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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

#161

Post by Alex3917 »

JamesBarney wrote: post #92
Alex3917 wrote: post #35

Earlier quoted context omitted.

Startups generally have only very limited (if any) access to money anyway, so making money more expensive for established companies is probably a net positive for folks who are legitimately trying to start real software businesses.

Not really. The money a startup is going to make is farther in the future than an established company. If you look at discounted future cashflow, a startup as an investment opportunity is much more influenced by the interest rate than an established company because a larger % of the value is coming from money farther in the future. Basically 20% of net present value of Microsoft comes from the money it'll make next y…

> reducing the startups ability to get funded more than Microsofts.

So for 99% of startups (who don't raise venture capital anyway) there is no difference. But for Microsoft there is a huge difference, which is why the big tech companies are doing layoffs. Whereas we're not seeing many Indiehackers posts about people working out of their parents' basements who are laying themselves off.

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

#162

Post by sbuttgereit »

mattmoose21 wrote: post #153
WalterBright wrote: post #140

Earlier quoted context omitted.

Government subsidy tends to attract a lot of malinvestment in order to get those dollars. For example, in Biden's bill, there's a subsidy for so-called "smart" glass that darkens when an electric current is applied. This is supposed to reduce solar input from windows by 20%. Of course, if this mattered, people would have already installed window blinds, which are cheap and easy. External eyebrows and eaves also work.…

Do you have a source for the smart glass subsidy? I haven't been able to find anything that mentions it.

https://www.axios.com/2022/08/30/smart-glass

"Among the Inflation Reduction Act's little-noticed yet potentially game-changing provisions: a big incentive for "smart glass," which can make buildings significantly more energy efficient."

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

#163

Post by MichaelConlon »

andrekandre wrote: post #133
qeternity wrote: post #105

Earlier quoted context omitted.

I agree with your sentiment but this isn’t true, in fact for most of the Fed’s life it was not the primary creator of money. Fractional reserve banking (which, by definition, the Fed is) creates money. If I deposit $1,000 into my local bank, and they turn around and lend $900 of that back out, that creates money.

> If I deposit $1,000 into my local bank, and they turn around and lend $900 of that back out, that creates money im kind of ignorant so please forgive if this is not correct, but i've heard its not necessarily "creating" money since its (the 900 dollars) all on the balance sheets as liabilities?

While it is not technically "creating" new money it is expanding the supply of money (credit) in the economy. In the above example you still have $1000 owed to you and the company/person receiving that loan now has $900. That's a total of $1900 of "real" money generated from your $1000 deposit. The balance sheets net out to zero but there is in effect an extra $900 now in the economy.

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

#164

Post by [deleted] »

slaw wrote: post #152
JumpCrisscross wrote: post #126

Earlier quoted context omitted.

> Fed doesn't have to fight with inflation if it not creating one. So Fed's balance sheet could be as well $0 Inflation has multiple causes. Fixed-money economies experienced inflation and deflation throughout antiquity.

Still, Fed is responsible for 90% of inflation.

[deleted]

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

#165

Post by closeparen »

fny wrote: post #82
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?

I'll mention something that most people are forgetting. The Fed was forced to cut rates to zero for a long time because fiscal policy was not stimulative enough. Rates are a shitty stimulative tool. Here's Bernanke in 2012: https://www.theatlantic.com/business/archive/2012/12/ben-ber... Low rates help people with money borrow more cheaply, accrue more wealth, and kick bankruptcy cans down the road indefinitely. It al…

When rates rise in response to inflation, that’s not a “meaningful” return you’re getting, is it?

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

#166

Post by _ea1k »

mattmoose21 wrote: post #153
WalterBright wrote: post #140

Earlier quoted context omitted.

Government subsidy tends to attract a lot of malinvestment in order to get those dollars. For example, in Biden's bill, there's a subsidy for so-called "smart" glass that darkens when an electric current is applied. This is supposed to reduce solar input from windows by 20%. Of course, if this mattered, people would have already installed window blinds, which are cheap and easy. External eyebrows and eaves also work.…

Do you have a source for the smart glass subsidy? I haven't been able to find anything that mentions it.

https://www.prnewswire.com/news-releases/inflation-reduction... - It seems like it just puts it on an equal footing with other solutions.

Unless there's a downside that I'm not aware of, that seems like a reasonable thing to do?

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

#167

Post by mattmoose21 »

sbuttgereit wrote: post #162
mattmoose21 wrote: post #153

Earlier quoted context omitted.

Do you have a source for the smart glass subsidy? I haven't been able to find anything that mentions it.

https://www.axios.com/2022/08/30/smart-glass "Among the Inflation Reduction Act's little-noticed yet potentially game-changing provisions: a big incentive for "smart glass," which can make buildings significantly more energy efficient."

Thanks!

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

#168

Post by hot_gril »

qeternity wrote: post #105
hot_gril wrote: post #65

Earlier quoted context omitted.

The Fed creates money, which nothing else can do. Of course the money supply has its own ebb and flow from private banks and such offering loans, but it's hard to ignore M2 doubling every 10 years.

I agree with your sentiment but this isn’t true, in fact for most of the Fed’s life it was not the primary creator of money. Fractional reserve banking (which, by definition, the Fed is) creates money. If I deposit $1,000 into my local bank, and they turn around and lend $900 of that back out, that creates money.

The money supply has been steadily but quickly increasing for decades now. That can't be a result of fractional reserve banking alone. When I say the Fed creates money, I'm referring to the virtual printing.

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

#169

Post by alecco »

dougmwne wrote: post #13

Given that mortgage rates recently rose past 6%, seems to me this latest rate increase is going to put strong pressure on house prices. The rate has a huge impact on the monthly payment required to service a loan, more so than is immediately apparent without doing the math.

If (when) the Fed starts selling mortgage-backed securities in its balance sheet ($2 Tn), then it will be a bloodbath closer to 2007. And again, there's the problem of people with negative equity just walking out, causing a vicious cycle.

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

#170

Post by WalterBright »

_ea1k wrote: post #166
mattmoose21 wrote: post #153

Earlier quoted context omitted.

Do you have a source for the smart glass subsidy? I haven't been able to find anything that mentions it.

https://www.prnewswire.com/news-releases/inflation-reduction... - It seems like it just puts it on an equal footing with other solutions. Unless there's a downside that I'm not aware of, that seems like a reasonable thing to do?

The downside is it is expensive, while much cheaper methods are available.
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