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The Fed plans to sharply boost unemployment

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Re: The Fed plans to sharply boost unemployment

#161

Post by rightbyte »

givemeethekeys wrote: post #124
MonkeyMalarky wrote: post #58

Earlier quoted context omitted.

That's why you import labour en mass, pay them less and kick them out when you're done with them. At least that seems to be my country's solution? Literally a permanent underclass of temporary foreign workers propping up parts of the economy.

If by your country you mean, Singapore, then yes. It works because foreign exchange is likely in Singapore's favor. People who come can be indentured servants and help out a lot of people back home. At some point though, the tide begins to turn and you have to find new sources of cheap labor. But, what happens when the sources run dry?

Qatar would be the prime example?

Re: The Fed plans to sharply boost unemployment

#162

Post by rightbyte »

paulmd wrote: post #159
pclmulqdq wrote: post #130

Earlier quoted context omitted.

You could make a decent argument that they have actually caused this recession. 75 bps rate hikes immediately after a crisis where they slam rates to 0 and do a ton of QE does not sound like a particularly responsible form of monetary policy.

Both of those moves are sensible given the circumstances. What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure. https://www.forbes.com/advisor/investing/fed-funds-rate-hist... Those politically-motivated cuts left the…

> Both of those moves are sensible given the circumstances.

Dunno but maybe raising rates like a year ago to slow the chock now would have been appropriate? Like, I guess they knew all the QE would end up somewhere eventually flooding the market with cash?

Re: The Fed plans to sharply boost unemployment

#163

Post by laylower »

lamontcg wrote: post #150
yuan43 wrote: post #89

Zero direct evidence for the title's claim was provided in the article. All the Fed is doing is to normalize interest rates. Deeply negative real yields (5% or more) are aberrations that history has shown to ultimately lead to catastrophe. Yet talking head and Dem Senator alike are treating rate normalization as financial Armageddon. Somebody tell me how at the very least a 0% real yield on cash is going to kill the…

The goal of Fed monetary policy is to contain inflation back down to the 2% target rate. The knob they have to turn is raising interest rates. There's a lot of steps in between that and inflation coming down. Inflation right now has a strong component of rising Labor costs because of low unemployment and workers having strong ability to bargain for higher salaries. To achieve low inflation in the current environment,…

Iamontocg, this would have been a sufficient explanation in a market with no interdependencies. Yet, the cause of the problem is not workers aiming for a living wage when the income inequality is at its all-time high.

Inflation causes vary: 1) Covid business loans 2) Cost of logistics post covid 3) Corporate profits recently hit all time high 4) FX rate with EUR and GBP

I agree that the vanilla solution seems to be the most effective - the knob as you called it. But that doesn't mean that it's going to be painless when credit expansion and overleveraged businesses and people are hit with the new higher rates.

Re: The Fed plans to sharply boost unemployment

#164

Post by pclmulqdq »

paulmd wrote: post #159
pclmulqdq wrote: post #130

Earlier quoted context omitted.

You could make a decent argument that they have actually caused this recession. 75 bps rate hikes immediately after a crisis where they slam rates to 0 and do a ton of QE does not sound like a particularly responsible form of monetary policy.

Both of those moves are sensible given the circumstances. What was not responsible was dropping rates 75bps in 2019, the “mid-cycle adjustment” period referenced here. The economy was already roaring and it was widely acknowledged even at the time that this was unnecessary and a concession to political pressure. https://www.forbes.com/advisor/investing/fed-funds-rate-hist... Those politically-motivated cuts left the…

Another overlooked irresponsible move by the Fed in recent times was when Yellen's Fed was very slow to raise rates coming out of the 2008 recession (the Federal reserve held rates near 0 until 2016), which gave certain segments of the market a lot longer to grow with free money than they should have had. That move, in turn, also gave the fed a lot less flexibility during Trump's trade war and the following crisis.

Both of those moves look to me like overreactions inspired/emboldened by Bernanke's actions in 2007-8. Powell saw that slamming rates to 0 had helped to prevent a complete collapse of the financial system in 2008 and went with it. He didn't notice that Bernanke did a whole bunch of other stuff too, and that Bernanke was one of the world's foremost experts on the economics of the Great Depression, which certainly helped in 2008.

Re: The Fed plans to sharply boost unemployment

#165

Post by lamontcg »

laylower wrote: post #163
lamontcg wrote: post #150

Earlier quoted context omitted.

