Federal Reserve raises rates by 0.75% • Hacker News Board

Re: Federal Reserve raises rates by 0.75%

#451

Post by Retric » Wed, Jun 15, 2022, 9:44 PM UTC

ketzo wrote: post #140

Retric wrote: post #90

Earlier quoted context omitted.

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.

The thought process goes: Consumer goods like TV dinners are still based on things further up the supply chain like fertilizer. Normally you get inflation when there is a shortage of say crude oil, but when everything is running into random shortages companies get defensive and start trying to stockpile supplies.

Hypothetical example: If Dell wants another 2 weeks of GPU’s on hand from Random Supplier X, and Random Supplier X wants 2 weeks of chips for their GPU’s on hand from Nvidia, and Nvidia wants 2 weeks of refined silicon on hand from supplier Y, who wants to source 2 weeks of raw materials early that’s 2 + 2 + 2 + 2 = 8 weeks worth of demand of sand from some mine somewhere out of thin air. Which then dramatically bumps prices for sand and that trickles back down the supply chain.

However, higher interest rates should moderate how much each company in that chain stockpiles, which reduces the demand for sand even if the same number of computers are shipped either way.

Re: Federal Reserve raises rates by 0.75%

#452

Post by 88913527 » Wed, Jun 15, 2022, 9:49 PM UTC

afterburner wrote: post #119

beezle wrote: post #115

Ridiculous that the Fed doesn't just raise 200bp and be done. They could have done this six months ago (call it 250bp then) if they truly believe that the level of interest rates will have a material effect on the inflation rate. The piece meal, drip drip increases just raises uncertainty for consumers and businesses while ensuring they are "behind the curve"

The piecemeal approach ensures they avoid massive shocks and over-correction. The cure should not be worse than the disease.

Where was this thinking when it came to applying trillions of dollars in monetary policy? We're supposed to cautious with interest rate hikes, yet free with the money printer. Quite the double standard I'd say.

Re: Federal Reserve raises rates by 0.75%

#453

Post by lovecg » Wed, Jun 15, 2022, 9:49 PM UTC

thfuran wrote: post #356

slaw wrote: post #286

Earlier quoted context omitted.

And monthly rate was lower than now with 5.5% mortgage. Yes, I want it.

All it will cost you is a few decades of deflation to get back to 70s prices.

To get back to 70s prices we should also go back to 70s building codes (less safe, but is something costing 2x, 3x, 5x really justifies the marginal safety improvements?) and 70s house sizes (smaller)

Re: Federal Reserve raises rates by 0.75%

#454

Post by lend000 » Wed, Jun 15, 2022, 9:49 PM UTC

coryfklein wrote: post #414

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…

While supply chain problems were real during the pandemic, especially w.r.t. automobiles, QE is by far the driving force of our current economic situation. Here is some data to put your talking point into context.

Look at the recent production some of the items being severely impacted by inflation. Now look up their price charts (you can use February before Putin invaded Ukraine to eliminate another variable).

Wheat: https://www.statista.com/statistics/267268/production-of-whe... Meats: https://www.statista.com/statistics/237632/production-of-mea... Steel: https://www.statista.com/statistics/267264/world-crude-steel...

The only economically significant shortages (as defined by lower production) were in automobiles and oil: https://www.statista.com/statistics/262747/worldwide-automob...

You could argue that demand for oil was also lower, because of fewer automobiles and, of course, lockdowns. Crude oil prices were at 2018 levels until the very end of 2021 (when inflation was at 7%), so you can't blame inflation on that.

Did Covid affect productivity? Undeniably. A significant portion of the world population was literally locked down for months. Is that lower productivity and resulting supply chain disruptment a contributor to inflation? Probably. Although without any government intervention, prices probably would have depressed similar to the 1930's as the economy contracted and cash became more valuable as paper loans eliminated money generated by the money multiplier.

But these statements suggest a low level misunderstanding: "and very little (if any at all) has to do with QE" and "one of the world's largest oil producers started a war."

QE is a major contributor (hence why it is finally being rolled back to undo the damage...) and the inflation rate was 7.9% in February, BEFORE Putin invaded Ukraine. If I had to guess a significance, I'd say overall economic price increases are a consequence of 70% QE, 20% supply chain, 10% Russia. Another thing... look at the stock market. If the supply chain truly demolished the value of the economy, why did the market go on a historic bull run? Either the supply chain issues were not as bad as you think, or the Fed way over-quantitative-eased and disconnected prices from reality by expanding their balance sheet with literal securities, and of course the historically low interest rates.

Re: Federal Reserve raises rates by 0.75%

#455

Post by ren_engineer » Wed, Jun 15, 2022, 9:49 PM UTC

treis wrote: post #325

imachine1980_ wrote: post #215

Earlier quoted context omitted.

