The Federal Reserve Raises Interest Rates By 0.75 of a Percentage Point (nytimes.com) 234
The Federal Reserve raised interest rates by three-quarters of a percentage point on Wednesday, its biggest move since 1994, as the central bank ramps up its efforts to tackle the fastest inflation in four decades. From a report: The big rate increase, which markets had expected, underlined that Fed officials are serious about crushing price increases even if it comes at a cost to the economy. Officials predicted that the unemployment rate will increase to 3.7 percent this year and to 4.1 percent by 2024, and that growth will slow notably as policymakers push borrowing costs sharply higher and choke off economic demand.
The Fed's policy rate is now set in a range between 1.50 to 1.75. Policymakers penciled in interest rates hitting 3.4 percent by the end of 2022 -- a level that would be the highest since 2008 -- and officials saw their policy rate peaking at 3.8 percent at the end of 2023. Those figures are significantly higher than previous estimates, which showed rates topping out at 2.8 percent next year. Fed officials newly expected to be cutting rates in 2024, which could be a sign that they think the economy will weaken so much that they will need to reorient their policy approach. The major takeaway from the Fed's economic forecasts, which it released for the first time since March, was that officials have become more pessimistic about their chances of letting the economy down gently.
The Fed's policy rate is now set in a range between 1.50 to 1.75. Policymakers penciled in interest rates hitting 3.4 percent by the end of 2022 -- a level that would be the highest since 2008 -- and officials saw their policy rate peaking at 3.8 percent at the end of 2023. Those figures are significantly higher than previous estimates, which showed rates topping out at 2.8 percent next year. Fed officials newly expected to be cutting rates in 2024, which could be a sign that they think the economy will weaken so much that they will need to reorient their policy approach. The major takeaway from the Fed's economic forecasts, which it released for the first time since March, was that officials have become more pessimistic about their chances of letting the economy down gently.
Recession incoming in 3, 2, 1... (Score:5, Insightful)
Re:Recession incoming in 3, 2, 1... (Score:5, Insightful)
If you really trust your ability to predict the economic future, then buy stock shorts and puts. In short, put your money where your mouth is. Whatever random uncertainty there was to economic prediction in the past, the pandemic quadrupled it. And add in the war. Thus, using past recessions as a reference source is extra dubious these days.
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In short, put your money where your mouth is.
Trash talking is low risk. That's why there's so many stupid people on the internet. The majority of them are unlikely to be quite as stupid in real life.
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If you really trust your ability to predict the economic future, then buy stock shorts and puts. In short, put your money where your mouth is.
How about instead we take the idea of betting against success in Capitalism, and shove it over a fucking cliff instead?
You wonder how we got here, and then ask for another helping of shit soup. Brilliant. As if profiting off COVID wasn't bad enough.
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> In your world:
Oh?
> The inflation has nothing to do with printing massive amounts of money.
If the economy had crashed due to pandemic, we could have had Great Recession 2.0. Risking inflation is better than risking death.
> The inflation has nothing to do with shutting down oil pipelines.
The XL pipeline doesn't affect availability of oil to US, only reduce oil transportation costs a tad.
> The inflation has nothing to do with limiting oil production
The oil co's have more than enough wells that ar
Re: nothing to do (Score:3)
> The oil co's have more than enough wells that are not currently in use or mined. Fox exaggerates this issue greatly.
They're also losing investor's money, from being wildly optimistic about both exploration and oil prices. Sure, we could keep bailing them out by betting on them again and again, I'm sure that's in the spirit of the gung-Ho capitalist GP.
Seriously, anyone who thinks inflation in the US is because wages are too high, is smoking something illegal.
Re:nothing to do (Score:4, Interesting)
I will respond on top of the other.
1) It does add to inflation... but "printing money" doesn't add as much as you think. Like below 1%. And printing money for a year or two doesn't do much either.
Only time printing does a lot of damage is when its done on a consistent, predictable, long term basis. There are a ton of other policies we have had over the last 20 years that have built up to this "inflation" we see today.
Large inflation is an after-the-fact long tail indicator of a long list of stuff you did wrong. Printing money at the end is basically a drop in the bucket at that point and if you can get the balance just right, it will actually curb inflation. This is why run away inflation is so hard to solve. If it was just about stopping printing monies... the US would never see it at all.
2) No. It doesn't. There is massive amounts of capacity in supply chains, production, and exploration available to the industry. Broken supply chains & refining capacity are the only real issue.
We just ended two wars recently and China is on lockdown/diminished production, and entire fleets are stuck outside of docks. These supply routes are all dried up, but they aren't being rerouted else where. We drill so much oil since 2020 that we are a net exporter, and since 2018, the largest producer.
