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Fed hikes rates as inflation worries push up bond yields

reuters.com

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Re: Fed hikes rates as inflation worries push up bond yields

#141

Post by macintux »

adventured wrote: post #33
andy_ppp wrote: post #23

So, during the Great Depression who ended up doing well? What can be applied to today?

There isn't going to be a great depression. The US is going to debase itself endlessly through spend-print-spend-print. At some point they may load up enough debt that the economy suffers a gradual heat death, in the style of Japan, wherein too much of your national capital is going to debt maintenance, sitting in a low yield blackhole sucking the dynamism out of your system (instead of going to productive use, busin…

> since Bush nearly doubled the size of the Federal Government and blew up our finances with simultaneous tax cuts + massive spending expansion

We were 10 years from paying off the national debt when Clinton left office. 10 years!

Re: Fed hikes rates as inflation worries push up bond yields

#142

Post by AnimalMuppet »

stymaar wrote: post #48
kadoban wrote: post #7

Earlier quoted context omitted.

Inflation is high, so interest rates need to go up to try to slow that, but the economy isn't doing amazing already, and higher interest rates won't help that. Not to mention the US debt is _high_ as hell and bond yields mean that's more expensive. And the country is run by a broken fool who has no interest or ability to fix any of that.

QE without public debt sterilization is going to appear as the costliest macroeconomic mistake of the early 21st century.

Disagree, fairly strongly. In 2008, four trillion dollars evaporated. In order to keep the economy from completely crashing, the Fed created $4T using QE and such tricks. The result was 15 years of flat. No inflation for 15 years. If inflation shows up a decade and a half later, that probably wasn't the fault of how QE was done.

Re: Fed hikes rates as inflation worries push up bond yields

#143

Post by watwut »

jameslk wrote: post #117
owebmaster wrote: post #112

Earlier quoted context omitted.

But just one wins elections promising they will reducing it

Neither party has realistic plans to reduce the debt. It’s been that way for decades. Kicking the can down the road gets more votes

It was democrat who ended with surplus. This is not both sides issue. This very much "conservatives make things worst and hide behind both sides".

Re: Fed hikes rates as inflation worries push up bond yields

#144

Post by karp773 »

marcosdumay wrote: post #61
dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

It's interesting that this article doesn't have the rate... (It moved from 3.5% - 3.75% to 3.75% - 4%, the US uses a range, not a fixed number.) But this one is something that gets results almost immediately. We will see what it does in 2 or 3 months, not years.

What results? Overnight interbank loan rates, yes, immediately. The effect of those rates on the economy? It will take time to propagate. Heck, some important committees only meet like twice a year.

Re: Fed hikes rates as inflation worries push up bond yields

#145

Post by swed420 »

dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

> This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.

And it's how Democrats have a reputation for being the "wrongly victimized underdog / misunderstood savior" despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.

Re: Fed hikes rates as inflation worries push up bond yields

#146

Post by jameslk »

atmavatar wrote: post #126
jameslk wrote: post #104

Earlier quoted context omitted.

The high inflation since Covid and $40 trillion in debt didn’t happen under one party

The (vast?) majority of the debt happened as the result of the Republican party both increasing spending and cutting taxes every time it lands someone in the White House and before midterms flip the House back to Democrats. There's a fair argument to be made that the Democrats could/should have reversed these disastrous fiscal policies when they gained power, but it's important to be wary of Murc's Law while also ack…

> The (vast?) majority of the debt happened as the result of the Republican party both increasing spending and cutting taxes every time it lands someone in the White House and before midterms flip the House back to Democrats.

Both parties have run an increasing deficit, with the only outlier being a small amount of time in the late 90s. The deficit is largely caused by social security outlays, medicare/medicaid outlays, and military spending, none of which are going to meaningfully change under either party

Re: Fed hikes rates as inflation worries push up bond yields

#147

Post by carefree-bob »

dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

A 0.25% rate hike is going to cause a recession? How, exactly, would that happen?

Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there.

My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement and instead ask them for their target. You think a 4% FedFunds is too high or too low? What do you think the correct value is and why? You think the stock market is too high or too low, what do you think the correct value of the index should be?

Most people, who were just moments ago vociferously complaining about a movement, when asked this question fall silent, because they have no idea what the target should be, and because they have no idea about the target, they really have no business complaining about movement. Instead, they use the movement as a springboard to air their ideological beefs. But if you are going to tie some thesis to a rate hike, you better be able to explain what you think the correct rate should be and why. I'm waiting.

Personally, I think a 4% rate is perfectly fine. 5% may even be warranted, and historically this has not been a high rate, if you assume, say, 2.5% inflation and 2% GDP growth, this is a pretty reasonable place to be.

Re: Fed hikes rates as inflation worries push up bond yields

#148

Post by xboxnolifes »

Scottn1 wrote: post #66
dabinat wrote: post #27

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a t…

At what point into a presidential term does it become their actual mess? And is there evidence of a time delay? Because by that argument, the mess we are in would been caused by Democrats.

Depending on who you ask, the mess we are in is caused by Democrats.

Re: Fed hikes rates as inflation worries push up bond yields

#149

Post by hirako2000 »

darth_avocado wrote: post #125
hirako2000 wrote: post #92

Earlier quoted context omitted.

But bond yields are based on a market. If interest rates go up, bonds get sold (for better yield bearing products), pushing the yields of those bonds higher. And it finds some equilibrium. The fact it isn't immediate has to do with short term vs long term bonds. When they mature and the pace of arbitrage. I don't see how a rate hike is meant to lower mortgage rate. And just looking at the figures shows it's the oppos…

You have to look at the current context. Bond yields have been spiking, mostly because of the inflation expectations from oil prices and tariffs (mostly oil prices). Mortgages mostly track 10 year yields, which is why when fed dropped the rates back to back, the mortgage rates didn’t come down. The current hike (and the next one) is supposed to create a deflationary pressure, but also provide confidence to the market…

what I'm saying is that Fed hikes interest rates → bonds sell off → yields rise → mortgage rates rise.

This is logical and empirically observed.

But you are right on the longer term effect. Zooming out: Fed hikes → inflation cools → inflation expectations fall → yields fall → mortgage rates fall.

But the latter is not guaranteed, and it takes time.

I'm unsure to understand how the ceiling and floor mechanisms work. But will dig into that. Thanks.

Re: Fed hikes rates as inflation worries push up bond yields

#150

Post by program_whiz »

AnimalMuppet wrote: post #140
ThunderSizzle wrote: post #58

Earlier quoted context omitted.

The country has been _run_ by fools for 26 years. Congress has had 26 years to do something about the fiscal situation, and we've had four presidents, and the fiscal responsible side of the electorate is never listened to. Both sides are to blame - neither will fix the problem. Obama could've made that his goal - he was competent, had a lot of political good will, and many people were frustrated at the bailout policy…

Why specifically 26 years? I agree that Congress has been increasingly useless, leading to more and more rule by presidential decree in order to have a government that runs at all, but there wasn't a step function 26 years ago.

its because prior to that (2000 Bush era), congress and president had a plan to payoff debt and had a balanced budget plan in place to avoid over spending.
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