Powell Warns Inflation 'Remains Too High' (ft.com) 148
Jay Powell has warned that inflation "remains too high," raising the prospect of further interest rate increases in the world's largest economy should price pressures persist. Financial Times: In a highly anticipated speech on Friday, the chair of the US Federal Reserve at times struck a hawkish tone, pointing to the central bank's readiness to maintain a "restrictive" policy to bring inflation down to its 2 per cent target. "Although inflation has moved down from its peak -- a welcome development -- it remains too high," Powell said at the Fed's annual economic symposium in Jackson Hole, Wyoming. "We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective," he added.
But he tempered that message with a pledge to proceed "carefully" as the Fed navigates the final stages of its campaign to stamp out the worst inflation shock in decades. Headline US inflation, according to the consumer price index, was 3.2 per cent for July, well down from its peak of 9.1 per cent, but above June's rate of 3 per cent. Powell said the Fed was now focused not only on the risk of tightening monetary policy too little and allowing inflation to become entrenched but also of raising rates too high. "Doing too much could also do unnecessary harm to the economy," he said.
But he tempered that message with a pledge to proceed "carefully" as the Fed navigates the final stages of its campaign to stamp out the worst inflation shock in decades. Headline US inflation, according to the consumer price index, was 3.2 per cent for July, well down from its peak of 9.1 per cent, but above June's rate of 3 per cent. Powell said the Fed was now focused not only on the risk of tightening monetary policy too little and allowing inflation to become entrenched but also of raising rates too high. "Doing too much could also do unnecessary harm to the economy," he said.
Translation (Score:4, Insightful)
The 99%-ers have got too much money.
Powell has said in the past that people having saving to spend is a problem. I remain convinced his goal is to spur a recession.
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I fully agree. Workers have too much power. We need layoffs fast.
Re:Translation (Score:5, Interesting)
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And make home ownership harder now, damnit! These middle classers are getting too upity thinking they are due financing security or the American Dream.
Things were going nuts back when interest rates were near zero. Housing costs and associated property taxes skyrocketing with no end in sight, corporations going on real-estate buying binges, commodity costs skyrocketing, crypto, NFTs, tech markets and related scams growing like fricking weeds.
I personally like the higher interest rates and hope the trends continues for some time to come. Current rates have been on the low side in comparison to much of the 20th century with near zeroing of rates for prol
Re: Translation (Score:2)
I mean, yes. (Score:3, Insightful)
The truth always is that inflation is too much money chasing too few goods. Absent an increase in productivity - meaning creating said goods - the only way to tame inflation is to reduce the amount of money people have. A recession will do the job.
It sucks, but this is why giving away free money does not work as a policy. Once merchants get the idea that keeping stock is bad and they have to consistently raise prices to avoid losing money on stock that cost them x yesterday and will cost x+1 today, it's
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But that isn't even the case. Where do you have way too much demand? Who has all that money that wants goods that are not supplied?
We're drowning in money on the supply side. We have investors here literally begging to find something worthwhile to invest in, alas there isn't anyone who could open up a promising business because, you guessed it, there is no market because there is no money on the demand side. Why do you think they park their money in real estate?
This inflation is not driven by too much deman
better explanation (Score:2)
If I give a billion dollars to 1000 rich people, what will they use it for? Probably not consumption of consumer goods. They aren't going to buy more big screen tvs, groceries, gas, rent apartments, or buy middle-class appropriate homes. No, that only happens when you give the money in smaller dollops to people living paycheck to paycheck.
Hopefully that clarifies the issue.
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because you didn't give the money to the rich who'd invest it in increasing production efficiency and capacity
Are you seriously arguing *for* trickle down in 2023?
Re: better explanation (Score:2)
More money chasing fewer goods is the definition of inflation.
More money chasing the same amount of goods is effectively the same thing.
Giving money to consumers doesn't stimulate production, it stimulates prices.
Give money to producers, it can stimulate production, lowering costs - but, you can't just hand money to producers and let them do what they want with it...
Under the guise of Pandemic refiners we repeatedly passed trillion-dollar spending bill quarterly, it seemed, and the gov't has become addicted
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If you gave Musk/Gates/Buffet $100B each, nothing would likely change and the status quo remains. Give that same $100B to 350M Americans ($857 each), and the bulk would be spent in a week and have some impact in the economy.