Now, there is "short term" price spikes due to those actions and normally it does take 2-3 months for the industry to accomodate supply chain changes and bringing oil wells back online. But the industry does this 2x a year, every year... and plans accordingly. However, the supply chains are still broken so even though demand is just barely above 2019, global production is still well below that.
Also, in some ways, rising oil prices actually cause deflationary pressures. Since its traded in dollars, the world over has a demand for our currency. Currency demand is equivalent to appreciating the dollar; negating the inflation.
If Russia wasn't involved in OPEC production, they would have raised it and we would see Oil back to ~$2-3 within 2 months. And OPEC can easily kill the US' top spot because our pumps cost more than theirs. But they prefer higher prices so watch their supply positions.
3) Limiting oil production, technically doesn't impact inflation. The higher travel costs impacts everyone (all currencies), but the dollar also sees a deflationary factor due to oil being traded globally; so the US comes out on top. We have had plent of oil price changes before and inflation/deflation of the dollar didn't follow directly.
Now I said technically, because the _industry_ determines their production quotas. If the federal government or other regulatory bodies artifically limit oil for a long time, there is an impact to dollar value because other consumers not under our govt are impacted positively. Read Oil embargo in the US. The Russian embargo does impact us because many other countries couldn't make the sacrifice.
4) Over simplification. Yes this is true. But thats on top of the amount we are sending to Ukraine, spent for 20 years of war, Trump's tax cuts, and the 2009-2011 Obama Recover Act. They do add to inflation, but lets not just focus on ONE of them. The stimulas stuff actually gets the economy growing again and if successfully done, curbs inflation. The Great Depression and Great Recession both would have been far worse if not for the stimulas. But we need to eventually play for the inflation those actions caused... hopefully we are better off to handle that inflation.
PS: Tax cuts cause inflation.
5) Yes, but the US isn't shutting down ports. In fact, the govt is pushing boundaries and asking they stay open for longer operations to help clear out the backlog. The supply chains are broken so the ports are broken. For a port to work properly, you need ships coming in on time/on schedule, workers to unload, machinery maintained, truckers to pickup, warehousing workers & space available, other parts arriving on time, sto
Re:Recession incoming in 3, 2, 1... (Score:5, Insightful)
Biden recently said “Milton Friedman isn't running the show anymore.”
Looks like the rules he described for how inflation works are still in charge, though...
Dry goods better (Score:2, Interesting)
Rice and dried beans are better than most canned goods. You basically need about five years of emergency food. Don't forget enough to help others too as needed.
Ammo is important but maybe even more important - invest in good cameras around your place... if you can scare someone off early without shooting them, all the better.
Also security film for all ground floor windows, maybe don't install it yet but just get some now for later. Kind of depends where you live.
Re: Dry goods better (Score:2)
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"even more important - invest"
buy it cheap and wait for market to recover. unless its the apocalypse in which case none of this matters. so chances are these will bounce right back up once enough money is made elsewhere.
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100% agree - the odds of an apocalypse is low, if it does happen none of this matters - buy low/now and wait 5-8 years and be golden, glad my retirement target is yesterday 2032, should be right at the right point in the cycle.
Re:Recession incoming in 3, 2, 1... (Score:4, Funny)
Gee, if we hadn't flooded the U.S. with guns, you wouldn't need that ammo. Also, be careful around the wife and kids, you wouldn't want to shoot of them by mistake. Also be careful to keep the guns away from the wife and kids, they may not like you as much as you think. Come to it, better lock it up tight in case some burglar breaks in and can steal your gun and shoot your ass. And be sure of your mental health, you may not like yourself as much as you think. Guns Yeah!!
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Imagine the Fed not being able to predict the future. What the hell are we paying them for if we can look behind with 20-20 hindsight and complain?
Re:Recession incoming in 3, 2, 1... (Score:5, Informative)
There are a couple problems with your statement.
1) "The Fed" is not part of the current - or any - administration. You might recall the previous president complaining regularly about the Fed not doing what he wanted. This didn't magically change when Biden was elected.
2) More current members of "The Fed" were appointed during the Trump administration (3) than during the Biden administration (2) - including the Chairman. The sixth member has been around since Obama.
https://www.federalreserve.gov... [federalreserve.gov]
Re:Recession incoming in 3, 2, 1... (Score:4, Funny)
What the fuck are you doing bringing facts into a perfectly good emotional and irrational us-versus-them argument? Don't you know this is Slashdot, where opinions are sunk in like tungsten bricks in 3,000 foot deep ocean trenches?
