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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

#191

Post by vuln »

pm90 wrote: post #165
vuln wrote: post #141

Earlier quoted context omitted.

The US has shattered record numbers of migrants crossing the southern boarder every month for over a year. It has had zero deflationary effects if anything it causes the supply to shrink even further as demand skyrockets. Migrants still need to be housed, feed, clothed and transported. There is no easy way out.

First, the question is about labor supply. Second, people crossing the southern border will never be large enough to affect the US labor market. Only increasing legal immigration can have meaningful effect on the labor supply.

Millions of jobless migrants crossing the southern border has no affect on labor supply? I also do not understand how "only legal immigration" can have an effect. Immigration is Immigration doesnt really matter the legality of it.

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

#192

Post by ClumsyPilot »

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.

> Easiest way to increase labor supply is to immediately increase the retirement age to 70.

Or to send kids back into coalmines.

You want a non-sadistic solution? Healthcare increases labour supply - or reduces labour supply that is sick or disabled.

Actually do we need to increase labour supply? the past couple of decades had little growth in salary becauae labour had no bargaining power. Now corporate profits are record high. A big renegotiation is about to happen and it will be good for labour

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

#193

Post by tdhz77 »

peterlk wrote: post #82
tdhz77 wrote: post #52

Earlier quoted context omitted.

It was about 6.5% in the 1998 recession and 5.25% in the 2007 great recession. It's unlikely we will head into a recession anytime soon. Numbers are all over the place, but I see most of it as temporary (Covid, Gas Prices) and not structural or risky behavior from investment banks in 2007. Remind me if I'm wrong, but I think inflation will drastically drop next report.

> not structural or risky behavior from investment banks in 2007 I don't see it that way at all. Over the last couple years, we've seen an explosion in private capital investments, NFT and crypto fads (questionable, but I would argue that these were large enough to be considered structural), greatly increasing home prices, supply chain disruptions, the war in ukraine (and all its knock-on effects). Things are a bit t…

The values of homes went up during the pandemic because people were in their homes. The extra savings of not going out to eat, vacations, etc.. enabled people to reason that paying for more of a house to fit their work from home lifestyles worth it. When you add that plus the historically low interest rate it was a tour-de-force. You might be on to something that it might be more structural now than how I originally thought. People are locked in homes that might be another housing crises, and if we start having job loss we could see something ugly like 2007. Again, I remain hopeful that salaries are up and unemployment is low. On the positive side, the US is better off inflation-wise in the United States than in Europe.

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

#194

Post by nonameiguess »

colinsane wrote: post #56

anyone know of bullet-proof analyses into central banking policy out there? after dealing with crypto projects that offer high interest rates, and do so by just inflating their token supply, fed policy seems magical to me. the fed’s offering you yield on your dollars, and that yield comes from printing new dollars (right? there’s no tax increase as part of this announcement). your share of dollars stays constant. so…

This is the exact opposite of what the Fed does. They have many instruments by which to influence interest rates, but mostly what they do is target the federal funds rate. This is the rate at which banks lend to each other overnight. The Fed mostly hits the target rate in two ways. One, by directly lending at the top of band rate and borrowing at the bottom of band rate, so banks will never lend to each other outside of the band. Second, by engaging in open market operations, which is primarily the buying and selling of US Treasury notes. Buying them increases the demand, which in turn increases the price, which decreases the interest rate. Selling them increases the supply, which in turn increases the interest rate. To buy treasuries, they simply create money from nothing, thus inflating the money supply is what lowers interest rates. When they sell treasuries, they simply destroy the proceeds, thus deflating the money supply to increase interest rates.

The Fed doesn't offer anyone yield on holding dollars. You get yield from holding treasuries and interbank commercial paper. The Fed influences the yield on these instruments by buying and selling them using a theoretically infinite supply of its own dollars.

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

#195

Post by Enginerrrd »

peterlk wrote: post #82
tdhz77 wrote: post #52

Earlier quoted context omitted.

It was about 6.5% in the 1998 recession and 5.25% in the 2007 great recession. It's unlikely we will head into a recession anytime soon. Numbers are all over the place, but I see most of it as temporary (Covid, Gas Prices) and not structural or risky behavior from investment banks in 2007. Remind me if I'm wrong, but I think inflation will drastically drop next report.