I'm not saying its good or bad, but doesn't that show its not "absolute bullshit"?
Re: I mean, yes. (Score:2)
Give that same $100B to 350M Americans ($857 each)
Check your math, it's more like $300/each.
If you divide $100BN by a third of a billion people, you get something around $300/person, or just under $1/day... hardly life-changing for anyone.
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He gave 100b to 3 people, i.e. 300b total, so it does work out.
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This is absolute bullshit. Drop trillions of dollars into the lap of the rich, and no inflation, but once the poors have it, it's the root cause? GTFO
Most of the pandemic trillions went to the poors, and it's that money that has really caused the inflation. More money in the hands of the already-rich doesn't cause much inflation, because when the rich get more money they don't spend it, they invest it. Flooding the market with money causes stock prices to increase like crazy, but that sort of inflation doesn't hurt normal people so much. Giving lots of money to individuals who will go out and spend it, that pumps up inflation.
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Re: I mean, yes. (Score:2)
Where do the rich invest? In stocks tgat give corporations capital to expand? To buy equipment for factories? Invest in a startup that creates jobs? When money is invested, the businesses the money is invested in benefits.
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Well... no.
I'm rich. And I have money. Of course I want to invest it, because spending it ... what on? Either I already have it or I don't want it. But I'd like to have more money tomorrow, so let's invest.
But invest in what in this fucked up economy? There simply isn't anything worthwhile to invest in. The ROI on anything is laughable, the risk on the other hand is through the roof. You can't even do some sort of VC stunt or angel investment sensibly because even high risk endeavors pay pennies to the doll
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That didn't cause the inflation. Too much money chasing too few goods caused it. Sure, it caused profits, but because of the cycle of price increases brought on by inflationary pressures. Businesses aren't in business to lose money and raise prices much more liberally than they reduce them.
This "pound the table in the absence of evidence" is fun i'm sure, but the world doesn't work that way, sorry. Otherwise we'd just give enough money to everyone to make everyone well to do, and we'd be done with pove
Re: ok, live in dreamworld (Score:2)
"This "pound the table in the absence of evidence" is fun i'm sure"
There is volumes of evidence that costs have risen about 15% while prices have risen over 50%. The corporations tell us that the prices have gone up to cover costs, but the facts tell us they are lying.
And you are telling us that you are willfully ignorant so that you can preserve your pull yourself up by your boot straps world view.
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The most damning argument about it is that we can't raise wages because that would drive cost, and thus inflation. Really? Have you done a calculation?
Take any good you want to produce. Let's say you're Starbucks. Just to make things easy and relatable. Your cost for one of those coffees now contains two things: The per-unit cost and the general cost. Per unit, you have to see what that cup of coffee really costs you. One cup, coffee, hot water, syrup, whatever else you pour into it. That cost is going up o
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Too much money chasing too few goods? This is at best true for consumer electronics. We indeed don't have enough Raspberry Pis. Yes. Well, it's getting better. The rest of the economy .... well, not so much.
We've recently had a large furniture chain and a shoe chain fold. Both because they were choking on a flood of goods they could not sell because nobody had the money to buy it. And that's just the beginning. Any store, any chain, that deals in goods that are not required for survival will have a hard tim
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The irony.
The biggest irony is his sig.
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Hand money to the rich, they throw it on the heap. Hand money to the poor they spend it.
Yes its a great source of stimulus, but when there isn't productive capacity to match it like say because you shut the economy down; its a disastrous recipe for inflation.
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We don't have productive capacity to match that? Have you been to a store lately? We've had two large chains shutting down lately because they could not get rid of their stockpile because people have no money to buy it!
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Really? Who's dropping dead? Where?
Have to admit, I haven't noticed that. Sure, I've seen a few people drop dead and cough their lungs up in a feeble attempt to fill them with air, but by and large they were of the control group.
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The only shortages we have right now are in the consumer electronics field because we decided it's better to outsource all our production in this field to China and China isn't "friendly" anymore.
