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Federal Reserve to increase interest rates by 75 basis points

federalreserve.gov

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

#241

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.

California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve. If they’re giving out stimulus, they must be getting it from tax payers, right?

> California doesn’t have a central bank, so it’s not like it can print money out of thin air like the Federal Reserve.

The whole point of an independent central bank is that the fiscal authority (Congress) cannot print money out of thin air to monetize spending, either; monetary policy is based on macroeconomic conditions, not fiscal demands.

OTOH, the federal government inherently has a much lower cost of borrowing than the states, and California, like many (almost all, I think, though the details vary) has a State Constitutional requirement for a balanced operating budget and effectively relies on federal deficit spending for countercyclical spending.

> If they’re giving out stimulus, they must be getting it from tax payers, right?

Yes, the inflation relief tax rebate is paid out of current tax revenue (in fact, it is a plan to fulfill a constitutional mandate to return surplus tax revenue beyond a certain spending limit if not spent on education and infrastructure) and is not characterized as “stimulus”, contrary to the upthread misrepresentation. It's redistribution which probably has a very slight stimulative (and thus inflationary) effect because it goes to people with a higher propensity to spend in the domestic economy, per marginal dollar, than those it comes from, in order to relieve more of the impacts of inflation at the lower end of the income distribution.

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

#242

Why does the Fed write the way it does? First, this article buries the lede. The first seven sentences are framing. Only sentences 8-9 are actually news. The next four are, again, context. The headline also does not actually say what happened. Second, of the fourteen sentences here, a full six are trivially true -- "The Committee is highly attentive to inflation risks. The Committee seeks to achieve maximum employmen…

"Tell me you were too young to remember Alan Greenspan without telling me that" The Fed has always shied away from saying things too bluntly, and preferred to deal with wishy washy code words. If it ever says something bluntly you know they really mean it. Something like "softened" is a deliberately ambiguous phrase designed to acknowledge the reality that they're declining without causing panic, by being uncertain a…

How does an interest increase influence unionization?

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

#243

Why does the Fed write the way it does? First, this article buries the lede. The first seven sentences are framing. Only sentences 8-9 are actually news. The next four are, again, context. The headline also does not actually say what happened. Second, of the fourteen sentences here, a full six are trivially true -- "The Committee is highly attentive to inflation risks. The Committee seeks to achieve maximum employmen…

"Tell me you were too young to remember Alan Greenspan without telling me that" The Fed has always shied away from saying things too bluntly, and preferred to deal with wishy washy code words. If it ever says something bluntly you know they really mean it. Something like "softened" is a deliberately ambiguous phrase designed to acknowledge the reality that they're declining without causing panic, by being uncertain a…

Oil is down 20% from June, so it's likely we'll have somewhat tapered inflation next CPI. Current best estimate for FOMC meeting 6 weeks from now is a 50 bps raise, and then two more 25 bps raise to end the year at 3.25%. Sounds reasonable to me.

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

#244

Earlier quoted context omitted.

But someone has to buy the bonds if they want to give out the stimulus as dollars. What are they doing in California? I haven’t been paying attention.

they have a budget surplus

Not just a budget surplus (revenue above planned spending), but revenue that exceeds a State Constitutional cap on what the State government is allowed to spend (unless it is directed to very specific spending categories which are unlimited), and thus has triggered an obligation to return funds via some rebate mechanism.

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

#245

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.

Unless by that you mean that people who have already reached their retirement age and retired and are collecting benefits would have those benefits withdrawn if they are not yet 70 I don't see how that would increase the labor supply. It would just slow down number of people already in the labor supply leaving it for retirement.

If you do mean that people already retired but not yet 70 have their benefits cut off until they reach 70 there are a couple problems with that.

1. It would be political suicide.

2. It would be very hard to deal with the logistics. First, a large number of the people who it forces to un-retire will no longer be living where the jobs are. Your plan will tank the market for housing in retirement communities making it impossible for many to sell their houses to move back to where the jobs are.

Second, a large number of them won't be capable of doing the jobs they did before, due to age or due to their skills being out of date. Many will need retraining, or will have to take jobs in fields they have no experience with.

Dealing with all that would be a lot of work, with many reluctant to put in that effort when the workers that you do manage to get are just going to be temporary.

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

#246
post #245

Earlier quoted context omitted.

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.

Unless by that you mean that people who have already reached their retirement age and retired and are collecting benefits would have those benefits withdrawn if they are not yet 70 I don't see how that would increase the labor supply. It would just slow down number of people already in the labor supply leaving it for retirement. If you do mean that people already retired but not yet 70 have their benefits cut off unt…

> It would just slow down number of people already in the labor supply leaving it for retirement.

If you have the same rate as before of people coming into the labor force and slow the rate of people exiting the labor force, the effect on the labor force is...what, again?

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

#247
post #87

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…

> 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…

How are individual landlords to blame for anything? I was with you on the rest.

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

#248

Earlier quoted context omitted.

The sad thing is that individual landlords are among the most responsive to tenant needs, while corporate landlords often are sons of Hell who should be Thanos-snapped out of existence.

You should tell my landlords that, the spoiled son and daughter who inherited a bunch of passive income from their mother (who was actually a great landlord), and who let the leak I could hear, and called them about, fester for over a year until a large chunk fell out of my ceiling.

In my experience landlords who bought the property themselves are great. The ones that inherited it are terrible. It's something every tenant should find out, and avoid the latter.

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

#249

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.

> Now if we can only get states (like California) to stop giving out stimulus payments (they literally calling it inflation stimulus; learn economics 101

California is not giving out anything called stimulus payments. You seem to be referring to the inflation relief tax rebate which is the system that has been adopted to return tax revenue that exceeds the Constitutional cap on state spending (FY 1978-1979 spending adjusted for population and inflation), because of the enormous revenue windfall the state has received in the post-COVID boom (and that cap takes into account inflation, so this is even with the high inflation.)

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

#250
post #220

Earlier quoted context omitted.

My understanding is that it shakes out to a couple of things: 1) while not beating the S&P, historical returns on real estate are pretty good and less volatile 2) There are a number of significant tax advantages to home ownership 3) you can't live inside a stock. Building equity instead of paying rent is a good thing 4) you can rent it out, making it pay for itself while accruing value as long as you are willing to a…

> Building equity instead of paying rent is a good thing That depends heavily on your goals. I hear this a lot, but it always reads to me like people think equity just magically happens when you buy a home (with a mortgage). No, you have to put money into it monthly, and a portion of that goes to pay of principal, which builds equity. Whether or not putting that money into a large, fixed, illiquid asset (versus stock…

Mortgage is the only type of leverage that an average Joe can get cheaply. Any attempt at getting a 'normal' loan will be met with insane interest rate.

That's the main reason why housing market is what it is.

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