11–20 of 67 posts
What bothers me is that in Europe it was expected to affect the real estate prices. The higher the interest, the lower the prices, which sounds logical but...the prices kept increasing. So what's going to happen when Lagarde decides to lower them? The demand is way to high and the offer is almost non existent. And it seems that it didn't affect the inflation either. Bad years for everybody who's not getting a 10% rai…
The core point from the article (because no one will actually read it): "Higher interest rates have proved a lot less destructive than investors feared in 2022, when the world’s central banks embarked on one of the most aggressive episodes of monetary tightening in history. Nothing has “broken”, contrary to the prevailing view two years ago; and this has even sparked a lively debate about why mainstream macro exagger…
They did slow it down ( including the form of couple banks going under and Summers begging for a bailout ). It just so happens that federal government also managed to pass some corporate stimulus in the form of 'green new deal' or whatever they ended up calling it and war of Ukraine, which helps domestic warmachine ( billions from misnamed foreign aid ). edit: Oh, and the Summeers did manage to scare enough people to…
If that's the cost to fight a proxy war, it's fairly cheap.
That's how much it costs to build a highway from Pittsburgh to Morgantown (Mon–Fayette Expressway).
> managed to pass some corporate stimulus
This is the key point, and a critical one at that. That corporate stimulus suddenly made swathes of American manufacturing, construction, etc cost effective again.
Earlier quoted context omitted.
They did slow it down ( including the form of couple banks going under and Summers begging for a bailout ). It just so happens that federal government also managed to pass some corporate stimulus in the form of 'green new deal' or whatever they ended up calling it and war of Ukraine, which helps domestic warmachine ( billions from misnamed foreign aid ). edit: Oh, and the Summeers did manage to scare enough people to…
Foreign Aid for Ukraine is overstated. It's just $5bil, which is a drop in the bucket for even state governments in the US. If that's the cost to fight a proxy war, it's fairly cheap. That's how much it costs to build a highway from Pittsburgh to Morgantown (Mon–Fayette Expressway). > managed to pass some corporate stimulus This is the key point, and a critical one at that. That corporate stimulus suddenly made swath…
edit: I will make a less convoluted statement. Ideally, the amount of that small 5b donation abroad would be zero.
The core point from the article (because no one will actually read it): "Higher interest rates have proved a lot less destructive than investors feared in 2022, when the world’s central banks embarked on one of the most aggressive episodes of monetary tightening in history. Nothing has “broken”, contrary to the prevailing view two years ago; and this has even sparked a lively debate about why mainstream macro exagger…
This wasn't "one of the most aggressive episodes". This was nothing compared to Volcker in 1979-1981. And the fact that nothing has broken indicates that they didn't go overly aggressive. They stopped inflation from getting worse without driving the country into a recession. That's a pretty decent balancing act.
But yea I agree with ya on the 2nd half.
* https://en.wikipedia.org/wiki/Monetary_transmission_mechanis...
Cullen Roche is always worth checking out:
> Monetary Policy is the various set of policies initiated by the Central Bank to try to stimulate or slow the economy. This typically includes changing interest rates, altering the size of the balance sheet and communicating via “open mouth policy”. The transmission mechanism of these policies are controversial and the goal of this post is to add some clarity to the ways in which this works.
* https://www.pragcap.com/monetary-policy-transmission-mechani...
It should also be asked "working at doing what, exactly?". If you have an hot economy because of a lot of demand because of easy credit creation, then clamping down on credit creation can help in slowing things down:
* https://en.wikipedia.org/wiki/Demand-pull_inflation
If however you have (e.g.) a geopolitical event that causes (say) a spike in food and energy prices, then that's not really an issue that is largely controlled through credit creation:
* https://en.wikipedia.org/wiki/Cost-push_inflation
Then there are other scenarios, like sudden changes in consumer behaviours that cause problems:
* https://ritholtz.com/2022/06/goods-versus-services/
* https://www.detroitnews.com/story/business/2021/04/19/global...
* https://www.cnbc.com/2022/02/18/whats-behind-the-congestion-...
* https://www.frbsf.org/research-and-insights/publications/eco...
Some of these things monetary policy can deal with better than others, but a lot of folks expect monetary to do something (anything!), and if it doesn't make an attempt than there's all sort of other drama.
If you believe data, monetary policy clearly does not work. We are doing better than ever!
If you do not believe data....
What bothers me is that in Europe it was expected to affect the real estate prices. The higher the interest, the lower the prices, which sounds logical but...the prices kept increasing. So what's going to happen when Lagarde decides to lower them? The demand is way to high and the offer is almost non existent. And it seems that it didn't affect the inflation either. Bad years for everybody who's not getting a 10% rai…
Earlier quoted context omitted.
Foreign Aid for Ukraine is overstated. It's just $5bil, which is a drop in the bucket for even state governments in the US. If that's the cost to fight a proxy war, it's fairly cheap. That's how much it costs to build a highway from Pittsburgh to Morgantown (Mon–Fayette Expressway). > managed to pass some corporate stimulus This is the key point, and a critical one at that. That corporate stimulus suddenly made swath…
You know.. if I could only get a small fraction of that $5b instead of contributing to it being send to everyone but me, I would be a happier man. edit: I will make a less convoluted statement. Ideally, the amount of that small 5b donation abroad would be zero.
Another thing to consider is that counter intuitively higher interest rates might be acting as a form of stimulus for many US households. If you've got a fixed mortgage and the government is now paying you for your savings your total disposable income might actually be increasing with rate hikes.