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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

#321

Post by api »

EVa5I7bHFq9mnYK wrote: post #314
api wrote: post #182

Earlier quoted context omitted.

> Unfortunately, so many people in the west have their net worth tied up in their homes that policies directly targeting property values is political suicide. I long ago concluded that the only way to escape high housing costs is to leave high cost of living places. No reform large enough to make a real dent is politically feasible, and in some overpriced cities the sheer amount of construction that would be required…

A decade ago I was offered two positions: one in NY and one in Raleigh, the former paying 20% more. I choose Raleigh, as I don't frequent Broadway shows and I can make a salad bowl myself. I also figured it preferable to be first in a village than second in Rome.

The first offer would have made sense if it was 2X the Raleigh salary.

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

#322

Post by trashtester »

8note wrote: post #203
trashtester wrote: post #152

Earlier quoted context omitted.

There are three alternativies when supply is short: 1) Increase prices until demand matches supply. 2) Price controls, usually leading to empty shelves. 3) Rationing. 1 is preferrable in 99% of cases. 2 is always the worst. 3 is needed during extraordinary times, such as when a country is in an all-out war.

1 is rationing too, just rationing to prioritize the wealthy. The more modern versions ration based on other things, like how to combat ticket scalping, bands release tickets through alternative means

1 is the capitalist way while 3 is the socialist way to distribute goods. The first works best under normal market condition, as it encourages economic growth, while the latter works better under special conditions where the scarcity is severe, unavoidable and caused by temporary factors (such as a war).

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

#323

Post by tdhz77 »

misiti3780 wrote: post #235
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.

"It's unlikely we will head into a recession anytime soon." We are in a recession now, what are you talking about? Lets revisit this comment tomorrow.

Most economists still don’t think the economy meets the formal definition of a recession, which is based on a broader set of indicators including measures of income, spending and employment. The G.D.P. data itself will also be revised several times in the months ahead.

It only means that the recovery is losing steam.

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

#324

Post by erellsworth »

vorpalhex wrote: post #258
erellsworth wrote: post #225

Earlier quoted context omitted.

Yes, inflation hurts workers. You know what also hurts workers? Low wages. The fed has specifically stated that reducing wages is one of their goals. I'm not against the fed raising rates. But any benefit workers see from such a policy is unintentional.

> The fed has specifically stated that reducing wages is one of their goals. Citation? I would be surprised for the fed to have such a thing as their goal.

"Wages are running high, the highest they’ve run in quite some time. And they are one good example of—or good illustration, really—of how tight the labor market really is, the fact that wages are running at the highest level in many decades. And that’s because of an imbalance between supply and demand and the labor market.

So we think, through our policies, through further healing in the labor market, higher rates, for example, of vacancy filling and things like that, and more people coming back in, we like to think that supply and demand will come back into balance and that, therefore, wage inflation will moderate to still high levels of wage increases, but ones that are more consistent with 2 percent inflation. That’s our expectation."

"So in principle, it seems as though, by moderating demand, we could see vacancies come down, and as a result—and they could come down fairly significantly and I think put supply and demand at least closer together than they are, and that that would give us a chance to have lower—to get inflation—to get wages down and then get inflation down without having to slow the economy and have a recession and have unemployment rise materially."

Implicit in all this is the idea that wages are currently too high, and need to be suppressed.

https://www.wsj.com/articles/transcript-fed-chief-powells-po...

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

#325

Post by lamontcg »

lamontcg wrote: post #208
setgree wrote: post #189

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…

Here's a good example of how the Fed language causes debate. From Paul Krugman:

> Well, we’ll have to wait and see. The good news is that policymakers appear willing to do just that. From my point of view, the most encouraging aspect of the Fed’s statement on Wednesday was the paragraph declaring that the committee setting monetary policy is prepared to be flexible, that it “will continue to monitor the implications of incoming information” and “would be prepared to adjust the stance of monetary policy as appropriate.” That’s a not-too-subtle rejection of demands from inflation hawks that the Fed commit itself now now now to a long period of extremely tight money.

https://www.nytimes.com/2022/07/28/opinion/recession-inflati...

My reading of that language, on the other hand, is that its pretty tepid and just what would be expected, and that the Fed not actually coming out with the most hard-line language possible is not worth much. It still suggests that they'll stick to their guns until they see a considerable amount of change in the data. I'm drawn more to the single blunt sentences which are "The Committee is highly attentive to inflation risks" and "The Committee is strongly committed to returning inflation to its 2 percent objective" which are two pretty harsh statements that they terminated paragraphs with that I think signal their overriding concerns.

Given that I think that they'll wait until they see clear changes in the data, and given that I think that the foundations of the economy are vulnerable to shocks and I'm expecting at least a commercial real estate implosion to go off once everything gets "stress tested" by higher rates, I am not anywhere near as hopeful as Krugman.

The fact that people can get such wildly different takes out of the Fed language is a feature, not a bug.

I'm over here building a nuclear fallout shelter, Krugman is in la-la land thinking its all coming up roses, we're both reading the same announcement, yet nothing in the Fed announcement is wrong or false.

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

#326

Post by tdhz77 »

misiti3780 wrote: post #235
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.

"It's unlikely we will head into a recession anytime soon." We are in a recession now, what are you talking about? Lets revisit this comment tomorrow.

Two days later.. still not in a recession.

https://apple.news/AjbBSLDkHQ_uod9ztY3IDyA

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

#327

Post by mint2 »

JumpCrisscross wrote: post #307
mint2 wrote: post #299

Earlier quoted context omitted.

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][…

If gas prices were simply a matter of the costs going up, the oil companies would not have record profits. if the actual costs are added up, it transparently does not equal the end price by definition due to the record profits.

Your comments is resorting to quibbling over whether it should be called profiteering or price gouging, the classic insincere debate tactic of derailing things into arguments over semantics rather than substance.

https://www.theguardian.com/business/2022/jul/29/oil-gas-com...

Justifying the record profits by idle speculation of future input is nice. But it’s utter conjecture.

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

#328

Post by tdhz77 »

misiti3780 wrote: post #235
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.

"It's unlikely we will head into a recession anytime soon." We are in a recession now, what are you talking about? Lets revisit this comment tomorrow.

https://www.nytimes.com/live/2022/08/05/business/jobs-report...

The evidence is not pointing to “we are in a recession now”

I would recommend reading the economist and not listening to Elon musk and or media hype.

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

#329

Post by tdhz77 »

misiti3780 wrote: post #235
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.

"It's unlikely we will head into a recession anytime soon." We are in a recession now, what are you talking about? Lets revisit this comment tomorrow.

https://www.nytimes.com/2022/08/06/business/economy/economy-...

Still the evidence is pointing to not a recession but in fact a boom.

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