But shutting down the economy now by ensuring that nobody buys anything anymore just to mask the fact that we don't have enough cheap chip crap from China is a bit of an overreaction. We're going to sink a couple of companies and thus jobs with this.
There are currently quite a few stores that are stuck with large s
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We have a supply shortage? Outside the field of electronics, I can't really say we do. Two chains already shut down for good because they couldn't sell their stockpiles to people who have no money to buy it, how many do we have to sink before people wake up and notice it?
Re:I mean, yes. (Score:4, Informative)
The "free money" was a drop in the bucket in the overall scheme of the economy. Giving people a couple thousand dollars extra over a few years isn't changing much.
Supply chain shocks started the inflationary trend, but if those were the whole story inflation would have ended and prices probably would have dropped. The $3T in pandemic relief handed out also played a big role, and perhaps the bigger role.
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The 99%-ers have got too much money.....
The Federal Reserve Bank doesn't work for you. At least in my particular industry, the Federal Reserve raises interest rates. Companies with negative cash flow cannot borrow money to continue operations. They either go out of business, or get acquired by big players. The big players, having reduced competition raise prices. The Federal Reserve notices "oh gosh, prices are higher than before", blames workers, and raises interest rates. The cycle repeats itself with more mergers, less competition, and higher
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Congress could be doing something about it but they are too busy displaying Hunter Biden's dick pics.
The reality is that large corporations have gone on unchecked for far too long. We used to enforce antitrust laws but that seems to have fallen by the wayside.
In the past this would have helped temper the Fed as they only really have one tool to deal with this issue. This is why you don't want the fed to solve your problem. Break up the large corporations that are causing high prices. In terms of the food
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"we've really done nothing over the last 40 years to reign in corporate America and the piper is calling"
Bernie Sanders, is that you?
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The last company to be broken up by antitrust laws was Ma Bell which left us with ATT and several then baby bells who have since be reconsolidated. That was 1982.
Do please explain how your comment actually relates to anything I've said, even better, feel free to provide info on anything that was done in the last 40 years to combat corporate greed running roughshod over the American people.
This has nothing to do with Bernie Sanders and there is no malice towards business in general. We have seen many compan
Re: Translation (Score:2)
Companies with negative cash flow cannot borrow money to continue operations.
Sure they can - if they promise to make fancy solar panels out of curved glass, if they promise to make EV batteries, etc. then they can get federal loan guarantees to delay their inevitable bankruptcy, just ask Solyndra or A123 batteries...
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His goal is the bring up unemployment. They essentially see employment as an easy lever to control inflation.
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A recession is preferable to an inflationary spiral.
Is it, though? Inflation is 3%. A recession could lead to a deflationary cycle (ask the Japanese how well that works out) or another round of rate cuts and stimulus -- exactly what got us into the past inflationary cycle.
Re: Translation (Score:2)
I call bullshit... (Score:5, Insightful)
All interest rates do is hurt the small guy. The person trying to buy a home. The small business guy trying to open his pizza shop. The big companies just raise prices and pass the cost on to.... you guessed it... the small guys (aka 99% of their customers).
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Both those things can be true at once.
Businesses have been shifting toward selling less units but having a higher profit margin over the last few years. Sucks for the people at the bottom, good for those at the top.
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"All interest rates do is..."
Interest rates don't do things. Anyone who has money doesn't want to loan it for free. The easiest way to charge for borrowing money is charging interest. When there is more money available, competition causes rates to drop. When money is in short supply, they go up.
Now the government does influence this by offering money to banks at set rates, but there is nothing stopping anyone from loaning money with no interest except their desire to not do bad business.
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Re:I call bullshit... (Score:5, Informative)
On the contrary I think the high interest rates have shown even further that we learned and done very much nothing to fix the systemic issues with the housing market and the economy since 2008.
The 2009-2021 period of ZIRP has no precedent. Some folks want you to believe that is how the world should be all the time but at no point in entirety of central banking was there a period with such low rates for so long. Things like mortgages existed just fine with rates that were even higher than they are today. Anecdote but the house I grew up in was bought with a 8% rate which was standard for 1976 and my parents bought that house on 2 middle class incomes.
The rates are not the issue, a lack of supply and building of homes is. Zoning, NIMBYISM, badly aligned tax structures and the worst misaligned incentive in the entire economy, the concept of homeownership as investment, savings which relies entirely on property prices increases, forever.
