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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

#221

Post by vdomi »

disgruntledphd2 wrote: post #211
mikewarot wrote: post #197

Earlier quoted context omitted.

I think this could be the thing that finally pops the AI circular financing bubble, leading to World Depression II. I'm not sure either of the existing 2 faces of the duopoly infesting politics will survive, and there's a non-zero chance this breaks civilization as supply chains collapse, and we enter a new dark ages.

> leading to World Depression II This is very, very unlikely. The US would probably suffer more, given how much AI related expenditure there is. The EZ mostly wouldn't notice, and China is already basically in a depression that it's desperately trying to export its way out of (which seems unlikely without them doing something about all the underwater property debt).

> China is already basically in a depression You gotta expand on that, chief.

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

#222

Post by rayiner »

leptons wrote: post #202
rayiner wrote: post #165

Earlier quoted context omitted.

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…

Okay, but how much tax revenue was raised from those high marginal rates? The top rate is meaningless without knowing how much money that actually brings in for the government. That’s the key part of the analysis for purposes of this discussion.

Aside from a brief blip during WWII, federal tax receipts as a percentage of GDP have been stable at around 17% of GDP, going back to 1950: https://fred.stlouisfed.org/series/FYFRGDA188S. Those high marginal rates never actually raised very much revenue. To close the deficit, we have to get that 17% number up to 23%.

To raise revenue, you need to lower the threshold at which high marginal rates kick in so that you actually capture the fat part of the tax base. About half of all income is earned by people making $100k-800k. That’s around where the heavy tax burden falls in every western european country.

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

#223

Post by SideburnsOfDoom »

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…

> A 0.25% rate hike is going to cause a recession?

Firstly a rate hike is as much a reaction to circumstances as it is a cause. It follows changes to the financial environment. As much as the current US Administration wanted a rate drop, circumstances dictated the opposite.

Secondly, it might not be isolated. These rates move by small increments, but there are usually several moves in succession, up to 8 times a year. Compare two or three small hikes to two or three small drops and the difference starts to add up. "A 0.25% rate hike" is small, but it indicates a change in direction. The article notes that it is "for the first time since 2023".

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

#224

Post by fireflash38 »

pjc50 wrote: post #219
carefree-bob wrote: post #163

Earlier quoted context omitted.

Central banks didn't use to do this, in the post-war period up until about 1980, they tried targeting the monetary aggregates like M2. Unfortunately they discovered that the size of monetary aggregates was outside the control of central banks, these were demand determined by the public's desire for money balances. So all attempts to control the growth of monetary aggregates failed. Having an inability to control anyt…

Bob is correct here. The other tool people keep forgetting about is fiscal policy; government deficit spending is inflationary, and the US is currently running a very large deficit and was floating even more inflationary ideas like directly bribing voters to vote Republican in the midterms. Really the problem is that everyone wants to make lots of money (economic growth) so they can spend more (increase consumption)…

He's right about interest rates. But he's missing the point behind the debate: whose policy choices got us to where we are today where this is necessary? Republicans.

Not just Trump, Republicans as a whole. They are not fiscally conservative at all, and their culture wars and religious crusades are going to bankrupt the nation.

They'll sell you up a rope to corporate donors asking for deregulation. And we've seen exactly what happens when there is money to be made at the expense of other people's lives: spoiler alert, people like money more than they care about other people's health.

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

#225

Post by datsci_est_2015 »

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…

Bring this energetic criticism onto Warsh, whose speech was nauseatingly political in comparison to his predecessor. Paraphrasing ~ “I’m not data-driven, I’m trend-driven”. Frankly speaking, he sounded like a dumbass who failed his way upwards into a position of meaningful power, much like the rest of the government at the moment. Warsh also refused to give a target or a forecast.

The OP that you’re criticizing is simply making a prediction, and he doesn’t work at the fed.

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

#226

Post by iamflimflam1 »

tossandthrow wrote: post #220
iamflimflam1 wrote: post #213

Earlier quoted context omitted.

Maybe the mortgage system is different in the US. But if you have a 25 year term on a loan for a $500,000 Approx numbers: 5%: $2922 monthly, total paid: $876,885 10%: $4543 monthly, total paid: $1,353,000.

Yes, so the 500k is not fixed - that should be obvious from these calculations.

[dead]

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

#227

Post by StevePrefontain »

ThunderSizzle wrote: post #35
darth_avocado wrote: post #20

Earlier quoted context omitted.

This is the right move. Inflationary pressures due to high oil prices and tariffs are not going away anytime soon. All the economic numbers point to a need for a rate hike. Not doing so has a much larger effect on the financial system than a 25 bps rate hike. Stagflation is a bigger risk to the economy. Counterintuitively the rate hike can help lower things like mortgage rates by stabilizing the bond yields.

We'll continue through the depression we've started since 2008. (GDP growth should be closer to 3.5%-5%, but we haven't really escaped sub-2% since 2008) - our GDP has been depressed by at least 1-2% growth since that crisis, and I think a large part of it has been the inflationary cycle we started and never stopped. The wars already put us into too much debt, Obama continued it for 8 years (granted, the deficit slow…

GDP growth is never going to be that high again. GDP growth is just per-capita GDP growth (1-1.5% per year) + population growth (used to be 1%, now is 0% or slightly negative). GDP growth of 1-1.5% will be normal going forward and could even go lower if population decline is at -.5% per year, for example.

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

#228

Post by almog »

datsci_est_2015 wrote: post #225
carefree-bob wrote: post #147

Earlier quoted context omitted.

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…

Bring this energetic criticism onto Warsh, whose speech was nauseatingly political in comparison to his predecessor. Paraphrasing ~ “I’m not data-driven, I’m trend-driven”. Frankly speaking, he sounded like a dumbass who failed his way upwards into a position of meaningful power, much like the rest of the government at the moment. Warsh also refused to give a target or a forecast. The OP that you’re criticizing is si…

It was hard to watch and ended abruptly. Perhaps the only 2 reporters that kind of tried to challenge the contradictions in his approach were Nick Timiraos and Michael McKee.

I think that one obvious question that no one asked him, is why not cancel the post FOMC press conference if he opposes forward guidance and won't even explain what data guides his vote when asked about it.

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

#229

Post by AnimalMuppet »

stymaar wrote: post #201
AnimalMuppet wrote: post #142

Earlier quoted context omitted.

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 b…

I see. Well, what you propose might have the minor problem of being illegal for the Fed to do. I'm not perfectly sure (and I don't want to take the time to research this rabbit hole right now), but the Fed is deliberately different from the Treasury. It's not supposed to fund the government by creating money.

At a minimum, doing so would have created doubts about the future of the dollar. (Because countries that start having the central bank create money to fund the government often wind up in runaway inflation, with the currency becoming worthless.)

As to a 4% target: Given that they were stuck at 0% for the next decade (and tried, and failed, to get up to 2%), why would they move the target to 4%? They already couldn't do what they said, why double their failure?

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

#230

Post by tmountain »

RickJWagner wrote: post #182
UncleOxidant wrote: post #133

Earlier quoted context omitted.

This president single-handedly raised tariffs on goods from all over the world.

Yes. It is a tax. He raised a tax. You might argue it is inflationary.

You might argue it is illegal.
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