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Federal Reserve to increase interest rates by 75 basis points for the third time

federalreserve.gov

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Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#141

Post by tssva »

kyrra wrote: post #83
jollyllama wrote: post #23

Earlier quoted context omitted.

>How much is our entire culture the result of cheap money? Only the parts involving housing, education, transportation, employment, and investments.

College Education pricing has many blames beyond cheap money. The fed getting involved in student loans have totally broken that segment of the economy. 1) Federal loans do not have limits on amount. 2) Loans are non-discharged (you can't shed them in bankruptcy). 3) There is no intensive for schools to charge less. (schools likely should have skin in the game if borrowers end up shedding debt through time expiration…

"Most people would be better served by trade schools or apprenticeship, but the US hasn't figured out how to do this well yet. This is more of a cultural problem, that I hope employers can figure out."

Employers including technology companies used to provide training and apprenticeships but purposely shifted their job training costs on to job seekers and the education system. You are in effect looking to those that are largely responsible for the current situation to provide the solution.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#143

Post by pfortuny »

Analemma_ wrote: post #79
maxfurman wrote: post #14

I'll echo what some folks have said in other threads, we've had rates down near zero for fifteen years, and we've got to get them back somewhere near historic normals at some point. If only so they can be cut again during the next crisis. How much is our entire culture the result of cheap money?

What does "historic normals" mean? Obviously rates need to be going up right now, but if you look at the very long (i.e. centuries) trend of natural interest rates, there's a clear monotonic downward trend. Who's to say the natural rate of interest isn't zero?

Either you can create value (which seems reasonable as long as we receive free energy from the sun) in time or not. If you can, the natural interest rate cannot be zero.

We are at the moment in time when we can make the most out of “thin air”. It makes no sense that the rate is effectively zero.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#144

Post by nine_zeros »

JumpCrisscross wrote: post #101
slaw wrote: post #51

Earlier quoted context omitted.

at $90B/month it will take 89 months to unload.

> $90B/month it will take 89 months to unload The optimal Fed balance sheet is estimated to be around $4tn [1]. A Fed with a ballooning balance sheet distorts financial markets. A Fed with no assets must do weird stuff to fight inflation, which distorts financial markets. (In a non-reserve case, a central bank with no reserves goes bust.) [1] https://advisors.vanguard.com/insights/article/thefedsplanto...

Very interesting. So historically, it appears that the FED balance sheet reserves is 25% of GDP. I wonder what it is for other countries. Especially rapidly developing ones.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#145

Post by jollyllama »

kyrra wrote: post #83
jollyllama wrote: post #23

Earlier quoted context omitted.

>How much is our entire culture the result of cheap money? Only the parts involving housing, education, transportation, employment, and investments.

College Education pricing has many blames beyond cheap money. The fed getting involved in student loans have totally broken that segment of the economy. 1) Federal loans do not have limits on amount. 2) Loans are non-discharged (you can't shed them in bankruptcy). 3) There is no intensive for schools to charge less. (schools likely should have skin in the game if borrowers end up shedding debt through time expiration…

Yes, #2 is quite pertinent. I think the money would not be so cheap if student loans could be discharged.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#146

Post by thechao »

greatpostman wrote: post #124
bryanlarsen wrote: post #118

Earlier quoted context omitted.

We live in a world that is awash in capital because old people & rich people have a large amount of capital. When the supply of something is high, the price goes down. And the price of capital is interest rates.

The excess liquidity comes from low rates. No serious financial investor thinks otherwise

I had literally never thought of this in any way. I've just finished reading two papers: one which shows that net-investment isn't really correlated to savings or interest rates which exactly supports your position (with data!); and, a second which shows that the ratio of old-to-young people is an incredibly good predictor of interest rates (with data!).

You're both right? I suspect that means there must be a third option.

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#147

Post by 11101010001100 »

digianarchist wrote: post #139
jazzkingrt wrote: post #106

Earlier quoted context omitted.

Many of us have already dealt with a 20% haircut, at least on the RSU portion of compensation. * Higher cost of borrowing is putting pressure on growth companies that relied on cheap capital * Economic downturn makes it harder to do business and lowers stock prices, which makes up a big part of any 400K SWE package * Tech companies can allow RSU grants to expire rather than implementing formal paycuts. Whereas compan…

My RSUs are down 70% from their post IPO peak.

question: is it illegal to setup a hedging instrument for this sort of thing?

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#148

Post by JumpCrisscross »

nine_zeros wrote: post #144
JumpCrisscross wrote: post #101

Earlier quoted context omitted.

> $90B/month it will take 89 months to unload The optimal Fed balance sheet is estimated to be around $4tn [1]. A Fed with a ballooning balance sheet distorts financial markets. A Fed with no assets must do weird stuff to fight inflation, which distorts financial markets. (In a non-reserve case, a central bank with no reserves goes bust.) [1] https://advisors.vanguard.com/insights/article/thefedsplanto...

Very interesting. So historically, it appears that the FED balance sheet reserves is 25% of GDP. I wonder what it is for other countries. Especially rapidly developing ones.

> wonder what it is for other countries

It varies pretty widely. I don't think there is good macroeconomic theory for its correct value, or even if there is a correct value.

https://tradingeconomics.com/country-list/central-bank-asset...

Re: Federal Reserve to increase interest rates by 75 basis points for the third time

#150

Post by boringg »

dragontamer wrote: post #129
boringg wrote: post #11

Earlier quoted context omitted.

After the election...

Powell is Trump's pick (1st term) AND Biden's pick (2nd term) with like 89 votes from the Senate. For better or worse, the man and his circumstances has proven himself to be apolitical.

He's done fairly well at navigating the political landscape I would say that he's smart enough to know that if he does anything strongly before the election it will be scrutinized heavily as political thus he will wait until after the election if he deems it necessary to make more drastic measures.
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