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What does the Fed have to do with the "current administration"? It's an independent entity.
I think the current economic situation is tricky and defies easy solutions, plus nobody really thought it was a good idea to raise interest rates during the pandemic given the economic risks already present.
Re:Recession incoming in 3, 2, 1... (Score:5, Insightful)
And that's the problem.
There's a lot of momentum in the economy - anything you do takes months before you start seeing the effects.
When COVID hit, things shut down, and the economy look like it was going to stall out. In this case, increasing interest rates is a hugely bad idea because that will only certainly guarantee stalling out.
But it didn't stall out - other parts of the economy boomed, much to everyone's surprise. And boom it did leading to a wildly increased demand for consumer luxury goods. The Port of LA, the cause of a lot of backups in the supply chain, was reporting over 125% of normal pre-pandemic traffic... by October 2020.
Automotive companies cut their production suddenly, thinking things would grind to a halt, leading to cutting orders and thus the automotive chip shortage we have because everyone shifted their production around.
In the end, it turns out the economy is far more intertwined and complicated and it defies simple and easy solutions.
Now we're coming out of the pandemic - the jobless rate is at an all-time low. People are hiring at unprecendented rates. Even people who got laid off often found work elsewhere, leading to a severe shortage of hospitality workers because they found less shitty more stable employment.
With economic boom, comes inflation. The Fed has only a very crude tool (interest rates) to adjust things.
But why now? Because we need to know if the economy is really booming, or it's a post-pandemic spike. But to do this requires 6+ months of economic data. So now we know it's not likely a brief spike in economic activity, but a boom and now we have to control it.
Usually booms can be seen from far away, but the pandemic has made things less certain. so you don't want to overreact because is it going to be a recession (as everyone thought at the start of the pandemic), a brief slowdown (what really happened), or brief burst of activity (what we thought would happen) or a boom cycle (what is happening).
The effects won't be felt until 6+ months down the road - and we're hoping for a cooldown of the economy to bring everything back in line, but not one that goes too far and drops us in a recession.
The problem is, you're dealing with something with a lot of lag - you need to know if what you're seeing is going to be brief or a long term trend, but you don't know until it's past, and by then, you would've wanted to react. You also don't want to over-correct because you cannot reverse the correction and have it take place immediately - the correction takes time to work out.
That's why recessions require two quarters.
The economy is a lumbering beast. Is it picking up speed because of a brief dip in the road, or is it because the road is going downhill? Imagine a car whose speed can only change 10 seconds after you apply an input - and you're trying to maintain a strict 50mph - too fast and you get a ticket, too slow and you hold up traffic. You can't see the road ahead, and you see the speedometer inching upwards - what do you do? You can slam on the brakes, but by the time they take effect, your speed would've gone too fast if it's downhill, and you'd have slowed down too much if it was a brief dip.
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There was always the remote possibility it would not blow up. Japan seemed to be doing okay. And man, it was making big money for the right people. Printing cash and stuffing it into the government and Wall Street (trickle down) was so very lucrative [stlouisfed.org]. The plebs got their crumbs so they were (sort of) happy.
Is this a surprise to anyone? (Score:5, Insightful)
They created an inflationary bubble with that $2.2T added to the economy. Now they want it to go away.
Unfortunately, it won't go away just because they want it so. They either need to get the economy going in overdrive (which won't happen, what with cost increases at all points in the supply chain & a complete lack of desire to remove that $2.2T, even if they could) or they need to bite the bullet and push us into a recession while they quietly remove that $2.2T (which won't happen because you don't win reelection during a serious economic downturn)...
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Raising the interest rate removes money from the economy. The fed also has other techniques for removing money from the economy, which it has been using.
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"The fed also has other techniques for removing money from the economy, which it has been using."
Maybe they should be using these "techniques" faster than the rate at which they are adding money to the economy? Particularly with output either contracting or even just staying level.
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They are.
Economic conspiracy theorists are so entranced by money printer memes they don't seem to realize that you can make numbers smaller as easily as you can make them bigger.
Re:Is this a surprise to anyone? (Score:5, Insightful)
Maybe they should be using these "techniques" faster than the rate at which they are adding money to the economy?
Why? This is an excuse to get interest rates back to a sane level. One of the problems with dropping interest rates to 0 is that this economic leaver disappears and can't be used to resolve a crisis anymore. Despite what you people think economics is actually an insanely complex multivariate problem that can't be reduced to "derp derp tehy printed monies! tehy bad! derp"
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Despite what you people think ...