The goal of Fed monetary policy is to contain inflation back down to the 2% target rate. The knob they have to turn is raising interest rates. There's a lot of steps in between that and inflation coming down. Inflation right now has a strong component of rising Labor costs because of low unemployment and workers having strong ability to bargain for higher salaries. To achieve low inflation in the current environment,…

Iamontocg, this would have been a sufficient explanation in a market with no interdependencies. Yet, the cause of the problem is not workers aiming for a living wage when the income inequality is at its all-time high. Inflation causes vary: 1) Covid business loans 2) Cost of logistics post covid 3) Corporate profits recently hit all time high 4) FX rate with EUR and GBP I agree that the vanilla solution seems to be t…

I don't know what made you think I suggested that this would be painless

FX rates are also the result of twisting the knob, not the cause.

And there's a lot of other factors in inflation, but the wage inflation is the one that has the Fed worried. The Fed knows everything else is cyclical and they weren't worried in the commodities boom and high oil prices in 2010-2014. The reason why they're so worried now is wage inflation. We haven't had wage inflation this high in 30 years and the Fed hasn't thrown on the brakes this hard since I can remember. This isn't the 25bp tightening every meeting of the Greenspan Fed.

Re: The Fed plans to sharply boost unemployment

#166

Post by deepsquirrelnet »

pitaj wrote: post #152
PaulDavisThe1st wrote: post #128

Earlier quoted context omitted.

Inflation is high because corporations have increased consumer prices well above their own increases in costs. There's just as much evidence for this claim as "inflation is demand > supply" or "inflation is M2".

The "corporations are just greedy" thing makes zero sense. If it's just greed, then why have they just recently started? It's not like they all got together and decided to raise prices.

If you are unwilling to let your stock price fall, but your company is unable to increase revenue due to supply chain constraints, then what else is left?

Maybe I’m missing something, but it seems to me that the stock market hasn’t been catastrophic, only because of rising prices. The people who will suffer most are those who can’t get on that raft. So it might ultimately be raising the bar on the middle class.

Re: The Fed plans to sharply boost unemployment

#167

Post by givemeethekeys »

rightbyte wrote: post #161
givemeethekeys wrote: post #124

Earlier quoted context omitted.

If by your country you mean, Singapore, then yes. It works because foreign exchange is likely in Singapore's favor. People who come can be indentured servants and help out a lot of people back home. At some point though, the tide begins to turn and you have to find new sources of cheap labor. But, what happens when the sources run dry?

Qatar would be the prime example?

Definitely - some of the Arab countries - Qatar, Kuwait, the UAE.

Re: The Fed plans to sharply boost unemployment

#168

Post by thunky »

lamontcg wrote: post #165
laylower wrote: post #163

Earlier quoted context omitted.

Iamontocg, this would have been a sufficient explanation in a market with no interdependencies. Yet, the cause of the problem is not workers aiming for a living wage when the income inequality is at its all-time high. Inflation causes vary: 1) Covid business loans 2) Cost of logistics post covid 3) Corporate profits recently hit all time high 4) FX rate with EUR and GBP I agree that the vanilla solution seems to be t…

I don't know what made you think I suggested that this would be painless FX rates are also the result of twisting the knob, not the cause. And there's a lot of other factors in inflation, but the wage inflation is the one that has the Fed worried. The Fed knows everything else is cyclical and they weren't worried in the commodities boom and high oil prices in 2010-2014. The reason why they're so worried now is wage i…

But there is no wage inflation overall. In real terms, wages are declining except for maybe the lowest earners [0]. For some reason that's unacceptable.

[0] https://www.americanprogress.org/article/wages-and-employmen...

Re: The Fed plans to sharply boost unemployment

#169

Post by Retric »

econ101time wrote: post #142
Retric wrote: post #39

Earlier quoted context omitted.

That’s assuming they need to raise capital. However, most companies are flush with cash and will only become more profitable with increasing demand.

So much wrong with this line of thinking. 1) They're also facing increased costs. 2) Most companies are by no means "flush with cash". 3) Cash is fleeting but the need for capital is always hanging over your head. Even if you pride yourself on bootstrapping your business and not needing much in loans or additional investment, one or two bad quarters can quickly leave you with no choice but to get loans or sell equity…

Based on what evidence do you think companies aren’t flush with cash? Every indicator shows US companies have cash reserves vastly above historic levels.

This isn’t about year to year changes. Start looking back to say the 1990’s and the difference is huge.

Re: The Fed plans to sharply boost unemployment

#170

Post by PaulDavisThe1st »

pitaj wrote: post #152
PaulDavisThe1st wrote: post #128

Earlier quoted context omitted.

Inflation is high because corporations have increased consumer prices well above their own increases in costs. There's just as much evidence for this claim as "inflation is demand > supply" or "inflation is M2".

The "corporations are just greedy" thing makes zero sense. If it's just greed, then why have they just recently started? It's not like they all got together and decided to raise prices.

I answered this elsewhere in these comments: https://news.ycombinator.com/item?id=32973663
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