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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

#91

Post by dragonwriter »

phone8675309 wrote: post #3
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.

It's even more of a headscratcher when you realize that the Federal Reserve is not a government committee.

> It's even more of a headscratcher when you realize that the Federal Reserve is not a government committee.

The Board of Governors of the Federal Reserve System is an executive branch agency whose Governors are appointed by the President and confirmed by the Senate, just like members of other executive branch boards, commissions, and committees... [0]

The Federal Reserve System itself is a weird public/private hybrid thing, but the System doesn’t set monetary policy, the Board does.

[0] hence, e.g., its inclusion here: https://www.loc.gov/rr/news/fedgov.html

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

#92

Post by ac29 »

avn2109 wrote: post #47
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.…

> "...the Federal Reserve will keep pushing those interest rates higher and higher..." They really can't raise interest rates much above 5%, this follows straightforwardly from observing how much of the national budget is consumed by debt service as a function of the interest rate. (Higher rate = larger fraction of budget allocated to debt service, obviously.) If they go above five-ish percent, this implies that they…

> They really can't raise interest rates much above 5%, this follows straightforwardly

Keep in mind this headline 5% rate is an overnight interest rate, not what the Treasury actually pays on the national debt. All treasuries between 2-30 years are trading below 4% today, and obviously long term debt issued when rates were lower remains at those low rates today.

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

#93

Post by zie »

bryanlarsen wrote: post #77
zie wrote: post #73

Earlier quoted context omitted.

Agreed, hence Congress is full of fiscal idiots. It's not new, Congress has been full of fiscal idiots for well over a decade.

> Congress has been full of fiscal idiots for well over a decade. For well over 200 years. Compared to how Andrew Jackson destroyed the US economy, the current Congress is doing fairly well.

I'm sure reasonable people could debate the timeframe ad-nauseum, but I think most people can agree, Congress in general has never been all that fiscally responsible.

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

#94

Post by caeril »

notahacker wrote: post #66
G3rn0ti wrote: post #58

Earlier quoted context omitted.

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.

Learning about banking and money from a gold-standard era Rothbard polemic which predates the policies of the modern Fed (and most of the theoretical debates and practical results that informed them) is a bit like learning about the practice of modern medicine from the writings of a 19th century homeopath.

Yes, reading the texts from a school of economics that was capable of predicting the price inflation we see now from the money supply inflation of the previous decade seems like a horrible idea.

Better to read about economics from the Keynesians and Chicago Monetarists who completely fucking failed to see the inflation coming, were "surprised" by it, and are now OVER-tightening their way to a depression. The same schools that only saw a "little froth" in the 2007 housing market, the same schools that STILL have no model to figure out why RRP participation is stubbornly stuck north of $2T, the same schools whose own dot plots are consistently WILDLY inaccurate even 6 months out.

Good advice.

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

#95

Post by thunky »

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…

> I imagine that all businesses would benefit from having some long term certainty

Individuals, too: the money you contributed to social security may be gone when you need it, so good luck planning your future. Or maybe you won't get anything until you're 80. Or maybe you'll get half of it. Or it'll be taxed to death.

So for the sake of planning, the common advice to younger workers is to assume you'll get nothing. Get back to work.

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

#96

Post by thunky »

ac29 wrote: post #92
avn2109 wrote: post #47

Earlier quoted context omitted.

> "...the Federal Reserve will keep pushing those interest rates higher and higher..." They really can't raise interest rates much above 5%, this follows straightforwardly from observing how much of the national budget is consumed by debt service as a function of the interest rate. (Higher rate = larger fraction of budget allocated to debt service, obviously.) If they go above five-ish percent, this implies that they…

> They really can't raise interest rates much above 5%, this follows straightforwardly Keep in mind this headline 5% rate is an overnight interest rate, not what the Treasury actually pays on the national debt. All treasuries between 2-30 years are trading below 4% today, and obviously long term debt issued when rates were lower remains at those low rates today.

> All treasuries between 2-30 years are trading below 4% today,

And, these treasury yields actually fell today.

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

#97

Post by thunky »

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…

> The least bad option would be to raise taxes

Taxes also reduce productivity/supply, which is that opposite of what you want.

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

#98

Post by tempera »

thunky wrote: post #95
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…

> I imagine that all businesses would benefit from having some long term certainty Individuals, too: the money you contributed to social security may be gone when you need it, so good luck planning your future. Or maybe you won't get anything until you're 80. Or maybe you'll get half of it. Or it'll be taxed to death. So for the sake of planning, the common advice to younger workers is to assume you'll get nothing. G…

That's the right assumtion: you'll get nothing.

As for having a saving, pension account I'd put a little bit aside in bitcoin, just in case in 10 - 20 years it will be a small fortune.

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

#99

Post by notahacker »

caeril wrote: post #94
notahacker wrote: post #66

Earlier quoted context omitted.

Learning about banking and money from a gold-standard era Rothbard polemic which predates the policies of the modern Fed (and most of the theoretical debates and practical results that informed them) is a bit like learning about the practice of modern medicine from the writings of a 19th century homeopath.

Yes, reading the texts from a school of economics that was capable of predicting the price inflation we see now from the money supply inflation of the previous decade seems like a horrible idea. Better to read about economics from the Keynesians and Chicago Monetarists who completely fucking failed to see the inflation coming, were "surprised" by it, and are now OVER-tightening their way to a depression. The same sch…

Aside from the fact that my core point was about the fact that the present system didn't even exist in 1963 for Rothbard to get angry about it, the Mises Austrians' habit of making annual predictions of imminent hyperinflation - something which has still never happened in the US - is hardly a track record that compares favourably with more mainstream economists!

Oh, and the current level of price rises? Had it on numerous occasions in the 19th century under the deregulated banking system notionally pegged to gold that Mises and Rothbard fetishised, followed by even more destructive deflation cycles. Plus higher interest rates than the "overtightening"

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

#100

Post by bryanlarsen »

thunky wrote: post #97
bryanlarsen wrote: post #50

Earlier quoted context omitted.

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…

> The least bad option would be to raise taxes Taxes also reduce productivity/supply, which is that opposite of what you want.

Raising interest rates also reduces productivity and supply. Raising taxes is more efficient so reduces productivity less than raising interest rates does.
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