There's the problem. :-)
Re:Is this a surprise to anyone? (Score:5, Interesting)
Even a 3% interest rate is incredibly low. I'm old enough to remember when you could actually get more than 3% interest on your banking accounts and the bank rate was double digits.
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There is such a thing. It's called "inflation."
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Inflation doesn't specifically target wealth hoarders. Sure, it hurts them, but minimum wage sure hasn't gone up by 8% in the time that consumer goods have increased by that much.
Re:Is this a surprise to anyone? (Score:4, Insightful)
Yes, it does. You're conflating two problems.
In a free market the cost of labour would go up at the same rate as inflation. That's basically what inflation is, the increasing cost of everything in response to excess demand or insufficient supply. But the labour market isn't free, at least not in the short term. As the owner and operator of a business I might raise my prices to cover my costs, including feeding and housing myself. As a casual employee when your boss calls and asks you to work the next day you could tell them you want a raise otherwise you're going to work for one of the other people who's asking. But as a unionized employee, your next contract negotiation might be five years away.
In fact, labour rates have gone up, but they're much, much more sluggish than things like gas prices.
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Put a 90% "deletion tax" (a collection of money that is destroyed rather than re-spent) on all the wealth-hoarders.
When you have a fiat currency (as the US does), taxation on a federal level literally *is* money destruction. The government prints currency, and can issue as much or as little as it wants. To keep inflation from spiraling out of control from just printing that currency, you have to remove some from circulation. Taxes are how you do that.
Re:Is this a surprise to anyone? (Score:4, Informative)
That's not how the money supply works in the US. Taxation doesn't destroy money; repaying loans does.
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How do taxes remove money from the economy? The federal government is PART of the economy. It spends those tax dollars. Maybe not how you and I want them spent, but they aren't just burning your tax dollars for fucks sake.
Re:Is this a surprise to anyone? (Score:5, Interesting)
You have to look at the whole picture, starting with Congress passing laws saying how much money will be spent. They say we're going to spend $X, but the United States Treasury only has $X - $Y in it, where $Y is the budget deficit created by spending more than we are taxing. So you need to come up with $Y.
Enter the Federal Reserve Bank and Quantitative Easing. The Treasury starts selling bonds in order to get $Y, and the Fed buys some fraction of $Y with money they wink into existence through a vote of the Board of Governors. They hand it to the Treasury in exchange for the bond, and then the government spends it on whatever Congress appropriated it for, sending it into the economy.
The government then collects taxes and puts them back into the Treasury. When the government pays back the bond when it matures (usually with more bond auctions and Congress increasing the debt limit), the Fed then has the option of holding onto that money and using it to buy more bonds, or sending it back to the swirling entropy they created it from, removing it from circulation.
Ergo, some amount of taxes remove money from the economy in a not-so-obvious and indirect way.
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Oh. Well that actually makes sense. I knew quantitative easing was created to remove money from the economy, but I did not quite understand how taxes and t bills figured into it.
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How do taxes remove money from the economy? The federal government is PART of the economy. It spends those tax dollars. Maybe not how you and I want them spent, but they aren't just burning your tax dollars for fucks sake.
It basically comes down to whether you subscribe to Modern Monetary Theory, basically. MMT is basically how many western governments have been operating since at least the 2008 crash, if not longer. Basically MMT posits that governments have essentially two controls on the monetary system. What they spend on things, and the taxes they collect, and the two controls are not intrinsically tied. A government that issues debt in its own currency can always pay it back, because it can always issue new currency to
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You wanna fix inflation? Put a 90% "deletion tax" (a collection of money that is destroyed rather than re-spent) on all the wealth-hoarders. Anybody worth more than 10 million or so.
And that tax would go where exactly? $6 trillion worth of "bailout", turned into a tax refund for the wealthy.
In the end, some retired banker would be running the Deletion Tax department. They'd even be arrogant enough to make their corporate logo, a boomerang.
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"go where". What part of "delete" escapes you as a concept? Into the ether. Gone. Destroyed.
Eradicating the concept of a billionaire, does nothing to the poverty and suffering that existed far before obscene wealth did. What it does do, is destroy motivation.
You want to go after the real hoarders of wealth and power? Destroy the concept of Patent Hoarders that stifle motivation and innovation today, and forever in the future.
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Let me guess, you make most of your income from investments rather than working.
Re:Is this a surprise to anyone? (Score:5, Insightful)
The return on investment is so high and so lightly taxed and the return on labor/earning is so poor and so highly taxed, it is a toxic combination. Between 1890 and 1930, the return on investment was so high, people with inheritance lived in incredible luxury while the working stiffs had absolutely no chance of making it.
