reserve raises rates by 0.75%

#428

Post by bombcar » Wed, Jun 15, 2022, 9:11 PM UTC

cavisne wrote: post #327

drexlspivey wrote: post #120

Earlier quoted context omitted.

Yes the bond coupon payments are fixed, only the newly issued debt will be affected.

Fixed over what time period? I think the interest paid is public knowledge, im wondering if the breakdown of rates/terms is known. What I'm curious about is what it would look like if interest rates went to 10% in terms of the interest payments (as loans mature and rollover etc)

Apparently much of the debt is in short-term bonds (which is expected, since the interest rates were low why would you want long term bonds?).

Re: Federal Reserve raises rates by 0.75%

#429

Post by Aloha » Wed, Jun 15, 2022, 9:12 PM UTC

bombcar wrote: post #409

Aloha wrote: post #361

Earlier quoted context omitted.

I think you're underestimating the long tail, the average age of a vehicle is 12.2 years old, we're probably 15-20 years from where 50% of vehicles on the road are electric. I'm 39, and I do not see a point in my expected lifetime (around another 35 years) where gasoline and diesel fuel will not be common and available.

Unleaded gas was introduced in the 1970s in the US - and leaded gas was still made and sold until the 1990s. And it's still available if you know where to look in every city in the US as 100LL Avgas, or with additives.

I'm expecting retail gas stations to be common for the next 20-40 years, with some density reduction towards the middle of that period is what I'm saying more or less.

To say leaded fuel is still available is a little bit of a misnomer, in the states anyhow, its not legally available as a road fuel, nor is a TEL additive - there are lead substitutes, but they're potassium I think, largely to prevent valve seat wear.

As far as I know, low octane unleaded fuel has always been available, you could always get a 'regular' grade gas without TEL, and premium fuel was marketed as with TEL.

Re: Federal Reserve raises rates by 0.75%

#430

Post by coryfklein » Wed, Jun 15, 2022, 9:12 PM UTC

If you've come here for informed commentary on economics, so far it seems the comments section is about par for the course by internet standards. If you're looking for informed professional analysis, I highly recommend the Inside Economics podcast by Moody's Analytics[0].

They post at least once per week and they often discuss recession odds, they break down the causes of inflation, and regularly host industry experts. (One of my favorites was an episode featuring an economist that works for a US car manufacturer and the insight they could give into the economics of new vs used cars and how auto makers are having to adapt to new economics of vehicles.)

[0] https://about.moodys.io/podcast-series/moodys-talks-inside-e...