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Federal Reserve pushes interest rates above 5% for first time since 2007

finance.yahoo.com

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Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#21

Post by lastofthemojito »

hospitalJail wrote: post #18

Just a perspective to share from someone trying to buy property for a small business(since most people think about it from a residential POV). Unlike residential mortgages, corporate loans are not fixed interest rates. They are all adjustable. What in 2020 seems financially sound, becomes impossible a few years later. I can't imagine how other companies do this, do you just make sure your business can handle 12% inte…

Like other cases where businesses focus on their core competency, I think many businesses just rent and let the professional landlords worry about such things. Unless your business is really chiefly a real estate play, like say those self-storage companies that buy property in far-flung suburbs, run a low-investment business for a few decades and then sell the property when sprawl has driven up land values.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#22

Post by ur-whale »

hospitalJail wrote: post #18

Just a perspective to share from someone trying to buy property for a small business(since most people think about it from a residential POV). Unlike residential mortgages, corporate loans are not fixed interest rates. They are all adjustable. What in 2020 seems financially sound, becomes impossible a few years later. I can't imagine how other companies do this, do you just make sure your business can handle 12% inte…

Just rent instead and negociate a fixed rent for the next X years.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#23

Post by htag »

This shows a level of confidence in the banking sector that I find questionable. Risks associated with raising bond interest rates were one of largest factors in the recent bank failures. Surely more bank failures would be seen as worse for the economy than inflation.

If more, larger banks fail in the next twelve months then the Federal Reserve will be sheepish about raising interest rates for the next hundred years. In inflation stays high then it seems likely the Federal Reserve will keep pushing those interest rates higher and higher until something breaks and we enter crisis mode.

Personally, I'd like to see Congress take more action to reduce inflation. Ideally I think the answer is some combination of raising taxes and reducing federal spending, to start to decrease the amount of cashflow. I think some activity on their front can have an impact without introducing the same types of banking risks associated with raising interest rates, and we'll see better results with less negative impact. Of course, given the contents of the Inflation Reduction Act this seems unlikely. The legislative and executive branches seem content to leave inflation to the Federal Reserve, as it absolves them of responsibility.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#24

Post by tsjackson »

Lots of smoke in the comments here. The Fed is doing what needs to create relative stability. Uncomfortable, but real. Demand is outstripping supply and prices are going up. The least painful option is raising interest rates. Alternatives are hyperinflation, (very bad), or various price fixing schemes (which have literally never worked despite many attempts and are even worse in the ultimate outcomes). There are lots of reasons why this is happening, and none of them are related to a "fake economy:"

People and businesses came out of lockdown with saved money and basically free loans burning holes in their pocket which caused a spike in demand (Least important, probably no longer an issue)

Businesses came out of lockdown with a diminished staff and a ton of new uncertainty (much more important, takes a while to recover for some businesses that are planning production multiple YEARS in advance).

Deglobalization/ U.S. national re-industrialization, started by Trump, continued with Biden, which will increase prices on pretty much everything. This is both a reasonable response to the issue, and makes the issue worse in the short term.

There's a hot war with a major energy producer, Russia, which will increase prices for every product where energy is an input (almost every product).

The biggest manufacturer in the world, China, has randomly been shutting down factories and whole metropolises for weeks at a time for the last several years. We just got a correction in this regard, but it will take time for the supply side of the equation to ramp back up, especially given all of the moving parts and uncertainty outlined above.

Bottom line - lean supply chains function well when everything is stable for a longish period of time and it looks like it will continue to be for a longish period of time. In unstable/uncertain environments, supply chains break down, and supply can't keep up with demand, and the government can't keep handing out free money without causing prices to hyperinflate.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#26

Post by rightbyte »

dangerlibrary wrote: post #16
rightbyte wrote: post #7

Earlier quoted context omitted.

All these rate hikes has made me understand how deeply manipulated the economy is. All these scary stories about the old left going to mess with the market ... It seems to me that the FED arbitrarily can manipulate the lowest return on money invested that is possible to get away with aswell as the highest rate you can expect to get on your money by some opaque banker only interest system. Like, how is printing money…

> how is printing money and giving it to the poor any worse. You might be onto something. https://en.wikipedia.org/wiki/Helicopter_money

My gut feeling is that it is a bad idea too. But the defenders of the system do not bat an eye when the Fed pours helicopter money over the rich. The hypocrisy is maddening. It is so dishonest.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#27

Post by curiousllama »

hospitalJail wrote: post #18

Just a perspective to share from someone trying to buy property for a small business(since most people think about it from a residential POV). Unlike residential mortgages, corporate loans are not fixed interest rates. They are all adjustable. What in 2020 seems financially sound, becomes impossible a few years later. I can't imagine how other companies do this, do you just make sure your business can handle 12% inte…

Are there no hedging instruments for something like this?

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#28

Post by gameman144 »

uptownfunk wrote: post #13
elzbardico wrote: post #8

The US have maybe a few months to completely undo their stupid sanctions on the Russians and return their money or the de-dollarizarion movement will keep gaining steam and those bank failures will look like children’s play. There’s no way the USA can survive as a world power if they keep stupidly weaponizing the dollar and weakening its status as the world currency. How do people think we will keep our standards of…

You raise a valid point so don't know why you're being downvoted. A lot of my investors reallocated their portfolios when SVB happened to minimize risk due to dollar volatility. I think perhaps this runs counter to the mainstream woke narratives whenever russia comes up

I didn't downvote, but I think one reason is probably the repeated characterization of sanctions and Fed actions as "stupid", since that kind of puts things in an us-vs-them mindset.

For instance, if I worked on a library and someone filed an issue saying "We need to remove the current networking implementation", I'd be interested to hear what they had to say. If someone said "We need to remove the current stupid networking implementation", I'd immediately be on the defensive (since presumably I had thought it was a good idea).

When trying to make a point, it's important to leave room for people that don't already agree with you to be convinced (especially when most people don't already agree with you).

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#29

Post by bequanna »

lastofthemojito wrote: post #21
hospitalJail wrote: post #18

Just a perspective to share from someone trying to buy property for a small business(since most people think about it from a residential POV). Unlike residential mortgages, corporate loans are not fixed interest rates. They are all adjustable. What in 2020 seems financially sound, becomes impossible a few years later. I can't imagine how other companies do this, do you just make sure your business can handle 12% inte…

Like other cases where businesses focus on their core competency, I think many businesses just rent and let the professional landlords worry about such things. Unless your business is really chiefly a real estate play, like say those self-storage companies that buy property in far-flung suburbs, run a low-investment business for a few decades and then sell the property when sprawl has driven up land values.

There can be good reasons to acquire the commercial property your business utilizes. If you occupy >51% of the space there are SBA loan guarantees which only require 10% down. You can then lease out the remaining space to other tenants.

Re: Federal Reserve pushes interest rates above 5% for first time since 2007

#30

Post by ttul »

htag wrote: post #23

This shows a level of confidence in the banking sector that I find questionable. Risks associated with raising bond interest rates were one of largest factors in the recent bank failures. Surely more bank failures would be seen as worse for the economy than inflation. If more, larger banks fail in the next twelve months then the Federal Reserve will be sheepish about raising interest rates for the next hundred years.…

Inflation costs more than bank failures. The Fed can fix bank failures by providing liquidity on demand - without any limit, theoretically. But unless they tighten rates, inflation will just grow and make future tightening more urgent and less easy to control.
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