We are returning to that age. Forget the top 1%, it is the top 0.1% that hog all the outsized returns. It is really bad, I actually agree with the sentiments of the OP. But took a cheap shot. As soon as I posted it I realized it. I am sorry.
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Absolutely, it is the top .01% even. The richest Americans are screwing over the rest of us. Wall Street is a den of corruption and unbridled greed. Regular investors are getting screwed, and that is by design. Old Fashioned pensions were destroyed for a reason, so Wall Street could push 401ks and then reap the rewards of having a captive market.
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Mainly techniques like buying/selling assets with free money.
Re:Is this a surprise to anyone? (Score:5, Insightful)
They created an inflationary bubble with that $2.2T added to the economy
We already had a bubble towards the end of Obama's last term. Rates should have been inching up then. [cnbc.com]
They want to raise rates; they want to get back to normal. They have said they thought they would raise four times plus this year and I don’t think there’s any scenario in my mind that they’ll be able to do anything remotely like that
Obama, Trump, and Biden wanted to ride high on low rates and prayed that other means of removing money would cover their ass. All three of them are on the hook for this ridiculous flood of money in the markets right now. Because cheap everything makes everyone feel good. The second someone made the American public behave and go back to a reasonable economy, everyone would have been shouting to run the person out on a rail. Voters love cheap shit and not having to think of the consequences. Politicians love giving the masses EXACTLY what they want to stay in office.
There's one problem with your theory (Score:3, Insightful)
The issue here is our economy couldn't take the shock from COVID and that we (and everybody else) has been doing Austerity for almost 15 years now, meaning zero infrastructure spending and constant cuts to education meaning a workforce that can't increase productivity organically.
We're seeing the effects of decades of neo-liberal economics crashing down on us. COVID touched it off but the whole thing was always a house of cards. You can't skip out on 40 years of
Go ahead and mod me down (Score:2)
I feel like I'm trapped on an express elevator to hell with a bunch of lunatics. Here is the Fed literally saying they want slower job growth [nytimes.com] which translates to lower wages for workers. Did everyone here on
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The only problem with this theory, is that the Board of Governors at the Federal Reserve Bank is an independent entity, which is neither elected by the public, nor subject to following orders of the President.
They're the ones that chose to keep monetary policy where it was. Not Obama. Not Trump. And not Biden.
The most a President gets to do is choose to keep someone in their chair when their term is up, or tell them to go fly a kite and put someone else there. And both of those choices are contingent on
The economy is a competition for resources (Score:2)
The economy is a competition for resources. A seller tries to get the most for his goods and services and a buyer tries to pay the least (exceptions: charitable giving [google.com] is about 2% of the economy [google.com]; taxes and government spending, about 30% of GDP [google.com]).
Companies can do all sorts of ill-advised things to make money in the short term [brookings.edu], which blows up in the medium term. The government can run the printer [stlouisfed.org] to bail them out. But, all that's happened is that a group has seized more wealth by convincing the government to b
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The hard part is federal treasury board members are elected for and serve 14 year terms (which don't have to be sequential - Janet Yellen was not, for example). There are still two Obama chosen board members, Powell and Brainard, and both could easily serve into the next presidency if Joe doesn't get re-elected (I'm guessing not a chance in hell, especially if there's a recession - hoping the Jan 6 committee finds Trump guilty so we don't have to see his smug face in the next election, and if both are out,
Re:Is this a surprise to anyone? (Score:4, Interesting)
This has very little to do with extra monetary reserve in US. This is mostly about the fact that boomers are retiring. Globally. That means supply of money is crashing with them.
Add to this massive rebuilding of the industrial plants across the West as coronavirus accelerated reshoring of industries as globalisation is receding, and those two alone lock in about the current inflation across the West. For at least half a decade, when we'll be done rebuilding most of the supply chains within the new, much smaller and less globalized world. Where it's going to be something like "US, EU and closest allies with everyone else for themselves".
Demographics problem is the one we knew was coming this decade in 1990s. Demographics were already clear back then. The reshoring part became clear in mid 2010s when US pulled the supercarrier off permanent station in the Persian Gulf. Without the constant overwatch over the life blood of globalisation that is oil, it's only a matter of time when everything has to be reshored close to consumers.
Compared to those two, expansion of monetary supply over last couple of years is pennies. It may add a percentage point, maybe two to inflation during next decade. The other two? Expect post WW2 rebuild levels of inflation, as we're doing something fairly similar. Retooling the industry wholesale while fighting a severe lack of capital to do so.