I thinks most becouse real growth only happens in Asian countries last decades, and usa and europe companies fake growth by overlabredge debt becouse of the lower inters rate, not productivity

Oh come on. Asia didn't invent the iPhone. They're not leading the self driving car race. The internet runs on AWS/Azure/GCloud not any Asian provider. Asia is making incremental improvements on products invented in the West. They're not the ones inventing classes of devices or breaking new ground.

>Asia didn't invent the iPhone

They didn't invent it, but they make probably 90% of the hardware components

Re: Federal Reserve raises rates by 0.75%

#456

Post by atweiden » Wed, Jun 15, 2022, 9:50 PM UTC

ljhsiung wrote: post #258

susanasj wrote: post #181

Earlier quoted context omitted.

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.

The concept of "inflating debt away" is an assumption that wages match inflation while debt stays static. This is a fair assumption in low inflation times, but is showing some cracks these days. One might then ask, do higher-class wages match/exceed inflation more than lower-class wages? This is debatable. But here's some interesting data from the Atlanta FED, where you can track wages by quintile, education, "skill"…

> The concept of "inflating debt away" is an assumption that wages match inflation while debt stays static

It also myopically focuses on household debt. But household debt is significantly lower than either corporate debt or government debt [1].

The biggest debtors benefit the most from inflation — quantitatively speaking, the debts of ordinary people aren’t very big.

[1]: https://www.mckinsey.com/~/media/McKinsey/Industries/Financi...

Re: Federal Reserve raises rates by 0.75%

#457

Post by bnjms » Wed, Jun 15, 2022, 9:50 PM UTC

jmyeet wrote: post #315

whiplash451 wrote: post #292

Earlier quoted context omitted.

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…

The US government only takes a 12.5% royalty on profits from oil and gas extraction on public land [1]. Norway has a petroleum tax of 27% and a special tax of 51% for a total of 78% [2] in comparison. While we would generate less tax revenue per capita than Norway would, that's not the point. The point is the state should take a much larger share of the profits of extracting natural resources that state owns. [1]: ht…

> The US government only takes a 12.5% royalty on profits from oil and gas extraction on public land [1].

This is horrific. Also the best argument I’ve seen.

Re: Federal Reserve raises rates by 0.75%

#458

Post by notch656a » Wed, Jun 15, 2022, 9:50 PM UTC

PragmaticPulp wrote: post #353

TheBlight wrote: post #279

Earlier quoted context omitted.

>What we're allowing to happen here through investors buying up housing stock (and jacking up the prices), second homes, AirBnB and so on has reached the point of being a human rights violation IMHO. There are plenty of affordable places to live. People just don't want to move there. Buying a house in a hip U.S. city/suburb isn't a human right.

This comment is too simplistic, but I have noticed this scenario playing out with a lot of the younger people I work with. We have a remote org and hire remote, but a lot of the young people we hire out of college have relocated to some of the most expensive cities. There’s a growing attitude that if they’re already paying exorbitant amounts for housing and have a large amount of student debt, why not go all-in and b…

I work remote and the thing that keeps me living in a relatively high CoL city is fear of being locked in if I'm fired and unable to find other remote work.

Getting a mortgage in the country, for a tech worker, is basically a bet that either home values will stay high enough you can back out or that you'll be able to stay remote for the length of the mortgage.

Re: Federal Reserve raises rates by 0.75%

#459

Post by Phrenzy » Wed, Jun 15, 2022, 9:51 PM UTC

pojzon wrote: post #301

Supermancho wrote: post #147

Earlier quoted context omitted.

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.

Rehire for the same position. Hiring budget is 3x bigger than rises budget. Dont ask me whose retarded idea is that.

It was Mark's idea.

Who's Mark?

Oh, he worked here three years ago.

Re: Federal Reserve raises rates by 0.75%

#460

Post by kaesar14 » Wed, Jun 15, 2022, 9:52 PM UTC

TheBlight wrote: post #397

hypersoar wrote: post #383

Earlier quoted context omitted.

Why shouldn't we expect people who work in cities to be able to live dignified lives in those cities? There are always going to be janitors, home care providers, baristas, grocery store employees, etc. Our daily lives depend upon them. It's insane to me that we have a system that requires those people to exist but barely pays them enough to afford to live.

If workers couldn't afford to live close to those cities they'd move somewhere else. Those cities would then experience a shortage of workers. Wages would have to rise to attract new workers. Costs to everyone else in those cities would have to rise in order to accommodate this. If non-workers could no longer afford these costs they would have to sell their homes and move out. This would increase supply and bring the…

Unfortunately the places where workers congregate is also the places where the most opportunity can be found in the job market and social sphere. Pushing people out of our most dynamic cities so that a bunch of landlords can artificially restrict supply to profit more is idiotic and a failure of public policy.