Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Federal Reserve to increase interest rates by 75 basis points

federalreserve.gov

Post reply on HN
Print view View original

301–310 of 329 posts

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

#301

Post by eftychis »

mjr00 wrote: post #87
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…

> 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…

The problem is that the point at which housing market will be such a dumpster fire will be a post-(economically)-apocalyptic for the U.S. -- and inadvertently the rest of the world. Don't forget what happened in 2007, and you are not even close to what can happen -- from a back in the envelope here of course.

Housing might be the topic that dooms U.S. may way way down the road. But the GDP damage and opportunity cost lost annually is substantial.

There should be a form of buy in from the government at some point -- kind of keep your house and get tax credit and we are moving on.

Or we reach the point of a literal revolution on the topic, where people ask for houses instead of bread.

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

#302

Post by eftychis »

To other commenters:

The only thing and the only job the Fed has now is to increase the Consumer Sentiment Index (without destroying royally the economy and the Consumer Confidence Index (employment that is)).

Its power are the statements and showcasing it is doing stuff. That's it. The interest rates and treasury issuance will do nothing by themselves -- the banks have not unloaded their portfolios yet. If it wanted to affect things it would start messing with the Mortgage Backed Securities "portfolio" which would be the "nuclear fusion bomb" word.

So let's hope people get convinced that things are fine and don't start running to the banks/stores to stock up on ... toilet paper. (wink)

Edit: https://ycharts.com/indicators/us_consumer_sentiment_index (Consumer Sentiment Index)

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

#303

Post by colinsane »

nonameiguess wrote: post #215
nonameiguess wrote: post #194

Earlier quoted context omitted.

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…

Reading my answer after posting, I think your confusion is really coming from the way bond pricing works, not anything to do with central banking. The price of a bond is determined by a pretty simple formula, P = M / (1 + i)^n, where P is the market price, M is the redemption value at maturity, i is the interest rate per period, and n is the number of periods at which interest is paid. Since interest rate is in the d…

> 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.

i think my understanding of bond pricing is adequate. what i don't understand is how much of this yield (from treasuries, commercial paper) is achieved by simply increasing the money supply in the future -- regardless of which entity actually does that -- v.s. coming from an external source.

a few hypotheticals -- based on my understanding -- for the case where none of this yield comes from commercial paper: 1. after 24 years of 3% rates, the money supply's doubled. 2. after 24 years of 3% rates, the money supply's been kept constant by levying a tax equivalent to the original money supply.

in the former, nobody should care what the rate is: it's a nominal metric completely detached from anything "real". in the latter, the rate is meaningful because it's attached to something that's redistributive.

introducing commercial paper: i guess this is where rates (coupled with reserve requirements) could contract the supply. if banks generally borrow more from the fed than they lend to it, then higher rates would decrease the supply over time. if the opposite, then raising rates temporarily decreases the money in circulation but inflates the supply over time. if the goal is to tighten supply, then i don't understand why the fed would ever borrow from banks, since that liability forces an increased supply in the long run. it would make more sense to me to decrease supply simply by increasing reserve requirements. but anyway, this is a complicated enough interaction for me brain that i just wish there were guides out there that set out to show the far-reaching effects of fed rates.

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

#304

Post by vel0city »

treeman79 wrote: post #295
goatcode wrote: post #148

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.

Yep. My rental (invitation Homes ) had a major gas leak that they covered up by keeping windows open when I did walk through. When I asked about smell they kept saying it was new carpet etc. Turned our cap for gas was just sitting on pipe. All the gas pipes were hand done (badly) and against code. So permanent brain and nerve injuries for while family and hundreds of thousands in hospital bills. Screw them.

To be fair, most gas connections are done by hand and can be done reasonably safe when done right. The fact it was hand done probably wasn't the problem, the problem was it was done by someone unexperienced and potentially without the right tools and parts.

Unless you're saying all the plumbing was only finger tight and they never used a wrench, which is just so wrong it didn't even originally cross my mind as what you're saying as done by hand. You're gonna need a good pipe wrench to get your gas connections tight.

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

#305

Post by MattPalmer1086 »

kelnos wrote: post #287
ta8645 wrote: post #164

Earlier quoted context omitted.

How exactly can a company price-gouge in a free market? First, nobody is compelled to buy anything from them. Second, anyone else is allowed to become a supplier, and easily make a fortune by offering a cheaper price. And the only thing that prevents the above from being true, is oppressive government policies that undermine the freemarket, which are sold to the people as "for their protection".

> How exactly can a company price-gouge in a free market? We don't have a free market.

Are you saying that price gouging cannot exist in a free market?

What do you define as a free market?

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

#307

Post by JumpCrisscross »

mint2 wrote: post #299
JumpCrisscross wrote: post #173

Earlier quoted context omitted.

