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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

#371

Post by notch656a »

qbasic_forever wrote: post #164
thehappypm wrote: post #96

Earlier quoted context omitted.

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.

You've been played by a study designed to manipulate the view of American wealth. The median household has a gigantic amount of wealth, over $100k worth. Not having $1k in a checking account doesn't mean you can't afford $1k or even a $10k expense.

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

#372

Post by jcadam »

seizethecheese wrote: post #305
jcadam wrote: post #255

Got my mortgage at 2.75% late last year. Woooooo.....

What do you think is going to happen to your home price is interest rates go up to 5% and then people can’t afford huge mortgages anymore?

We'll see. we didn't have inflation like this during the last big downturn in 2008. I also don't think the Fed is going to be able to raise rates as high as they did back in the early 80s.

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

#373

Post by bogomipz »

monktastic1 wrote: post #244
bogomipz wrote: post #203

Earlier quoted context omitted.

The FOMC(Federal Open Market Committee) is the policy arm of the Fed. They can not and do not set interest rates directly. What they do is adjust the money supply to try to influence interest rates towards a target range. One of the tools they have to do this is the the federal funds rate which is the rate that banks charge each other to borrow money overnight in order to meet their reserve requirements. The Fed Fund…

As I mentioned in a sibling comment, there hasn't been a reserve requirement for two years. I'm not sure what's primarily driving the interbank borrowing now.

The Fed Funds rate is still the reference for policy but the Fed has been using a new framework called "ample reserves" since the latter part of 2020. See:

"How Does the Fed Influence Interest Rates Using Its New Tools?"

https://www.stlouisfed.org/open-vault/2020/august/how-does-f...

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

#374

Post by OGWhales »

causalmodels wrote: post #315
freedomben wrote: post #301

Earlier quoted context omitted.

You're correct, but I think the problem is that a lot of people who advocate for MMT, don't actually understand it, because many of the pro-MMT people I've talked to really do think you can print money forever . It's not unique to MMT, the same thing happens with plenty of other subjects too.

Not even the MMT people understand MMT. The lack of formal models means everyone is working with wildly different and often contradictory definitions

> everyone is working with wildly different and often contradictory definitions

I’ve found the main MMTers to be mostly consistent amongst themselves in their theories. Now, I think some ideas are wrong, but they do seem mostly on the same page. I agree MMT does an excellent job convincing laymen of some pretty wacky ideas and that’s one of my bigger complaints with it.

Also, I find the focus on mathematical models problematic in mainstream economics. It obfuscates a lot of erroneous assumptions. Models are great for testing, but words are useful for communicating ideas too and can sometimes be a better format, especially for wider audiences. To be clear, I’m not saying models are bad or that MMT shouldn’t use them, in fact I saw one MMTer post this paper recently: http://www.levyinstitute.org/pubs/wp_992.pdf

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

#375

Post by stale2002 »

dragonwriter wrote: post #364
throwaway894345 wrote: post #260

Earlier quoted context omitted.

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.

MMT isn't a thing to try or be tried: it's not an ideology or set of policies or even policy goals (there is a very loose correlation between adherence to MMT and certain progressive policy goals, but they aren't the same thing.) MMT is an understanding of factual nature of the environment in which government operates . Reduced to one sentence it is “the entire concept of fiscal balance is play-acting as if the gover…

> it's not an ideology or set of policies or even policy goals

That might be true in the academic sense.

But in reality, the only people who talk about MMT are people who just want to spend money infinitely and claim that there is no negative consequences to doing so.

Which of course, doesn't make any sense if you know anything about MMT in the academic sense, which absolutely admits that there is negative consequences to spending/money printing.

Mainstream economists don't really think MMT has much to say, TBH, and few professionals care about it.

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

#376

Post by mariodiana »

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…

Even if we imagine MMT working perfectly — whatever that means — it represents a stealthy redistributing of wealth. The idea behind it is for the government to acquire and then redistribute goods and services from those in the private sector who would otherwise command that wealth, and do something else with it: in other words, give these goods and services to others.