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Yeah, coming out of the covid recession didn't cause a spike in demand, eh? How blind can you be? The rest of the world exited as well, thus the demand for oil increased. During covid, oil companies cut production. The supply chain problems also constricted supply of just about everything.
Oh, but you put your finger on the one cause, which probably saved the U.S. economy from really tanking during Covid.
No, it's commodity prices. (Score:2)
No, commodity prices caused this problem. That's why most of the rest of the first world is having the same problems we are.
The cycle continues. (Score:2)
The bubbles and busts are CAUSED by the artificial interest rates imposed by the Fed. You cannot centrally manage an economy effectively like this, it will always end up in these boom and bust cycles. Let the market dictate the interest rates and we will be better off for it.
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The bubbles and busts are CAUSED by the artificial interest rates imposed by the Fed.
This makes no sense.
Let the market dictate the interest rates and we will be better off for it.
You can loan money at whatever rate you want.
Re:The cycle continues. (Score:5, Insightful)
Let the market dictate the interest rates and we will be better off for it.
The market is free to dictate any interest rate it wants. Also maybe consider googling "Tragedy of Commons" before you suggest the free market should be a solution to economic problems. A large portion of the boom/bust cycles of the past were caused by ... can you guess...? Deregulation.
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Yeah, unless the GP is under 14 years old - he should've already been aware of this...
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Boom/bust cycles aren't caused by deregulation.
Boom/Bust cycles are caused by central banks.
We have not had honest deregulation in my lifetime. We have a method of central banking and central state management called "deregulation" where the powers that be create new laws, loopholes and restrictions for old businesses and hand control over to their buddies running new businesses, and they label it "degulation".
I've always profited from the boom-bust cycle for 30 years because it's so obvious, and because th
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Your post made me ask a lot of questions about how exactly the Federal Reserve controls the rates.
The Federal Reserve doesn't set the interest rate that banks charge. The banks decide that on the open market. Instead, the Federal Reserve influences interest rates by setting the rate that the government gives on loans to the banks, by buying back bonds (to reduce the amount of money in the system), and by selling government bonds (to increase the amount of money in the system). What "The Fed" announces in
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The bubbles and busts are CAUSED by the artificial interest rates imposed by the Fed. You cannot centrally manage an economy effectively like this, it will always end up in these boom and bust cycles. Let the market dictate the interest rates and we will be better off for it.
You're wrong. Fed policy, properly executed, is a counterbalance that counteracts market forces that causes crashes (but admittedly takes advantage of imperfect fed policy). It should be a lot better executed though. Should have raised rates more in 2006/7 to cool down the real estate bubble that was obviously developing. Did a decent job after the crash. Was a bit slow to raise rates in 2016-2019, would have had more room to work in 2020 when the yield inversion curve happened (oh, and that other thing too
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Reality check booms and busts were common before the Fed. They were also pretty shallow most times. In depth and duration.
Great Depression happened on the Feds watch.
Infrastructure spending did not fix the problem - only WWII did. FDR spend 1933 - 1939 spending on infrastructure, the depression continued.
- My own read of it all is that, its unclear if fiscal stimulus works in the long run at all. It certainly works in the short term. Centralized control of monetary policy has been a FAILURE, we still have b
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Wrong.
FDR was beating the depression before the war. The war obviously helped greatly but the data shows it was turning around BEFORE the war. This is just historical fact.
Why is this on Slashdot? Who would miss this? (Score:2)
Who would miss this who cares?
75 points... but how bad is it? (Score:3)
I'm not claiming it's insignificant. But the problem is that people bought property in variable rate mortgages that are so expensive compared to their income that a 3/4 percentage increase is debilitating. I'm not absolving the system in general - it's still a nightmare of predation - but just like buying an SUV because gas is cheap "today" is problematic, so is getting a mortgage when rates are cheap "now". People make strategic decisions on operational data. If you have a five year mortgage at the start of the upward swing, you'll be surprised how quickly five years goes by.
I just bought a home in March. Not my first one, but only my second. I based my purchase on what I could comfortably afford if the rate doubled, and now I'm thinking I might not have been conservative enough.
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Anyone purposely taking an ARM loan after 2008 should know what they were signing up for. They went for a low monthly payment on something they couldn't afford, rather than right-sizing and buying the fixed percentage. Anyone in the mortgage business worth talking to would have warned them about an ARM loan post-2008.