Building permits (Score:2, Interesting)
The rates are not the issue, a lack of supply and building of homes is. Zoning, NIMBYISM, badly aligned tax structures and the worst misaligned incentive in the entire economy, the concept of homeownership as investment, savings which relies entirely on property prices increases, forever.
We just got a septic system installed. Took the contractor two or three days to dig the hole, trenches, install, and cover back up. Took the gov't 9 months for permits before that could even happen though.
At this rate, we'll be dying of old age before our house is built and certified for occupancy.
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Goverments are after all, just a bunch of people doing a job.
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Thing with that is building permits is probably as local a form of government you can find, what do you think is going on in your town? Maybe they are underfunded? Understaffed? Incompetent? It's one of those things where you can go sniff around, see whats up.
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We really should be heavily taxing housing ownership that are investments, via higher property taxes or land value taxes, sales taxes, and/ or higher capital gains taxes.
Lots of states already do this implicitly via homestead exemptions for people that actually live in their homes The absentee-landlord owner of the house across the street from me pays almost 50% more per year in property taxes than I do, despite our homes being of comparable value and me having bought our place 12 years after she bought h
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So instead you'll spend thousands of dollars extra to a landlord each month because you don't want to spend it paying interest AND building equity?
You sound like one of those people who advise not paying off your mortgage so you can save on taxes, and spends $500 extra on interest to not pay $150 in taxes.
Re: I call bullshit... (Score:2)
High interest rates drive down home prices, because buyers can only afford so much per month, the higher interest rates go, the bigger bite it takes out of the buyers monthly payment.
Buying a house in SF when interest rates were in the teens was a good idea because they watched prices sky rocket due to the Tech Industry, not *because* interest rates were high.
Inflation is too damn high (Score:4, Interesting)
Duh (Score:3)
Powell Warns Inflation 'Remains Too High'
File under "No Shit, Sherlock?"
I'm beginning to wonder if these people have been to a grocery store in the past couple of years. Inflation is quickly eating away purchasing power.
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No. No he hasn't. In my mind, it's questionable whether he even knows any part of the name, however approximately, of the person who buys his food.
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His name is James.
His name is always James. I can't be assed to learn a new name just because I hire someone new, I have important stuff to bother with.
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Yeah, but he sure as all hell won't increase your purchasing power because you them may actually want to buy stuff you don't need for survival. And that's bad for the economy... somehow.
What is going to do about it? (Score:2)
Re:What is going to do about it? (Score:5, Insightful)
*All* methods of controlling inflation, boil down to controlling the size of the money supply in one way or another. The rest is details.
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Inflation is the growth of the money supply relative to the grown of production. Controlling it can involve manipulating the numerator OR denominator in that equation.
Of course, the Fed's job IS "controlling the size of the money supply", so yeah, what you say is right regardless, but the Fed's job is to project economic growth and expand the money support to target an amount of inflation, which now appears to be an inflexible 2% regardless of what that target has been previously.
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They don't, at all. Banks don't need to loan by getting new reserves, but the rate of new reserves allow the CB to set the price and influence inflation. And if you set the price of commodity, you can't control the quantity.
Besides which, the quantity isn't the velocity in the first place, so they can't even pretend to have a time window. The mythical Phillips line (that doesn't even get to be a curve) certainly ain't it.
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If you owe money, inflation can be beneficial but only if your earning power compensates. Generally it doesn't. Your debt payments stay the same, your cost of living goes up and you can afford even less. Not a win.
The Federal Reserve has more tools than just the interest rate, and there's no reason to believe 2% is an absolute target or that 3% is a problem that requires action.
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Higher interest rates control genuine inflation that results from supply/demand or money supply factors, but I don't think it does much to control inflation that results from profiteering.
Inflation slowed. 3% is fine. (Score:5, Insightful)
I can deal with 3%, especially if it means the economy grows faster. 2% is an unnecessary target. 2-4% is a happy range. Maintain this rate for 3 months. Then bring it down a quarter. See how the rate goes. See how the market reacts.