> isn’t a shortage of many items that have had large price increases like oreos The wheat, the trucks, the oil and the labour that make every Oreo have increased in price. (We have amply-documented wheat, energy and logistics shortages worldwide.) Also, nobody needs Oreos. The concept of “price gouging” is economically illiterate, but the nonsensicality squares when applied to literal candy.

Look I am using Oreos as a general example but even gas prices do the same. Input costs may rise by x cents but the companies mark up prices by 5x because they can, not because they have a shortage. Gas prices are way higher than they should be but it’s not all the reasons the oil companies like to point to. They simply point to supply to distract from price gouging. The house is even trying to get the government to…

> companies mark up prices by 5x because they can, not because they have a shortage

These are the same thing. Fuel is a competitive market. If people are paying a premium and producers aren't undercutting each other, it's less likely a conspiracy than math.

The crack spread, i.e. "the differential between the price of crude oil and petroleum products extracted from it," has risen, but not much more than crude [1][2][3]. Given fuel, labor and shipping costs flow gap the traded price of gasoline to the price at the pump, that's not an unreasonable increase.

Pumps aren't making much money. Refineries are doing well. And primary producers are making off like bandits. To the degree intermediaries are profiting it's because people are paying a premium to ensure supply. A hallmark of a shortage.

> house is even trying to get the government to investigate that

It's an election year and people swallow tripe.

Gasoline is unusually transparent in that its primary (crude), intermediate (gas) and final (gas after transport + tax) forms are publicly priced. You can add up numbers to see who's making how much more than whom. If you find a way to take the RBOB, ship it to your town and pay the taxes while undercutting the local gas stations, I'm all ears--there is a thriving market of private petrol shipment for commercial use.

> alluding that the original comment is “nonsensical” and “illiterate”

Never my intention. Price gouging describes short-term, localized increases in prices of essentials. If Oreos prices are increasing nationally, it's not price gouging. Because it's widespread. And they're Oreos.

What it might be is profiteering. But both profiteering and price gouging are closer to philosophy than economics. They're used when we perceive prices to be unfair, with the moral definition of fairness being invoked more than an economic one.

To the degree we can define either, it's a sustained jump in profits following some calamity. (A steady-state seller, noting a jump in demand for e.g. fuel, might raise prices today, temporarily raising their margins, in anticipation of their higher input costs tomorrow.)

Anti-gouging laws are shortage-aggravating, in some cases, inducing [4]. But it leaves us with a society that feels fairer in emergencies. That psychological benefit may be worth the cost paid. But it should be recognized for what it is: paying with shortages for a notion of fairness.

[1] https://en.wikipedia.org/wiki/Crack_spread

[2] https://www.eia.gov/outlooks/steo/marketreview/petproducts.p...

[3] https://www.bloomberg.com/opinion/articles/2022-05-09/crude-...

[4] http://journal.apee.org/index.php/ajax/GDMgetFile/Parte1_202...

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

#308

Post by al_mandi »

standardUser wrote: post #289
al_mandi wrote: post #274

Earlier quoted context omitted.

Who are the wealthy in your view? Anyone making more than N amount? Or worth more than M amount? And what's that amount?

Only three leading questions? Go on, ask a few more. Or feel free to make a point.

The point is that the model itself is broken and unfair. I'd recommend looking into Islam's Zakat system for something that works.

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

#309

Post by CoffeeCollector »

kelnos wrote: post #279
CoffeeCollector wrote: post #251

Earlier quoted context omitted.

Most of your ‘refutation’ is dishonest, Keynesian, MMT nonsense. Fiat doesn’t get introduced unless printed or borrowed by the government. Full stop. Companies raising prices is not inflation and conflating that with government monetary policy is outright disinformation.

> Companies raising prices is not inflation Given that we base inflation numbers on CPI, inflation exactly is companies raising prices -- well, companies that produce the goods that are included in CPI, anyway. Yes, we still have to consider the reasoning behind why they are raising prices. Personally, I believe it is more because of supply chain shortages than COVID fiscal policy (though the latter certainly contrib…

> Personally, I believe it is more because of supply chain shortages

Why?

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

#310

Post by CoffeeCollector »

d4mi3n wrote: post #286
CoffeeCollector wrote: post #251

Earlier quoted context omitted.

Most of your ‘refutation’ is dishonest, Keynesian, MMT nonsense. Fiat doesn’t get introduced unless printed or borrowed by the government. Full stop. Companies raising prices is not inflation and conflating that with government monetary policy is outright disinformation.

I'm not an economist and don't really understand your refutation. To help me understand your viewpoint, could you explain in simple language why government spending or policy is the only source and cause of inflation? Please correct me if that's an incorrect interpretation of your statements. Going by what I see as an individual, there are lots of things happening around me that drive prices up that don't have any st…

https://en.m.wikipedia.org/wiki/Monetary_inflation
Post reply on HN