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US Federal Reserve raises interest rates for first time since 2018

theguardian.com

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

#251

Post by fundad »

throw0101a wrote: post #47
nimbius wrote: post #37

Earlier quoted context omitted.

imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. What i really think are needed --Clinton era 4-5% rates-- are all but taboo to the market post-housing-collapse. nearly a year ago the fed was cheerleading "transient" inflation in an attempt to avoid culpability for the corporate credit bub…

> imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action? And we still have supply chain issue before all geopolitical problems even started: just try asking n…

Hiring back 10 million laid-off workers is expensive and consumers are paying the bill. The problem is wage growth at the bottom is the last thing elites want.

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

#252

Post by birdyrooster »

pkulak wrote: post #190
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…

How is it a test? MMT doesn't say you can increase monetary supply forever without consequence. It says that you can increase monetary supply until you see consequences, at which point you need to start reducing it, mostly through taxation. Raising interest rates does reduce monetary supply, but I don't think nearly to the degree that MMT would call for. Now, if congress immediately votes in a bunch of new taxes, it'…

MMT simply has currency scaling with the exponential utility of commerce. Value is created on both sides of each business transaction, not just for the recipient of the money. The money supply increases to reflect all of the new value created by commerce.

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

#253

Post by cjsplat »

jjoonathan wrote: post #182
reflexco wrote: post #122

Earlier quoted context omitted.

It seems that Putin is the scapegoat for inflation and will be the scapegoat for recession as well.

This isn't a rate-hike recession, it's stimulus withdrawal. Rates are at 0.25%. Last time it took 20.00% to stop inflation. We haven't even started. We haven't soft-defaulted on the national debt, so we can't even think about starting. The Ukraine conflict will be dusty history by the time actual rate hikes and an actual rate hike recession come around.

The MMT point is that it isn't clear that the interest rate is what killed inflation.

A major cause of inflation in the 70s was the 6x increase in the price of oil.

From 1980 to 1986 there was nearly a div by 5 drop.

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

#254

Post by yalogin »

We did waste the 3 yrs before Covid hit by not increasing interest rates and not reducing Fed's money printing. I don't know if it's the fed or if the government pushing to win elections, but feels like we didn't take care of the house in good times and we have led ourselves into this cycle.

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

#256

Post by wolpoli »

BurningFrog wrote: post #26
whoseonthat wrote: post #7

Earlier quoted context omitted.

It seems interest rates lower during recessions. Right now we are already low and are raising which seems to be a different pattern. Is lowering interest rates a method to overcome a recession?

It used to be, until they reached 0%. The usual metaphor is that the interest rate is how hard you pull a rope. Pulling harder slows down the economy more. But below 0%, you're trying to push the rope. And, as any rope expert will tell, you that doesn't do anything.

It's important to note that the Federal reserve normally controls the overnight rate, and let the market determines the interest rate for other durations (eg. 30Y). That changed with the introduction of Quantitative Easing where it reduces the interest rate over the entire yield curve.

In other words, even through the overnight rate is 0%, you could still push down the interest rate down for bonds of a longer maturity, and that'll further stimulate the economy.

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

#257

Post by r00fus »

boppo1 wrote: post #199
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…

> Congressional Budget Office would have carefully analyzed possible inflation ahead of time... Ah yes, surely central planning is the solution.

You jest, but that's exactly what the CBO is supposed to do.

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

#258

Post by mikeyouse »

dragonwriter wrote: post #139
mikeyouse wrote: post #129

Earlier quoted context omitted.

Estate taxes don't exist for 99.7% of people. A married couple can exempt the first $24M of their estate from any Federal taxes. https://www.kiplinger.com/taxes/601639/estate-tax-exemption-... Mind you, this also avoids a ton of tax that would otherwise be due had they not died via the step-up in basis... it's a massive giveaway to the rich. https://www.investopedia.com/terms/s/stepupinbasis.asp

> Estate taxes don't exist for 99.9% of people. Which supports the claim that they are low, and, consequently that young people (who often stand to inherit from their elderly relatives) have a stake in the investments of old people not getting wiped out.

Of course young people have a stake in their rich parents not getting wiped out - but it has nothing to do with the estate tax.

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

#259

Post by birdyrooster »

unyttigfjelltol wrote: post #183
paulpauper wrote: post #165

Earlier quoted context omitted.

has MMT worked. it remains to be seen

Says the man midway through a 40-story fall from a skyscraper: "So far so good!"

The alternative is a static or deflationary currency. This leads to hoarding of assets which were originally intended to serve and increase commerce. Think Bitcoin. Without MMT, we would be falling from a skyscraper as you depict.

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

#260

Post by throwaway894345 »

dragonwriter wrote: post #216
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…

Yeah, MMT basically asserts that the separation between fiscal and monetary policy is artificial, and that the only real constraint on “fiscal” policy (tax and spending) is monetary effects, not the metaphorical limited purse (“fisc”) that must be filled with revenue and borrowing to allow spending. It is not “Congress can spend willy-nilly” but “Congress needs to stop thinking about fiscal balance and start thinking…

Irrespective of its economic merits, any policy which depends on a competent and upright Congress does not inspire confidence. It feels like it's bound to be one of those "True MMT Hasn't Ever Been Tried (TM)" things.
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