They put a wager that the Fed wouldn't raise rates, and they just rolled boxcars. Time to suck it up and refinance with a shitty fixed rate far higher than you could have locked 6 months ago
1984 Here we come... (Score:2)
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Specifically RE "mortgage rates" - so what? No, really, why does this actually matter to a serious homeowner? Remember, you can refinance into a lower interest rate loan for a modest fee at any time that the price makes sense to you -- you are not beholden to your initial rate forevermore.
The higher rates will generally reduce the price of housing that people can generally afford across the board, but all that will do is generally suppress housing market prices and reduce the massive profit margins that new
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To answer both of your questions, remember what causes/d inflation: too much money chasing too few goods, and supply and demand causes prices to go up. In 2020, some people, a huge number actually, were suddenly out of work. So the government sent everyone free money, not just those people out of work. (HUGE mistake - should have fasttracked unemployment insurance payments or something). So while a lot of somebodies needed it to pay rent, another lot of somebodies now had more money for big flatscreens or s
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Well, not really, because the cost of real estate expands to whatever the market will bear. In other words low rates cause inflation in housing, so cheap mortgages don't actually help buyers (once prices settle out). Who does reap a windfall is whoever happens to own the property at the time rates are slashed, because now the same monthly payment equates to a larger sale price.
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I think your logic breaks down with "End result of less production is that demand outstrips supply". By definition, less is being produced because there is less demand.
While a free supply of oil would certainly reduce the cost of everything, it's not going to happen. The next best thing to reduce inflation is monetary policy. Trust us. When construction declines because it's harder to get a loan, contractors won't be rolling their trucks as much. Demand for fuel will decline, and prices will follow.
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COVID restrictions were a wake up call. Here is how they create a green economy with out that pesky "choosing" problem.
Government "is" force.
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"The pain is the point" every now and then they say the quiet part out loud. This is spot on nobody should be fooled. The goal of the political left in this country is rob from the middle class to pay for the excesses of the rich and the poor are their useful idiots.
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The rich can afford those taxes. The middle class cannot. Therefore when the middle class person that has a house and is trying to grow their retirement plan they get hit by all the same stuff the rich get hit with. This hurts the middle class as more of their money will go as a percentage to taxes then the richer folks.
The taxes never seem to exclude people under a certain threshold but rather just look at whatever assets you've managed to acquire. I'm a lot better off then a lot of people because I was sm
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End result of less production is that demand outstrips supply.
You have it backwards. Access to capital manipulates the demand side of the equation not the supply side. Construction occurs due to people's ability to pay for it, not the other way around.
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OK, let's assume what you're saying. The result, which you have to agree with, is that there will be fewer housing units in the country. Meaning that fewer people will have their own place to live. Many people will be forced to either live with their folks or rent. The price of rent will go up because of the high demand for a place to live. Higher rent = more homeless or living in poor conditions. Is that a good thing?
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The demand won't go down, it will be unaffordable to many people. You might as well have inflation at that point. What's the point of controlling inflation if not to preserve quality of life. Less people have homes, less people will have jobs, less people have cars .. how is that a good thing? Meanwhile things will be really expensive because only monopolies can exist since there is no capital to build competing factories.
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The goal here is to cause layoffs.
The Fed would settle for people getting motivated to actually look for work, which right now is plentiful. No more snowflakes demanding to be able to wait tables at Cheesecake Factory over Zoom.
What the heck are you talking about? (Score:2)
This is driving up wages, and the Fed No Likey. They want wages low. Your wages low. Because they think (incorrectly) that'll l
Infrastructure spending now identifies as pork (Score:2)
There's another way. Infrastructure spending.
Well that used to be a good way but these days pretty much all infrastructure spending is just pork going to political allies and not doing anything for real infrastructure.
We already had a TON of infrastructure spending in Covid relief bills, I've not seen a single bit of real world infrastructure improve as a result. But that money is sure gone...
It's the same as how we are sending tens of billions rot Ukraine, except Ukraine as best might see 1/10 of that. T
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Do you think that a bill passed and signed 6 months ago for infrastructure spending to take place over 10 years is going to move the needle in only 6 months? They've barely had time to figure out what to fund with all that money, much less actually start moving dirt on any of it. It took two months just for the FAA to announce [house.gov] that they would be making $1B available in 2022 for airport terminal construction and renovation, out of the total of $5B appropriated for airport terminal construction and renovati
I've been hearing this since I was a kid (Score:3)
Think about that worthless coworker. The one that never gets anything done and when he tries makes things worse. Think about how every department has one, two sometimes three or 4
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heheh I need to make some popcorn now - watching the leftists suddenly embrace supply side economics should be a hoot.
