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Fed increases target rate to 3.75-4.00%

federalreserve.gov

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Re: Fed increases target rate to 3.75-4.00%

#101

Post by yunwal »

SantalBlush wrote: post #88
nightski wrote: post #57

Earlier quoted context omitted.

I like how the law of supply and demand in economics has been renamed "price gouging" by democrats.

You're not wrong, but we see the same thing with the "labor shortage" rhetoric, which is just conservatives and business owners refusing to acknowledge supply and demand in the labor market.

Both are valid concerns when demand is inelastic. I'd say this is true in regards to essential goods and services (you can't choose not to buy medicine or healthcare). I have yet to see many cases where it's true for labor. It seems in most cases companies can either implement new automation or just choose not to run as much if they have a labor shortage.

Re: Fed increases target rate to 3.75-4.00%

#102

Post by SideQuark »

r00fus wrote: post #33

This will do nothing for actually impacting inflation. Instead it will crash the economy. Real inflation seems to be due to price gouging by companies[0], combined with energy increases due to OPEC price fixing [1], and rent increases due to collusion [2] and corporate domination housing market [3]. Jerome Powell had no answers to the Senate Oversight committee when asked how increasing rates would actually reduce th…

> Real inflation seems to be due to price gouging by companies

A IGM poll of ~100 of the world's leading economists pretty thoroughly show that your belief is very, very far to the fringe, more so than just about any other topic. [1]

They answer the "A significant factor behind today’s higher US inflation is dominant corporations in uncompetitive markets taking advantage of their market power to raise prices in order to increase their profit margins." with 2% strongly agree (with 3% confidence in this answer), 5% agree (7% confidence), 19% uncertain (12% confidence), 51% disagree (52% confidence), 16% strongly disagree (27% confidence), and 7% of no opinion or did not answer.

As to economic questions posed to this forum, this one is pretty slam dunk to the side opposite your claim.

Reich is about as far to the fringe of economists you can find. Try reading more widely. This forum is a much better place to get information about economics than opinion pieces in papers vying for views.

Real reasons for inflation: trillions were added to keep people afloat during COVID, and prices have gone up due to supply chain issues and the war in Ukraine.

If companies could simply raise prices willy-nilly, they'd have done it already.

[1] https://www.igmchicago.org/surveys/inflation-market-power-an...

Re: Fed increases target rate to 3.75-4.00%

#103

Post by yunwal »

nightski wrote: post #57
r00fus wrote: post #33

This will do nothing for actually impacting inflation. Instead it will crash the economy. Real inflation seems to be due to price gouging by companies[0], combined with energy increases due to OPEC price fixing [1], and rent increases due to collusion [2] and corporate domination housing market [3]. Jerome Powell had no answers to the Senate Oversight committee when asked how increasing rates would actually reduce th…

I like how the law of supply and demand in economics has been renamed "price gouging" by democrats.

Laws of supply and demand work very differently when dealing with monopolies/consolidated industries and inelastic goods. Laws of supply and demand only work "how they're supposed to" with either perfect competition or perfect elasticity. So yeah, people don't like that companies are getting away with destroying competition so they can jack up their prices.

Re: Fed increases target rate to 3.75-4.00%

#104

Post by [deleted] »

r00fus wrote: post #89
WillPostForFood wrote: post #82

Earlier quoted context omitted.

>banks want to crash the economy so their wealthy clients can get in at the bottom This is like the left wing version of q anon craziness. Banks don't want the economy to crash - they are big losers when it crashes.

This is your point to prove. I proved Fed gets lobbied (see GP comment).

[deleted]

Re: Fed increases target rate to 3.75-4.00%

#105

Post by medvezhenok »

adventured wrote: post #50
nine_zeros wrote: post #22

Earlier quoted context omitted.

> "I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. It will not. The only way to reduce prices of oil/gas and fertilizers (for food) is to bring back the amount of oil/gas and ammonia that went offline due to Russia. There is no amount of digging anywhere in the world that will quickly replace this much lost natural resource. What…

Oil isn't a serious problem, neither is gasoline. The West can safely maintain the situation with Russia indefinitely. Brent has been in the $90s for a while now. That's equivalent to $65-$70 from ten years ago, which also wasn't a problem then. It's very modestly elevated at present. Natural gas may be a different matter, although the Europeans look like they can have that permanently solved over the next few years…

You can't mention oil prices without mentioning the U.S. SPR (Strategic Petroleum Reserve) releases (around ~250M barrels released this year, around 1/3 of the total reserve):

https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...

Without those, the price of crude oil would likely be higher than it is at the moment (although hard to say how much higher). The fact that China is still pursuing a COVID-0 policy has also helped keep global demand depressed - but we can't rely on that indefinitely.

Re: Fed increases target rate to 3.75-4.00%

#106

Post by thehappypm »

apropos_g wrote: post #4

"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)

Interest rates make things requiring financing (cars, homes, stuff bought on credit) more expensive and out of reach. People either buy less, or buy the same but pay more interest, meaning they have less money for the next purchase.

Re: Fed increases target rate to 3.75-4.00%

#107

Post by mywittyname »

georgeecollins wrote: post #29
apropos_g wrote: post #4

"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)

Here's my try: - Unlike popular perception, money is not created by "printing it". Money is created, or the supply of money is added to, when entities (corporations, institutions, people) borrow money from a bank. - When interest rates go up, the cost of borrowing goes up because you have to pay back more over time. - When the cost of borrowing goes up people borrow less. - When their is less borrowing their is less…

Lots of companies make money from the cash flow spread between interest rates and whatever their investment is. And when interest rates rise, entire segments of their business become fundamentally unprofitable. It's not just banks either.

Say a company buys a $100k asset, and they can use it to generate $10k in revenue. That's a profitable investment at 5% interest ($5k), but not at 10% ($10k). So at high enough interest rates, it's not economically viable for that company to expand. That lack of expansion has upstream implications, and can have a cooling effect on asset prices at broad levels.

Re: Fed increases target rate to 3.75-4.00%

#108

Post by apropos_g »

guyzero wrote: post #5
apropos_g wrote: post #4

"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)

By reducing demand. I guess.

How exactly do rising interest rates reduce demand for food?

How does it reduce demand for gas?

This is what I mean.

Re: Fed increases target rate to 3.75-4.00%

#109

Post by apropos_g »

avmich wrote: post #13
apropos_g wrote: post #4

"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)

The idea is that people will cut spending somewhat to have more money stored in saving accounts where they produce more low-risk return. Cutting spending will dampen prices. Increasing interest rates increases the temptation to lend money instead of spending.

> is that people will cut spending somewhat

Why would people cut spending on food and gas? They need both to survive. That's what the CPI is made of.

Re: Fed increases target rate to 3.75-4.00%

#110

Post by apropos_g »

georgeecollins wrote: post #29
apropos_g wrote: post #4

"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas. (This should be the new Deleuze meme.)

Here's my try: - Unlike popular perception, money is not created by "printing it". Money is created, or the supply of money is added to, when entities (corporations, institutions, people) borrow money from a bank. - When interest rates go up, the cost of borrowing goes up because you have to pay back more over time. - When the cost of borrowing goes up people borrow less. - When their is less borrowing their is less…

> ... borrowing... borrowed...

Borrowed money is rarely spent on food and gas.

You can be stupid and talk about buying food and gas on credit cards. Very few people in this country will stop buying food and gas to prevent default. People need food and gas to survive. So it's not really the borrowed money that is spent on food and gas.

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