And no one is going to notice this? The people who are used to enjoying some quantity of goods and services are not going to notice that they now enjoy less, because someone else is enjoying them?

Or, is this somehow supposed to "stimulate" the economy, so that more goods and services are actually produced, because of the extra money?

This is alchemy. Production comes before consumption.

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

#377

Post by qbasic_forever »

notch656a wrote: post #371
qbasic_forever wrote: post #164

Earlier quoted context omitted.

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.

You've been played by a study designed to manipulate the view of American wealth. The median household has a gigantic amount of wealth, over $100k worth. Not having $1k in a checking account doesn't mean you can't afford $1k or even a $10k expense.

Sure if you define 'household' as home owners, of course their assets are well above $100k because of the hyper inflated housing market in the country.

I would _love_ to see how someone renting an apartment and working minimum wage with less than $1k in their checking account can get a $10k loan. What are they going to do, go to the check cashing place around the corner and walk out with 10 grand? (that's saracasm btw)

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

#378

Post by monktastic1 »

drexlspivey wrote: post #324
monktastic1 wrote: post #126

Earlier quoted context omitted.

As another reply indicated, the Fed doesn't actually set interest rates. That's a common misconception. Instead they purchase and sell treasuries to member banks, such that those banks' balance sheets change in such a way as to make money more or less expensive to trade amongst themselves, which has knock-on effects for consumers. On the other hand, since there's no longer a reserve requirement since the start of cov…

> As another reply indicated, the Fed doesn't actually set interest rates. That's a common misconception. The FED absolutely sets the interest rates by controlling the federal reserve rate which is the interaste rate paid to banks every day for their deposits with the FED

The Fed (not FED, BTW) doesn't "set" the rates, but has policies (including IORB, or what you call the federal reserve rate) which guide the markets to arrive at their target. Maybe that's a small distinction, but I think it helps OP, because I labored under the same confusion for a while.

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

#379

Post by notch656a »

qbasic_forever wrote: post #377
notch656a wrote: post #371

Earlier quoted context omitted.

You've been played by a study designed to manipulate the view of American wealth. The median household has a gigantic amount of wealth, over $100k worth. Not having $1k in a checking account doesn't mean you can't afford $1k or even a $10k expense.

Sure if you define 'household' as home owners, of course their assets are well above $100k because of the hyper inflated housing market in the country. I would _love_ to see how someone renting an apartment and working minimum wage with less than $1k in their checking account can get a $10k loan. What are they going to do, go to the check cashing place around the corner and walk out with 10 grand? (that's saracasm bt…

>Sure if you define 'household' as home owners

I don't. All households. Majority of households have > 100k wealth. Your claim is patently wrong, when taken against your citation which shows nearly everyone found _some_ way to pay the expense. Personally I would just pay with a credit card so I can let inflation shred away ~0.5% of the real cost, but I'd be tossed away with those who 'cant afford' it by your interpretation of the study.

I usually keep less than $1k in fiat accounts and I could easily have tens of thousands tomorrow if I like, and my household is far poorer than the median household. It's called selling (or borrowing against) assets. The median household can do the same thing. Only an idiot holds fiat in a savings account when inflation is raging.

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

#380

Post by xxpor »

alexilliamson wrote: post #358
IncRnd wrote: post #339

Earlier quoted context omitted.

That's very astute of you. The GP was talking about a rate called U-3, but the U-6 rate is far more descriptive. U-3 is what is generally used as the quoted rate, because it severely minimizes actual unemployment, allowing the Federal Government to use false statistics. [1] [1] https://www.bls.gov/news.release/pdf/empsit.pdf

I'm glad someone else got on this soap box today. Folks will bend over backwards to justify the U-3 rate when it's not that meaningful at all.

It's extremely meaningful. It measures those who are unemployed. U-6 counts underemployment and people not actively searching due to an "economic reason".

Even regardless, the current U-6 rate is very close to the record low: https://fred.stlouisfed.org/series/U6RATE

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