Infrastructure spending only works when there is a return. government could spend a lot of money building canals and employing people to do it with teaspoons; but it would not be productive. Nobody needs a canal in 2022 and teaspoons are not an efficient way to go about making one.
That is the problem. While there are few things like maintenance of existing roads, and better rural internet ac
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Infrastructure spending only works when there is a return
I'd say bridges that don't randomly collapse is a return. The infrastructure is in a sorry state due to neglect. Look what happened just a few months ago.
https://www.cbsnews.com/pittsb... [cbsnews.com]
https://www.npr.org/2017/08/01... [npr.org]
https://en.wikipedia.org/wiki/... [wikipedia.org]
Looks like the USA is leading the pack on that list.
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Good luck - I don't disagree that we need to make some investments in highways and bridges. However you can't find people who want to work in the trades need to build them for any reasonable sum current and if you can, you can't get the supplies.
I suppose you could toss enough dollars at it to 'make it happen' but turning a bunch of riveters into millionaires isnt a recipe for controlling inflation..
The infrastructure projects needed here just don't exist - even if infrastructure projects exist. We did this
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Good luck - I don't disagree that we need to make some investments in highways and bridges. However you can't find people who want to work in the trades need to build them for any reasonable sum current and if you can, you can't get the supplies.
I suppose you could toss enough dollars at it to 'make it happen' but turning a bunch of riveters into millionaires isnt a recipe for controlling inflation..
The infrastructure projects needed here just don't exist - even if infrastructure projects exist. We did this in 2009 - we were not able to even allocate the money appropriated.
So your solution is to let everything rot because it's simply too expensive (in your opinion) to pay people?
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The American Society of Civil Engineers thinks they do [infrastruc...rtcard.org] and I've seen little evidence to the contrary. While it's easy to be cynical whether government is up to it, there is at least some leverage for society to hold their feet to the fire.
The return is new cities (Score:3)
The gov't spent the 60s, 70s and 80s building wealth for the working class with massive public works projects. Then along came the boomers to pull the ladder up behind them. We slashed funding to higher education in the 90s
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I doubt very much I'll see a pay cut - literally NEVER happened my entire career, in good economies or bad. What I won't see - already not seeing is pay raising keeping up with inflation.
I plenty self aware; I also know that is my personal situation not everyone elses - but you know what I vote in my own self interest!
I got mine and I want to keep it - I hope that does not also mean 'fuck you' but if it does well adapt or die; because you are just as happy to support policy that harmful to me and mine.
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The answer is simple: eliminate the minimum wage in order to bring prices down, and replace it with a universal basic income. People who want more than the UBI offers will continue to work or, knowing their living expenses are paid for, will start their own business or go back to school.
Do we want to give people that kind of freedom or not?
Why stop there? (Score:2)
But Silvergun, won't their masters just take the money away?
Hush little one. Go back to sleep. Don't think things through. Thinking things through is the mind killer.
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We recognize secondary education as infrastructure, why not tertiary education? That aside, this is about the government undoing the damage caused by helping colleges convert education into a pump-n-dump scam, and probably giving banks more money too.
Spending alone ...
The policy is called "Build America", providing the infrastructure that 36 years of right-wing policies refused to build.
Or, the government could keep it to pay-off federal debt, instead of treating debt like an endless Ponzi scheme.
re: building canals with teaspoons (Score:2)
Trust me.... government has already been doing a whole LOT of this horribly inefficient stuff. Rand Paul just put out an economic plan that, if followed, could balance our budget in 5 years' time. It relies on government making a $298 billion spending cut in the first year and $16.1 trillion over the next 10 years relative to adjusted baseline estimates. Who knows if it's the "best" way to do things? But at least he published something concrete and is talking about it, unlike practically everyone else in po
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I largely agree with the sentiment of your post. However, today, "infrastructure" is too vague. [strongtowns.org] I suggest we remove costly infrastructure which we don't need and can't afford; a great place to start is the interstate highway system. Donate it to the states and let them try to balance the books (keeping in mind that the states can't print money like the federal government can). The necessary roads will be funded through tolls & taxes, and the others can be dismantled (starting with "interstates" which g
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The dual mandate of the feds is to MAXIMIZE EMPLOYMENT and STABILIZE PRICES. Sorry for shouting, but if they cause job losses they are violating the first part of that mandate. Their goal has to be to stabilize prices and cause as few layoffs as possible. Admitting they are intentionally causing layoffs violates their purpose.
That said, abolish the Fed, anyone? It was a terrible system designed to maximize banker profits to begin with, so I'm all for starting over.
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robot overlords welcomed here