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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

#201

Post by stymaar »

AnimalMuppet wrote: post #142
stymaar wrote: post #48

Earlier quoted context omitted.

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.

You're getting my point wrong:

- I absolutely agree that inflation has nothing at all to do with QE, people who claimed that are just idiots who have a gold fetish.

- the problem I'm talking about is the fact that central banks didn't use QE as an opportunity to erase the public debt it bought. At the time it wouldn't have been an issue in any way. But now because inflation is back (due to oil) central banks cannot buy government bonds when they reach maturity and have to raise rates. Then the government bonds have become very expensive, and it has to be paid to the private sector on the market, so whenever a US govt security reaches maturity, the budget constraint increases. Sterilization of the debt would have alleviated this issue a lot at no cost.

Also, we should have taken the lessons of the era and raise the inflation target to 4%[1] at that time (it was definitely politically achievable then, now not so much).

[1]: https://www.imf.org/en/publications/wp/issues/2016/12/31/the...

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

#202

Post by leptons »

rayiner wrote: post #165
nemomarx wrote: post #47

Earlier quoted context omitted.

You really really just need to raise taxes. Just find a way to sell that to the public (focus on the rich or large corporations or whatever outgroup you want basically)

Our budget deficit is $2 trillion. To close it, you need to significantly raise taxes on the fattest part of the income curve, which is the top 25%. They have $10 trillion of income. https://taxfoundation.org/data/all/federal/latest-federal-in... . An across the board 200 basis point increase would close the deficit. That would raise their taxes to 38% at the low end to 46% at the high end, which is perfectly fine. T…

The wealthy have been taxed appropriately in the past, we just need to do it again. There is precedent.

The Peak Year (1944): The 94% rate applied to taxable income over $200,000 (which included a 3% regular tax and a 91% surtax). That $200,000 would be incomes over $3.8 Million today.

The High-Tax Era: Top marginal rates remained above 90% for two decades, spanning from 1944 through 1963.

This is supposedly the era that made America "great".

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

#203

Post by Animats »

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.

The current official US inflation rate is 3.4%. So the real interest rate is under 1%.

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

#204

Post by [deleted] »

carefree-bob wrote: post #147
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 a…

[deleted]

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

#205

Post by watwut »

aftbit wrote: post #158
hsbalanxvxjsmab wrote: post #119

Earlier quoted context omitted.

I would love to hear what was "radical" or "divisive" about Obama's policy. A significant portion of the country disliking him because of his skin color doesn't make his policies "radical"

A universal health care mandate were both radical and divisive, and the popular nickname for the ACA today is "Obamacare". I happen to think the policy was a good idea, and voting to keep it in play was the best vote of John McCain's career ... but it was definitely both radical and divisive. Now, much of the "mandate" has been stripped away, health care remains a mess, and access is far from affordable, but you can'…

It was not radical and he adopted originally republican ideas. They even originally backed it.

The thing is, the divisiveness comes from one side - conservatives who were and are determine to oppose literally everything.

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

#206

Post by khriss »

jameslk wrote: post #57
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…

Both parties are responsible for the inflation and debt. Fiscal policy is largely driven by congress, not the president

I wonder which party's presidents have started all the trillion dollar wars in the past 30 years.....

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

#207

Post by iamnothere »

tossandthrow wrote: post #199
iamnothere wrote: post #103

Earlier quoted context omitted.

Only if you expect rates to come down in the future. If the monthly payment is the same, I guess you have a slightly bigger mortgage interest deduction for tax purposes, but you’re still paying the same amount each month. If you expect rates to come down soon, you can plan to refinance in the future, but that’s a gamble. Rates may not go down, or the value of the house could go down before you refinance, which may ma…

No? Paying down a high interest mortgage will always have bigger impact on the dollar than paying down a low interest mortgage.

If you’re paying the same amount monthly, your cash flow is the same. Are we not comparing apples to apples here? I mean a traditional fixed mortgage.

I’m comparing a mortgage with a high rate and lower principal to one with a lower rate and high principal, where the minimum monthly payments are the same and the owner pays the minimum.

A high interest mortgage just means that you pay more total interest over the life of the mortgage. In any case traditional mortgages are front-loaded, so you pay more towards interest up front than you do principal.

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

#208

Post by khriss »

ThunderSizzle wrote: post #58
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.

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…

> The country has been _run_ by fools for 26 years.

It's hard to accept the 'everyone is the same' in light of Trump's antics. Remind me again which presidents started wars of choice at the behest of Israel even when they were explicitly warned of the consequences?

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

#209

Post by disgruntledphd2 »

DoesntMatter22 wrote: post #121
matteoraso wrote: post #97

Earlier quoted context omitted.

And which party controls congress? I'll give you a hint: It's the party that spent decades advocating for irresponsible tax cuts without cutting spending[0]. [0] Yes, I know that the Republicans said that they were going to cut spending to match the tax cuts, but that never ends up happening.

Partly it doesn't happen because you can't really get much done even if you have a majority. You really end up needing a super majority. The one thing both parties agree on though is running up a massive deficit

> You really end up needing a super majority.

Assuming you're talking about the Senate filibuster, then this can be changed or removed by simple majority vote. It's not in the Constitution, just a rule that the Senate adopted.

Like, personally I think that even sans filibuster, the Senate would move much slower than the House, because of election cycles.

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

#210

Post by hirako2000 »

darth_avocado wrote: post #172
hirako2000 wrote: post #149

Earlier quoted context omitted.

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. B…

> Fed hikes interest rates → bonds sell off → yields rise This part isn’t true. It can happen, but not always, especially right now.

So far you are right, yields are falling since yesterday.
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