Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Fed hikes rates as inflation worries push up bond yields

reuters.com

Post reply on HN
Print view View original

231–240 of 240 posts

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

#231

Post by iamnothere »

tossandthrow wrote: post #214
iamnothere wrote: post #207

Earlier quoted context omitted.

If you’re paying the same amount monthly, your cash flow is the same. Are we not comparing apples to apples here? I mean a traditional fixed mortgage. I’m comparing a mortgage with a high rate and lower principal to one with a lower rate and high principal, where the minimum monthly payments are the same and the owner pays the minimum. A high interest mortgage just means that you pay more total interest over the life…

I said that the monthly payment is the same. Not that you pay the same amount towards your loan. An optional extra payment is worth more when interest rates are higher. Ie. An optional extra payment of 1000$ will pay your 150$ a year in saved interest when the rate is 15% and only 15$ when the rate is 1.5%. Everything else being equal, optional payments has a higher value, which represent value to the buyer.

This is true, but I was not assuming extra payments and I don’t know where you got that assumption from. Many people can’t afford to make extra payments given the already high cost of housing and the rising cost of everything else.

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

#232

Post by tmountain »

seanmcdirmid wrote: post #99
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…

No, this will probably fall apart before Trump is out of office and a Democrat will be expected to clean up his mess again.

It’s optimistic to assume that a Democrat will be permitted to hold the office of the President. It came down to Mike Pence last time, and things have changed a lot since then.

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

#233

Post by disgruntledphd2 »

vdomi wrote: post #221
disgruntledphd2 wrote: post #211

Earlier quoted context omitted.

> 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.

So, their property sector essentially collapsed from 2019-21, vaporising much of the wealth possessed by many Chinese people (who were often buying expensive flats of the plans).

As a result of this many local government pushed money into car/electronics/whatever export industries. This lead to vicious competition, and many of the exporters are tapped out of Chinese markets (vicious competition) so they are attempting to export as much as possible (which is rational).

Looking at things more broadly, one could argue that lots of the reason for the vicious competition is precisely that many Chinese people are still in loads of debt from the property bust (much like Irish/Greek/Spanish people were after their property busts).

The central government is pushing the exporting companies hard, as they don't want to have to inject loads of money into the economy (apart from local support of exporters).

This makes sense from the government perspective as they want to be able to build everything that they need (so the US/EU can't screw them), but it's pretty bad for the chinese people, many of whom are not spending (there's been some deflation over the past 5 years).

So, in many ways the Chinese economy is not in a good state, even lots of the exporters/industrial companies are doing badly, hence why they are focusing on exports.

And because Xi is basically leader for life, the likelihood is that these policies won't change until he dies.

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

#234

Post by rayiner »

cbolton wrote: post #218
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…

> Over 10% of the country will be in the top 1% of earners at some point in their life Though most of them only for one year due to temporary revenue, so it's not that rational.

At peak career ages, the 75th percentile household income is almost $200k and the 90th percentile is almost $300k. That’s exactly the range you need to tax. Across all ages, households earning between $150k and $800k earn half of all income—$7 trillion.

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

#235

Post by dpc050505 »

carefree-bob wrote: post #190
esalman wrote: post #189

Earlier quoted context omitted.

I don't think numbers matter here. Bond prices shooting up is a result of market losing trust in US, or it's ability to not default. Dollar is famous backed by $700T military. But the world has seen how it failed to secure a strait. The current US government has broken all kind of promises. I want to highlight two in particular - free trade and immigration. World economy has benefited for decades on the promises of f…

The dollar is not "backed" by a military. China has a huge military and no one uses the Yuan for third party trade. Why not? Because China does not run trade deficits that allow third parties to acquire the Yuan in the first place, it does not have open capital markets that allow third parties to store their surpluses in Yuan, and it does not have the investor protections that give investors confidence that they can…

The petrodollar system resolved the 70s inflation crisis after Nixon sent the head of the CIA to Saudi Arabia. The US military backed revolutionaries during the arab spring because the dead dictators wanted to start a pan-african currency with which to trade oil. Iran, Venezuela and Russia were under sanctions and treated as enemies in very big part because they were selling oil for other currencies than the USD.

The US dollar is propped up by constant US dollar liquidity related to the fact that you need it to trade significant quantities of oil with the vast majority of producers. That situation was held up by the US' military might. Starting shit with Iran and being unable to finish it means there's no reason for oil producing countries to keep financing american debt on the cheap. What are they going to do? Restrict their own access to crude?

There's more to it, but the USD for gas scheme is a big structural chunk of the financial house of card. You break that and the rest won't hold up very long. And it's not like other structural parts of what makes the USD the global reserve currency aren't getting eroded either. Fed independence stands there glaringly obvious.

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

#236

Post by bryanlarsen »

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 might be the straw that breaks the camel's back. There are a lot of stressors on the economy right now. I don't think it's going to take too many more to tip it. And once it tips, it'll pop bubbles that'll magnify the recession significantly.

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

#237

Post by bluGill »

iamflimflam1 wrote: post #213
bluGill wrote: post #116

Earlier quoted context omitted.

He assumed that the payment is the same meaning the principal for the same house went down and so this is neutral. If your payment is the same it doesn't matter what is principal vs interest. In the best cases rates go down in the future and then you refinance and your payment goes way down. House prices tend to be "sticky", so that assumption is probably wrong. People who own a house often cannot afford to sell for…

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.

You didn't do the same math.

Given a $1500 monthly payment and a 30 year loan (30 year is most common in the US), at 5% loan is $279,400; at 10% the loan is for 170,900.

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

#238

Post by maattdd »

bluGill wrote: post #237
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.

You didn't do the same math. Given a $1500 monthly payment and a 30 year loan (30 year is most common in the US), at 5% loan is $279,400; at 10% the loan is for 170,900.

How is 10% less than 5% ?

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

#239

Post by tossandthrow »

iamnothere wrote: post #231
tossandthrow wrote: post #214

Earlier quoted context omitted.

I said that the monthly payment is the same. Not that you pay the same amount towards your loan. An optional extra payment is worth more when interest rates are higher. Ie. An optional extra payment of 1000$ will pay your 150$ a year in saved interest when the rate is 15% and only 15$ when the rate is 1.5%. Everything else being equal, optional payments has a higher value, which represent value to the buyer.

This is true, but I was not assuming extra payments and I don’t know where you got that assumption from. Many people can’t afford to make extra payments given the already high cost of housing and the rising cost of everything else.

My initial complaint was merely that the interest rate it not neutral to buyers.

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

#240

Post by marcosdumay »

Animats wrote: post #203
marcosdumay wrote: post #61

Earlier quoted context omitted.

It's interesting that this article doesn't have the rate... (It moved from 3.5% - 3.75% to 3.75% - 4%, the US uses a range, not a fixed number.) But this one is something that gets results almost immediately. We will see what it does in 2 or 3 months, not years.

The current official US inflation rate is 3.4%. So the real interest rate is under 1%.

The most relevant comparison is the short term treasure rates, that is currently at 4% for 3 months.

What means that the US is still paying banks to take loans. They just fixed it so it pays very, very little.

Post reply on HN