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Agreed. 3% is alright. I mean, it might not look like it from somebody who's wages have been flat for a few years... which is a lot of people... but any economic balance is an exercise in pissing off some folks and enriching others. Of course the long arm of history has demonstrated which groups generally benefit... but, hey... nothing's perfect.
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Agreed. 3% is alright. I mean, it might not look like it from somebody who's wages have been flat for a few years... which is a lot of people.
Wages are actually rising now, though, real wages, meaning they're rising faster than inflation.
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I don't know how you arrived at that conclusion. Care to elaborate? If that were true, looking at the chart over the last 40 years it should cost $100,000/month* to rent an apartment.
*not calculated. Put for absurdity. But not unreasonable absurdity. See: https://www.macrotrends.net/co... [macrotrends.net].
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5%?
You mean, you want to get a wage raise above the inflation rate?
What cheek!
Duh (Score:2)
"Powell said the Fed was now focused not only on the risk of tightening monetary policy too little and allowing inflation to become entrenched but also of raising rates too high."
In other words, literally the job. Is there ever a time to do one and not the other? Is it even possible?
Don't recall hearing about "the risk of tightening monetary policy too little" with the last administration. 0% seemed like the right answer then, except to Trump who tried to get it "lowered". Same with Nixon.
If lowering inte
The real reason they hate inflation (Score:3)
Inflation is a regressive tax, it affects every dollar equally regardless of the wealth of the person holding it.
Regressive taxes are generally bad for the poor, but when you have a billionaire class inflation starts to look like the only way to get them to pay even a portion of their share.
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You should really rethink this comment. Inflation destroys wealth, it affects people who have it.
Inflation WITHOUT wage increases harms the poor, but that's more than just inflation.
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I suppose there's some insulation from not having any wealth at all, so it's only regressive down to the somewhere just north of the poverty line.
Regardless, I like inflation over tax collection because it's more difficult to escape with accountants and lawyers, and you don't have to file any paperwork.
Also, it lets you annoy young people with stories about how cheap movies and public transit were when you were a kid.
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Also the 20% mortgages making it so you could barely buy a home on one income, the savings accounts that paid 18% with no fees and how even big businesses had low profits.
No homeless living in tent cities either as even on minimum wage, you could pay rent and eat.
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Well, not necessarily.
Considering that the average American today is already drowning in debt, 500% inflation looks like something most Americans could be looking forward to. Those 100k you owe may be what you earn in a day in 2-3 years.
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Wages rise much lower than profits for multiple policy choices; if wages grew higher than inflation, that would be fine... for most. The issue is that with the CB coming up heads, they can speculate and inflate nonsense, tails, and they can "get ahead" of expected price rises with explicit and implicit market power, and hopefully for them, take advantage of a higher unemployment downturn.
Except, (in the US) mortgages are fixed and supply issues keep improving, while workers are fighting back, so they can't
Your milage may vary (Score:5, Informative)
Low interest rates are great, but it's also important to have some longer-term perspective.
People are complaining about these high interest rates, and they certainly are much higher than we've been used to for roughly the last decade. But (shifting to gramps mode) way back in the day, meaning ~1990, my wife and I bought our house with an 8.5% mortgage. Closer to 2000 we refinanced, and were able to drop our rate... all the way down to 6%!
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My parents bought a house in 1980. To get it they had to assume the loan of the previous owner at 11.5%.
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I bought a house in 2000 and paid 8.5% and it was pretty close to the going rate.
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All you need to know is in this chart:
https://tradingeconomics.com/u... [tradingeconomics.com].
My parents had a mortgage in the 80s at 15%. Rates below 5% are a luxury of the last decade, and it might be past the end of my lifetime before we see them that low again.
Re: Your milage may vary (Score:2)
The graph setting that goes back before 1980 is impressive and a good display of how bad it really was back then.
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Yes, but that's the problem: The refinancing you did back then won't work today. And that will break the camel's back.
People got a mortgage running in the early 90s when they earned about as much as they had to to pay it off. What happened then was what has been happening ever since the 1980s: Wages didn't keep pace with living costs. We earn less and less every year, in purchasing power. And then the 2000s came and people couldn't pay their mortgages anymore, but they could refinance with the lower interes
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Back in the day, wages still rose and ate part of the interest. But the prices got sticky, because how else are you going to fool the middle class than to make living property investment, and they got much further away in how many years people need to pay for a roof, which all adds up.
