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I'm really wondering what the Fed's game plan is. Raising rates quickly and launching quantitative tightening in a globally weakening economic environment seem

I'm really wondering what the Fed's game plan is. Raising rates quickly and launching quantitative tightening in a globally weakening economic environment seems crazy.

prostoalex 8y ago
One man’s weakening is another’s correction and bubble deflation. Unemployment is at record low and USD inflation is next to non-existent.
- coralreef 8y ago
  Unemployment is low, but real wage growth / purchasing power is stagnant
- aliston 8y ago
  Wouldn't non-existent inflation be a reason not to increase rates?
  - docker_up 8y ago
    They have to normalize interest rates after years of ZIRP. Now is the best time to do it when the economy is very strong.
downrightmike 8y ago
The great depression was made worse because as things recovered, rates stayed the same. Eventually there wasn't interest to lend against and the market seized. And even though The New Deal helped, but it was the massive build up to WWII that allowed recovery to happen.
zackmorris 8y ago
I feel like I haven't seen appreciably high interest rates from the fed since the 90s. It feels like we're in a boom right now like in the dot com era, so I'd like to see rates in the 3-5%+ range so they have room to take the brakes off in a recession. The real problem to me though is that the fed interest rate no longer reflect reality. Who cares if it's 2% when people are paying 15-30% on their credit cards. If we really wanted to help the middle class, we should tie bank and credit card interest rates to a maximum multiplier, say no greater than 2:1 or something for secured debt, and 4:1 or something for unsecured debt. So a mortgage could only be 5% if the fed rate is 2.5% and a credit card could only be 20% if the fed rate is 5%.
- linuxftw 8y ago
  This would simply limit lending to riskier borrowers who would then seek financing through other, less desirable means (title loans, or even loan sharks). Credit Card interest rates can be 1000%, as long as you pay off your statement balance in full before due date, it doesn't matter (cash advances notwithstanding).
- prewett 8y ago
  Treating the symptom won't fix the problem. The middle class could help itself by refusing to finance consumption with debt. The middle class could just quit taking on debt at 15%. And before you say that they have to just to survive, no, the definition of middle class is people who actually have enough money to live on. What would help the middle class is getting them to learn some basic financial sense. That said, I do think that credit card interest rates are unconscionable and should be capped much lower. As it is, credit card debt is financial slavery and people should treat it like crack cocaine--just say no.
- pkaye 8y ago
  If people stop using credit cards for long term debt the rates would be less of a concern.
empath75 8y ago
If they don’t, then inflation is going to go through the roof and the bubble will inflate to catastrophic proportions.

I'm really wondering what the Fed's game plan is. Raising rates quickly and launching quantitative tightening in a globally weakening economic environment seems crazy.

prostoalex 8y ago

One man’s weakening is another’s correction and bubble deflation. Unemployment is at record low and USD inflation is next to non-existent.

coralreef 8y ago
Unemployment is low, but real wage growth / purchasing power is stagnant
aliston 8y ago
Wouldn't non-existent inflation be a reason not to increase rates?
- docker_up 8y ago
  They have to normalize interest rates after years of ZIRP. Now is the best time to do it when the economy is very strong.

downrightmike 8y ago

The great depression was made worse because as things recovered, rates stayed the same. Eventually there wasn't interest to lend against and the market seized. And even though The New Deal helped, but it was the massive build up to WWII that allowed recovery to happen.

zackmorris 8y ago

I feel like I haven't seen appreciably high interest rates from the fed since the 90s. It feels like we're in a boom right now like in the dot com era, so I'd like to see rates in the 3-5%+ range so they have room to take the brakes off in a recession. The real problem to me though is that the fed interest rate no longer reflect reality. Who cares if it's 2% when people are paying 15-30% on their credit cards. If we really wanted to help the middle class, we should tie bank and credit card interest rates to a maximum multiplier, say no greater than 2:1 or something for secured debt, and 4:1 or something for unsecured debt. So a mortgage could only be 5% if the fed rate is 2.5% and a credit card could only be 20% if the fed rate is 5%.

linuxftw 8y ago
This would simply limit lending to riskier borrowers who would then seek financing through other, less desirable means (title loans, or even loan sharks). Credit Card interest rates can be 1000%, as long as you pay off your statement balance in full before due date, it doesn't matter (cash advances notwithstanding).
prewett 8y ago
Treating the symptom won't fix the problem. The middle class could help itself by refusing to finance consumption with debt. The middle class could just quit taking on debt at 15%. And before you say that they have to just to survive, no, the definition of middle class is people who actually have enough money to live on. What would help the middle class is getting them to learn some basic financial sense. That said, I do think that credit card interest rates are unconscionable and should be capped much lower. As it is, credit card debt is financial slavery and people should treat it like crack cocaine--just say no.
pkaye 8y ago
If people stop using credit cards for long term debt the rates would be less of a concern.

empath75 8y ago

If they don’t, then inflation is going to go through the roof and the bubble will inflate to catastrophic proportions.