> not structural or risky behavior from investment banks in 2007 I don't see it that way at all. Over the last couple years, we've seen an explosion in private capital investments, NFT and crypto fads (questionable, but I would argue that these were large enough to be considered structural), greatly increasing home prices, supply chain disruptions, the war in ukraine (and all its knock-on effects). Things are a bit t…

The only structural issue I'm concerned about is years of cheap debt. As a result we've seen a lot of growth in debt across individuals, corporations, and governments, and I wonder what happens when we reach a point where debt simply stops growing significantly.

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

#196

Post by lamontcg »

benjaminwootton wrote: post #159

I wonder if people are starting to question if the magnitude of the Covid response was justified now the bill is becoming due? Is anyone willing to put their head above the parapet of supporting the shutdowns and now realising it wasn’t worth the cost? Huge inflation, generational debts, increased poverty, broken systems left right and centre etc etc. Or does Putin get all the credit?

The covid response was fine.

A lot of what we're seeing now is bullwhip effects from the massive evaporation of demand due to the pandemic (spot prices for oil actually went negative at one point, which is one of those things that everyone seems to have entirely forgotten). That will be transitory. So will the impact of the stimulus checks.

Secularly we're seeing the impact of cracking down on immigration combined with death and disability due to Covid and the retirement of baby boomers.

There has also been a 40-year long secular trend of tax cuts for the rich and free money policies which has blown up asset bubbles and increased the Gini index of wealth disparity (give rich people money to spend and they blow up asset bubbles and create evaporating risk premiums as investment money goes looking for gains).

The covid stimulus to average workers was actually overdue and did create some wage inflation (which would offset the asset bubbles and decrease wealth disparity) but that is what is now being cracked down on by the Fed. I suspect it will be entirely successful at what it is trying to do in the short term, and unemployment will get driven much higher because we can't tolerate the lower class doing any better in this country, that's a disaster.

Then I suspect we're going to oscillate between periods of sharp recession and sharp inflation as the secular problems (inequality, lack of immigration and retirement) won't be addressed. 10 years from now Putin and Covid will be long gone, but we'll still be dealing with the secular trends.

What I don't know is how much pain that investors or homeowners will be put through either deliberately or unintentionally by policymakers. Everyone has forgotten the problem of "pushing on a string" where no matter how much money you give to investment banks it just gets hidden under the mattress and can't stimulate demand. If they break the economy hard enough we could wind up there and the trajectory of the economy could be out of their control.

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

#197

Post by boppo1 »

pm90 wrote: post #180
throw_m239339 wrote: post #138

Earlier quoted context omitted.

> No. Easiest by far is to relax immigration restrictions. Easiest way to make citizens of a country vote for anti-immigration parties is to significantly increase immigration.

Regrettably, This is what does tend to happen. But its also a failure of society because immigrants are easy targets for scoring political points, despite it being repeatedly shown how beneficial immigration has been to Western econonomies.

Can you support that last claim? Might have been good for the S&P, but I'm not so certain the average joe off the street has seen said benefits. I could swear I recently saw a stat that locally born men in the US have only shared in like 3% of new job growth for the last decade or something like that.

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

#198

Post by throwaway4good »

JumpCrisscross wrote: post #134
throwaway4good wrote: post #96

Earlier quoted context omitted.

The Russians curbed inflation at the start of the war quite effectively ... by raising interest rates to 20%.

> by raising interest rates to 20% And confiscating hard currency and implementing capital controls.

I think we (the west) did that ...

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

#199

Post by pkaye »

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.

Then US should also remove the cap on social security taxes.

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

#200

Post by 650 »

RIMR wrote: post #185
benjaminwootton wrote: post #159

I wonder if people are starting to question if the magnitude of the Covid response was justified now the bill is becoming due? Is anyone willing to put their head above the parapet of supporting the shutdowns and now realising it wasn’t worth the cost? Huge inflation, generational debts, increased poverty, broken systems left right and centre etc etc. Or does Putin get all the credit?

I think that if we have to choose between letting hundreds of thousands of additional people die, or having a healthy economy, we utterly failed our priorities as a society long before the pandemic started.

"Every one percent unemployment goes up, 40,000 people die" – this comes from the film The Big Short.
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