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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

#51

Post by a_subsystem »

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.…

Congress isn't incentivized to fix inflation. On the contrary, stats are concocted from cherry picked consumer goods to show current inflation at lower levels than what is reflected in reality and the specific goods vary depending on their cost at the time stats are concocted. Assets also tend to accumulate value when inflation rises, and so congresspeople know this and accumulate assets that will do so.

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

#52

Post by zie »

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.…

Except the US treasury and the Fed gave all US banks a 1yr blank check to get their act together, if rising rates really are causing them trouble. This was during the SVB crash. So no, banks should not fail because of rising rates, if they don't have idiots in charge. Oh wait, SVB failed specifically because they had idiots in charge. Good thing they all got fired. How many more idiots are in charge of banks? The FDIC will find out for us in about a year I'm betting.

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

#53

Post by Dalewyn »

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 downvoted because if our collective desire for world peace is anything substantive rather than just vapid, feelgood window dressing, sanctioning Russia is among the first of many actions we should be taking.

And honestly, we aren't doing enough to demonstrate that warmongering is not acceptable in this day and age.

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

#54

Post by hotpotamus »

rightbyte wrote: post #7
pfannkuchen wrote: post #2

This whole interest rate hike exercise and its obvious effects on various markets has really made the economy seem fake to me. How can one government committee have so much arbitrary decision making power over how hundreds of millions conduct business in this country? It’s extremely demotivating.

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…

It turns out that it's all a system built and operated by humans. It's easy to lose sight of that being born into the world in media res so to speak; there's plenty of path dependence, and to give the economists at least a little credit, some seemingly innate human behavioral factors, but fundamentally it's all a built-up system, and it could have been and could be built differently.

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

#55

Post by gameman144 »

rightbyte wrote: post #26
dangerlibrary wrote: post #16

Earlier quoted context omitted.

> 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.

I can offer my perspective as someone who would probably be considered a "defender of the Fed" (definitely not government policy as a whole, though).

Pouring helicopter money down is going to increase inflation, hands-down. Giving it to more people will increase inflation more than giving it to fewer people (since the competition for scarce goods will be more widely distributed), but it's just as bad giving helicopter money to the rich.

Helicopter money is largely fiscal policy (i.e. how do we spend our money) instead of monetary policy (i.e. how much money should there be, and how should it flow).

I'll not defend fiscal policy, as I find that Congress often just tries to buy votes with money (the right with tax-cuts, the left with loan-forgiveness or entitlements).

In terms of monetary policy, though, the Fed's responsibilities are to make the employment market and inflation stay at good levels. Manipulating the interest rate of bank lending does do that (albeit not nearly as much as it could if coupled with good fiscal policy).

Raising the interest rate does reduce inflation, since there are fewer free-floating dollars to compete for good. It also does make the job market less hot, since there are fewer free-floating dollars to invest in businesses or employees.

There's some deep hypocrisy in fiscal policy, but I think the Fed is doing what the Fed can do to keep jobs and inflation in balance.

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

#56

Post by jandrewrogers »

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

The primary argument against helicopter money is that it greatly accelerates the rate at which inflation manifests in the economy due to the increasing monetary supply, which causes more extreme disruption (the economy doesn't have time to adjust gradually).

If the inflation manifests slowly enough, the theory is that slower inflation combined with productivity growth can mitigate the major adverse effects and dislocations by allowing the economy to adjust at a much slower rate.

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

#57

Post by zie »

bryanlarsen wrote: post #50
tsjackson wrote: post #24

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…

The least bad option would be to raise taxes. If the problem is too much money, directly removing the money from the system is the solution. Taxes can be precisely targeted and work quickly. Call it a "windfall tax" for political cover, but given that it would have to be large to be effective, it would be more than that. The Inflation Reduction Act was a good start, but it only raised taxes by $700B. The next least b…

I agree, raising taxes would definitely help AND would help the US govt with their currently fiscally idiotic ways.

Unfortunately, that would imply Congress has their act together. Since they currently can't even manage to keep from defaulting the US govt on their current debt, I'm not hopeful they will stop being fiscal idiots anytime soon. I mean this to imply both political parties are fiscal idiots as far as I can tell.

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

#58

Post by G3rn0ti »

rightbyte wrote: post #7
pfannkuchen wrote: post #2

This whole interest rate hike exercise and its obvious effects on various markets has really made the economy seem fake to me. How can one government committee have so much arbitrary decision making power over how hundreds of millions conduct business in this country? It’s extremely demotivating.

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…

Try reading this classic:

„What Has Government Done to Our Money?“

https://mises.org/library/what-has-government-done-our-money

It’s a good introduction to banking, money and the business cycle.

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

#59

Post by Workaccount2 »

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…

A de-dollariztion and a move to what? Yuan? Ruble? Bitcoin?

Sure countries might be unhappy with the dollar as of late, but there really is no serious competitor. It's like being upset with the Ritz and threatening them with moving your stay to the Comfort Inn.

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

#60

Post by blitzar »

avn2109 wrote: post #34
brianwawok wrote: post #5

Earlier quoted context omitted.

How would you prefer to do it? Like China?

The common answer to this question is that the base rate could be set by some free-market themed mechanism, where the price (aka base rate) depends on the balance of supply and demand for loans, instead of the current status quo of centrally-planned rates.

When shocks his the system, the supply of loans collapses and the demand for loans increases. In good times the supply of money would far exceed the demand. Rates would go up in recessions and down in booms making the bust nearly impossible to exit and the booms into a week long party fuelled by a cocktail of heroin, cocaine and ecstasy consumed off a shovel.
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