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Federal Reserve to increase interest rates by 75 basis points

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Re: Federal Reserve to increase interest rates by 75 basis points

#121

Post by cm2187 »

mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

The shortage of housing and population growth have been around for 20 years and the fear until a year ago was deflation not inflation. Don't think that's what is driving inflation.

Money printing is what caused the initial rise in prices. But we aren’t printing money anymore, so that would be a one off. Super tight labor market is what will create the self-fulfiling cycle of prices up => higher wages => prices up. I think the Fed is trying to create unemployment, so that it breaks the ability to demand higher wages, and stops the cycle.

It’s a ugly process that the fed should have started a year ago. The conspiracy theorist in me thinks Powell’s decision might have been influenced by the fact that his mandate was up for renewal by the Biden administration, who didn’t want to hear about inflation risk and tighter monetary policy at the time.

Re: Federal Reserve to increase interest rates by 75 basis points

#122

Post by notch656a »

Victerius wrote: post #113
LetsGetTechnicl wrote: post #97

What is being to address the price gouging by companies? Oil and gas companies are seeing record profits, how can it be just inflation that costs are going up?

The free market normally takes care of price gouging by drawing in new entrants. If the barriers to entry are too high, then price controls or nationalization.

>If the barriers to entry are too high, then price controls or nationalization.

Or remove the barriers, like regulation/licensing/taxation.

Re: Federal Reserve to increase interest rates by 75 basis points

#124

Post by bradfa »

pbk1 wrote: post #103
mjr00 wrote: post #87

Earlier quoted context omitted.

> It's too difficult to curb demand for things like food and housing if the population is growing. It's also difficult (impossible) to curb demand for housing if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. Unfortunately, so many people in the west have their net worth tied up in their homes that policies directly targeting property values is political s…

> if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. citation needed? genuinely curious - are there studies about long-term returns from housing vs. other asset classes (namely public equities)?

Local to me, real estate investment really only works if you're a landlord and the rent is your income. Buying then selling or flipping homes has not historically been a profitable endeavor. If you timed things just right for COVID, maybe you made a good return, but otherwise in history prices have been rather stable and increasing only similar to inflation for decades.

Surely there are markets where flipping houses is extremely profitable, but it's not all markets.

Re: Federal Reserve to increase interest rates by 75 basis points

#125

Post by saurik »

pbk1 wrote: post #103
mjr00 wrote: post #87

Earlier quoted context omitted.

> It's too difficult to curb demand for things like food and housing if the population is growing. It's also difficult (impossible) to curb demand for housing if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. Unfortunately, so many people in the west have their net worth tied up in their homes that policies directly targeting property values is political s…

> if housing is far and away the best investment you can possibly make, both in the short, medium, and long-term. citation needed? genuinely curious - are there studies about long-term returns from housing vs. other asset classes (namely public equities)?

I did a Google search for "long-term returns from housing vs. other asset classes" (purposefully using exactly what you typed here to show how easy this is) and found a ton of references showing this is an overly-strong (and even somewhat "debated") claim but (as far as I am concerned) right enough for a discussion forum (and remember a lot of people aren't in a good mental position to own stocks but have to live somewhere anyway and so might as well own a house).

https://seekingalpha.com/article/4242070-in-long-run-house-w...

> This mix of comparable returns (Finding 1) with lower volatility (Finding 2) leads to one of the research's most puzzling, but fascinating, discoveries: over the very long run (circa the last century), housing earned a superior risk-adjusted return than equities. Sharpe ratios for the asset summarise this fact; note too that the pattern is consistent across countries.

Re: Federal Reserve to increase interest rates by 75 basis points

#126

Post by JamesBarney »

LetsGetTechnicl wrote: post #97

What is being to address the price gouging by companies? Oil and gas companies are seeing record profits, how can it be just inflation that costs are going up?

There is really only one organization that price fixes oil and it's OPEC. Any individual oil and gas company has literally zero influence on the price of oil and gas.

Re: Federal Reserve to increase interest rates by 75 basis points

#127

Post by BitwiseFool »

dragonwriter wrote: post #105
BitwiseFool wrote: post #83

Earlier quoted context omitted.

What I find tragic is that 'we' had all this time to gradually increase the retirement age but didn't do so. I can totally understand the political backlash of trying to immediately increase the retirement age, as old people vote and young people don't. However I feel like forward looking legislators could have passed gradual increases on future generations. If we know life expectancy is gradually going upwards, why…

> What I find tragic is that 'we' had all this time to gradually increase the retirement age but didn't do so. ‘We’ actually did exactly that, over a 20 year period that just finished in 2020, under a law passed in 1983. (‘We’ also phased in increased incentive for delayed retirement past the nominal “full retirement age” at the same time, so that the actual maximum retirement age of 70 has substantially higher benef…

I'm looking at https://en.wikipedia.org/wiki/Social_Security_(United_States...

Although I guess I should amend my lamentation to say that 'we' did but it wasn't nearly enough and it took them way too long to start.

Re: Federal Reserve to increase interest rates by 75 basis points

#128

Post by throw_m239339 »

ParksNet wrote: post #66
mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

Easiest way to increase labor supply is to immediately increase the retirement age to 70. Welfare and retirement systems across the West are insolvent at current settings anyway.

> Welfare and retirement systems across the West are insolvent at current settings anyway.

Easiest way to solve that problem is to increase capital gain taxes significantly.

Re: Federal Reserve to increase interest rates by 75 basis points

#129

Post by laweijfmvo »

mywittyname wrote: post #47

I'm skeptical that interest rate hikes will curb inflation. I'm even skeptical that a recession will curb inflation. We have significant shortages of so many products and services that people rely on and the only way I see the situation improving is if supplies increase, maybe dramatically. It's too difficult to curb demand for things like food and housing if the population is growing. Those are things we just need t…

Probably just my pet peeve, but everyone conflates inflation with CPI. We've had the ridiculous inflation starting in 2008 (and doubling down in 2020), now we're seeing the CPI.

Why this matters (just my theory): previously all that new money went to banks, the stock market, VC, etc., not so much directly to consumers. So we saw the stock market explode, but not so much for the price of eggs. Now we have supply chain shortages and people itching to spend, so we're seeing CPI explode.

Raising interest rates won't help now (again, my theory), because they do nothing to discourage consumers from spending, other than maybe to slow housing or other purchases requiring loans. In fact, I can't get a better return from current interest rates (actually I can still get approximately 0) than prices continue to rise, so I'm incentivized to keep spending.

The Fed needs to convince people to start saving/investing (stop spending), otherwise nothing will change (for the better...)

Re: Federal Reserve to increase interest rates by 75 basis points

#130

Post by 01100011 »

chickenpotpie wrote: post #104
nodesocket wrote: post #10

Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101) and drop student debt forgiveness nonsense. The fed is trying to curb inflation, while politicians are trying to get re-elected at any cost, fighting the fed.

This is not economics 101 and it's more nuanced than that. Stimulus checks can make inflation go up, but they can also do nothing. And it's important what type of inflation it causes, because California is only giving it to lower income citizens. If you quadruple the price of sports cars by giving every low income person a check, you still helped out the most vulnerable people.

> California is only giving it to lower income citizens.

Not last time I checked. I work at a FANG and am definitely not low income yet my wife and I will be getting a few hundred.

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