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Long term perspective is still that low rates are still better than high ones... no matter what anyone tells you them or their parents did.
No one is disputing that low rates are better for the buyer.
93 Escort Wagon is just pointing out that the notion that current rates are super high is wrong. The long-term average rate on a 30-year fixed-rate mortgage from 1971 to the present is 7.74%. So the current rate of 8% is only a quarter point above average.
Of course, housing prices have climbed a lot recently, so the 8% rate bites harder than it typically has over the last 50 years, but keep in mind that the high cost of housing was in large pa
Gee ... (Score:2)
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Inflation was historically low during the Obama presidency. Are you suggesting making Obama our permanent president? Somehow I'm guessing no.
biggest source of price inflation since 2021: (Score:2)
Germany has gone from power house to s***house economy because of natural gas prices.
The US economy can be similarly destroyed.
Re:biggest source of price inflation since 2021: (Score:4, Interesting)
Get mad at Congress (Score:3)
Simple Solution (Score:2)
Boil them in oil (Score:4, Interesting)
What Powell failed to say:
"We created this disaster by printing trillions of dollars and then creating artificial demand and deflating the value of the currency by ballooning the money supply We went from just under $4T in the M1 money supply in 2019 to a high of almost $21T in 2022. [stlouisfed.org] Yup that was us printing and printing; well not printing, we just have a guy who enters a number on a computer terminal and *poof* instant money. There was no economic growth associated with that jump so all your savings and earnings deflated as well, we just didn't tell you. Now we have heavy inflation because we're stupid fucks and we really should be lined up against the wall and shot for the economic disaster we created but we're the elite and we'll continue to screw over the middle and lower-class people of the world as much as we want."
Re:Boil them in oil (Score:5, Insightful)
What Powell failed to say:
"We created this disaster by printing trillions of dollars and then creating artificial demand and deflating the value of the currency by ballooning the money supply We went from just under $4T in the M1 money supply in 2019 to a high of almost $21T in 2022. [stlouisfed.org] Yup that was us printing and printing; well not printing, we just have a guy who enters a number on a computer terminal and *poof* instant money. There was no economic growth associated with that jump so all your savings and earnings deflated as well, we just didn't tell you. Now we have heavy inflation because we're stupid fucks and we really should be lined up against the wall and shot for the economic disaster we created but we're the elite and we'll continue to screw over the middle and lower-class people of the world as much as we want."
That's overly simplified, and the fact that this is a global problem demonstrates that.
In a very real way this is fallout from a couple years of supply-chain issues. Shortages in products and services drove up prices, which drive up prices which drive up prices which drive up prices.
Sure, low borrowing costs and government incentives have amplified the issue, but they're not the only factors.
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That's overly simplified, and the fact that this is a global problem demonstrates that.
No, it is not a "global" problem. It is mainly a US & Europe (+Japan & SK) problem.
For example, China do not have high inflation problem, they have exactly the opposite problem, they are at risk of deflation. They have been lowering rates recently while the Feds is raising rates.
That's what happens when you force the separation of the country with largest money supply and the one with the largest manufacturing capability. One side now have too much money (inflation), the other side now have too m
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It is mainly a US & Europe (+Japan & SK) problem.
Except it's not. Canada would like to have a word with you, where we've barely got it under control, maybe. Mexico... 4.7% and 5% the last two months. Australia? 7%. South Africa? 4.7% and 5.4% the last two months. Brazil? Down from last year's 8%, at 3.99% this month.
What do you want? I pick some random countries scattered over the globe and find they're all experiencing high interest rates. You say it's mainly US, I show it's also Canada and Mexico, making it North America... a continent. Th
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Where do you think the trillions to pay interest come from, and to whom it goes to? There's no difference. Promoting growth is a fiscal policy, and quantity isn't velocity.
Jackson Hole (Score:2)
Seriously? They are having a serious meeting there? I go there for vacations. Grand Teton National Park.
Where’s their next meeting? Hawaii? The Bahamas?
Interestt rate only controls 1/2 of inflation (Score:3)