US Federal Reserve raises interest rates for first time since 2018 • Hacker News Board

Re: US Federal Reserve raises interest rates for first time since 2018

#161

Post by Loughla » Wed, Mar 16, 2022, 8:39 PM UTC

bequanna wrote: post #44

chipgap98 wrote: post #38

Earlier quoted context omitted.

Consensus from who?

Every person in the US who has had their purchasing power destroyed over the past ~18 months. Unfortunately, most people were/are too drunk on (maybe temporary) housing and stock market gains to care. Cheap money, free money and rampant speculation could all have easily been cut off a year ago and we would have had a much “softer landing”. Now we’re in a much more precarious position and may end up fighting stagflati…

I legitimately want my home value to tank. I'm sick of paying taxes on a 275k home value that will never, ever, ever sell for that much. I wish it could go back to 80-100k, regardless of whatever "equity" that costs me. I'm in my permanent home, not an investment property.

Re: US Federal Reserve raises interest rates for first time since 2018

#162

Post by throw0101a » Wed, Mar 16, 2022, 8:40 PM UTC

cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government)

Japan money supply:

* https://fred.stlouisfed.org/series/MYAGM2JPM189S

Japan inflation:

* https://fred.stlouisfed.org/series/FPCPITOTLZGJPN

Money supply ≠ inflation.

> As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselves in.

Except for the multiple decades post-WW2 with Bretton Woods.

Further, being on the gold standard didn't seem to help with inflation in the US during the 1920s:

* https://www.theatlantic.com/business/archive/2012/08/why-the...

* https://archive.ph/FWKcL

Re: US Federal Reserve raises interest rates for first time since 2018

#163

Post by efsavage » Wed, Mar 16, 2022, 8:40 PM UTC

bshep wrote: post #55

mym1990 wrote: post #40

Earlier quoted context omitted.

Someone posted the graph earlier: https://www.macrotrends.net/2015/fed-funds-rate-historical-c... Fed funds rate in the early 80s were at their historical peak. We are still currently at near historical lows.

How did anyone buy a house or a car with interest rates in the 20%s?

House values are driven by what people can afford, which is heavily influenced by the interest. If you can afford $1k/mo and 10% of that is interest, 90% is going to principal and you can figure out the math on what your total principal would be. If 20% of that is going to interest, you're still paying $1k, but now your initial principal is much lower, which at scale will drive housing down to some equilibrium where, to be a bit reductive, average people can afford average houses.

My parents bought their house in 1979, for $33k. ~10 years later, when rates had lowered significantly, it was worth $150k.

Re: US Federal Reserve raises interest rates for first time since 2018

#164

Post by qbasic_forever » Wed, Mar 16, 2022, 8:40 PM UTC

thehappypm wrote: post #96

mactitan wrote: post #54

The Fed is trapped: It can’t raise too much since trillions of debt rely on very low rates. If it doesn’t raise enough then inflation will cause a recession.

A recession may be all right. Americans have a gigantic amount saved up and so long as it’s mild enough it’ll probably strengthen the dollar.

Over half of America can't cover a surprise $1000 expense: https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-...

You are not looking at the reality of the situation if you think the average American has a "gigantic amount saved up". The average American is working paycheck to paycheck and is lucky to have a couple hundred bucks for a rainy day or unexpected car repair.

Re: US Federal Reserve raises interest rates for first time since 2018

#165

Post by paulpauper » Wed, Mar 16, 2022, 8:40 PM UTC

andreyk wrote: post #137

An interesting aspect of this is that the endless printing of money in the last few years was a sort of stress test of modern monetary theory, which has been seeing lots of discussion in those same years. I never quite understood how this theory would work while avoiding inflation, and what's happening now seems to at least be related - https://www.nytimes.com/2022/02/06/business/economy/modern-m... Conceptually the…

has MMT worked. it remains to be seen

Re: US Federal Reserve raises interest rates for first time since 2018

#166

Post by [deleted] » Wed, Mar 16, 2022, 8:41 PM UTC

andreyk wrote: post #137

An interesting aspect of this is that the endless printing of money in the last few years was a sort of stress test of modern monetary theory, which has been seeing lots of discussion in those same years. I never quite understood how this theory would work while avoiding inflation, and what's happening now seems to at least be related - https://www.nytimes.com/2022/02/06/business/economy/modern-m... Conceptually the…

[deleted]

Re: US Federal Reserve raises interest rates for first time since 2018

#167

Post by code51 » Wed, Mar 16, 2022, 8:41 PM UTC

MR4D wrote: post #65

mactitan wrote: post #54

The Fed is trapped: It can’t raise too much since trillions of debt rely on very low rates. If it doesn’t raise enough then inflation will cause a recession.

It’s even worse - if the Fed actions tank the markets, then millions of retirees who have been enjoying high market values are screwed and have no other source of wealth or income. I do not envy the position the Fed is in.

Shouldn't there be an "invisible hand" at work to settle this problem automatically when Fed over-raises or under-raises? With the invisible hand and free market arguments, this should have been a non-problem at the first place. But... since the initial move was not natural (lots of cash injection), the natural final move has to be sudden and forceful. These analysis-paralysis rate hikes seem like lots of pawns to be lost before the final blow. It just opens a window of opportunity for ahead-of-the-curve retirees to save their wealth, not helping to avoid the final effect.

Re: US Federal Reserve raises interest rates for first time since 2018

#168

Post by [deleted] » Wed, Mar 16, 2022, 8:41 PM UTC

throw0101a wrote: post #162

cubano wrote: post #116

Inflation is almost 100% caused by "too much money" chasing "too few goods". "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) As we all should know, in the US, on 6/5/1933 FDR took the US off gold-backed currency and started the fiat currency situation we still find ourselv…

> "Too much money" is a condition almost always caused by the creation of too much "fiat currency" (ie a currency that is backed by nothing but the good faith and credit of the issuing government) Japan money supply: * https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Money supply ≠ inflation. > As we all should know, in the US, on 6/5/1933 FDR took…

[deleted]

Re: US Federal Reserve raises interest rates for first time since 2018

#169

Post by analyst74 » Wed, Mar 16, 2022, 8:41 PM UTC

lapetitejort wrote: post #3

If you're a dummy like me, 25 bps means 0.25%.

Current rate, which is nearly 0, is also an important consideration.

What this means is if you borrow at 0.25% interest rate yesterday, and it becomes 0.5% tomorrow, your cost of borrowing just doubled.

Re: US Federal Reserve raises interest rates for first time since 2018

#170

Post by throwawayboise » Wed, Mar 16, 2022, 8:42 PM UTC

bshep wrote: post #55

mym1990 wrote: post #40

Earlier quoted context omitted.

Someone posted the graph earlier: https://www.macrotrends.net/2015/fed-funds-rate-historical-c... Fed funds rate in the early 80s were at their historical peak. We are still currently at near historical lows.

How did anyone buy a house or a car with interest rates in the 20%s?

I don't think mortgate rates ever broke 20% but were in double-digits.

At that time, though, you needed about 20% down payment to qualify for a mortgage. So you weren't borrowing as much, and houses were smaller and cheaper. It was very difficult for many people to buy a house in those years.