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Federal Reserve raises rates by 0.75%

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Re: Federal Reserve raises rates by 0.75%

#481

Post by rurp »

hgomersall wrote: post #348
rurp wrote: post #167

Earlier quoted context omitted.

Exactly, the best time to raise rates was 6 years ago when the economy was humming along well. Instead the fed kept them too low creating huge bubbles, which it's now in the process of popping. These next few years are going to be a lot rougher than they needed to be. This isn't just hindsight bias either. Plenty of people have been warning about exactly this problem for years.

Why should they have raised interest rates? Standard economic dogma has it that below target inflation like the last 15 years needed low interest rates to get it back up. Or could it be that standard economic dogma is a steaming pile of horse shit?

Sure inflation was low for buying food or milk or whatever, but was much higher than 2% in some massive areas of the economy, like stocks and housing. Keeping rates so low created huge pressure to invest in high risk speculative assets. Crypto is basically the poster child for how absurd things have been in recent years.

Re: Federal Reserve raises rates by 0.75%

#482

Post by jkestner »

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…

Workers can’t afford to live close, and they haven’t moved elsewhere. Why? Perhaps moving costs money while they never have an opportunity to save for it.

Re: Federal Reserve raises rates by 0.75%

#483

Post by smithza »

TheBlight wrote: post #279
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…

>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 does not even factor in the NIMBY-ism of many progressive cities. People argue that housing is a human right and time and time again refuse to allow permitting changes that build more affordable, multi-family homes in their backyard.

Re: Federal Reserve raises rates by 0.75%

#484

Post by _-david-_ »

lovich wrote: post #393
nemo44x wrote: post #381

Earlier quoted context omitted.

Sales tax, property tax, fees, etc are a rounding error essentially and are local. At a Federal level they are meaningless. Saying that I'd be all for a Federal sales tax of 20% if we could nearly eliminate income taxes.

Why? That puts more of the tax burden on those with the least

You can exclude necessities from sales taxes and alleviate most of the taxes paid by the poor.

Re: Federal Reserve raises rates by 0.75%

#485

Post by bko »

mpwoz wrote: post #230
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

The M1 jump is not new money for the most part, it's a reclassification of things that used to be M2 as also being M1 (liquid) https://fredblog.stlouisfed.org/2021/05/savings-are-now-more... M2 increased in 2020, but not by as much as you're saying https://fred.stlouisfed.org/series/M2SL

Thanks for sharing. I never knew that. The post says savings accounts were moved into M1 because they're pretty liquid now. But what was the real rationale or implications? Odd time to do that move (April 24, 2020)

Re: Federal Reserve raises rates by 0.75%

#486

Post by BizarroLand »

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…

They're drinking the water while choking the river.

If you have to have ever-increasing profits, you have to ALSO have purchasers with ever-increasing purchasing power.

You can slide by for a while by wedging yourself into a currently existing system and tapping some of its resources, but eventually if that drain isn't backfilled with more then it will run dry.

Re: Federal Reserve raises rates by 0.75%

#487

Post by troon-lover »

diydsp wrote: post #322
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…

> complete outlier Norway may be at the far end of the spectrum, but it's not black and white. Most countries have resources and very few share them with their citizens. It's not just to be born into a system where an incumbent oligarchy has control of resources. That kind of modern realpolitik doesn't develop any kind of civic duty or pride.

It is black and white, this is a great example of it.

Norway is white.

Re: Federal Reserve raises rates by 0.75%

#488

Post by notch656a »

no_wizard wrote: post #480
notch656a wrote: post #317

Earlier quoted context omitted.

I can buy a plot of dirt for maybe $10k near a city with lots of jobs in my state. The problem is actually building something requires following codes and building regulations. A simple adobe house is doable by hands by a family with the occasional help from extended family or friends. But government say "bad" and I need permits, even if it's on a 5 acre plot with zero chance of any structural failure spreading to a…

I don't think its onerous safety regulations that limit affordable housing. Its a well documented phenomenon that housing policy is driven to protect past buyers over future ones (NIMBY, using zoning laws to limit density of housing, minimal acreage in cities etc). A combination of loosening up zoning laws around residential buildings and a land value tax would do lots to facilitate affordable housing, but nobody wan…

>onerous safety regulations

I see you interchanged the words I actually used "onerous regulations" and instead addressed "onerous safety regulations." Nowhere in the comment you replied to is the word "safety" found.

But it is true a lot of regulations are made in the name of "safety." What these fail to account for, is that many of these regulations increase expense, so there are tradeoffs such as those who lose healthcare or education opportunities by instead spending it making housing more safe (thus, they may actually become less safe by having a safer house). Or even worse, people who end up homeless because although they could have built an "unsafe" shack, the regulations in all their wisdom deem it's better to be dead of the elements on the street than to live in a sub-par structure.

> Its a well documented phenomenon that housing policy is driven to protect past buyers over future ones (NIMBY, using zoning laws to limit density of housing, minimal acreage in cities etc).

>A combination of loosening up zoning laws around residential buildings and a land value tax would do lots to facilitate affordable housing, but nobody wants to disrupt current homeowners on behalf of renters and future buyers

Agree on all accounts here, the stars really align against new entrants.

Re: Federal Reserve raises rates by 0.75%

#489

Post by MrWiffles »

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…

I agree with pretty much all of this, but would add that while the stimulus was absolutely necessary, it was applied/distributed so sloppily that lots of people who didn’t need it wound up with tons of free money (I personally know a few) while folks who were really suffering got almost no benefit at all (too little too late).

Once again, the only people who came out ahead are the ones with all the money and power in the first place.

Re: Federal Reserve raises rates by 0.75%

#490

Post by cpeterso »

beezle wrote: post #265
afterburner wrote: post #165

Earlier quoted context omitted.

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…

To avoid reacting too late, maybe the Fed should have a policy of always adjusting funds rate every month, even in a stable economy. Like TCP congestion control, the funds rate would tack up and down around the "optimal" value. This would also reduce the market surprises because people would know the rate will go up or down every month. And with smaller, more frequent changes, people can more easily anticipate which way the rate will tack.
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