4 ms·

So close to understanding the cause... "Historically, central banks have needed to slash official rates as much as 4-5 percent in order to offset the effects o

by burfog 8y ago

So close to understanding the cause... "Historically, central banks have needed to slash official rates as much as 4-5 percent in order to offset the effects of a financial crisis or an economic slowdown. That’s why former U.S. Federal Reserve Chair Janet Yellen talked about the need to raise rates in good times — to provide room to cut when necessary. Yet, even after recent U.S. interest rate hikes, the Fed has nowhere near enough room to cut rates that much without going negative." Um yeah. The Fed hiked the rates and thus crashed the economy. Some are speculating that they crashed it on purpose, to make Trump look bad or to punish him for taking a stand against 1-sided tariffs that have been hurting the USA for decades. It is interesting to think about the Fed having such tremendous and unaccountable power. This is deeply troubling. It's a bit like the Supreme Court, powerful yet unelected, except that it isn't a constitutionally defined branch of our government.

hopfscotch 8y ago
Christ let's talk about "who really did 9/11" next.
- JewsDidIt 8y ago
  See my username for the answer.
ergothus 8y ago
There's an argument to be made that if you cant raise rates much above the incredible low rate this far into a recovery, then your economy has bigger problems to deal with. Without denying your statements of the power the Fed has, I havent seen anything odd about the timing, frequency, nor quantity that the fed has raised rates lately. You didn't address the argument of the quote you made (that the rate needed to raise) nor did you supply evidence to support your implication that the fed was willing to tank the economy to hurt Trump.
- disgruntledphd2 8y ago
  Like, I don't really get why people are so worried. Wages are going up, employment is going up, and the price of assets are coming down. This is pretty good for most of the population. It's really only the small fraction (of which I am a member) that have equities that have really lost anything. Inflation is still reasonably low, so PPP is going up. I just don't get it. Mind you, a few years back I didn't really understand how unemployment was bad, wages were poor, asset prices were too damn high and everyone was talking about this "recovery". I probably just don't understand macroeconomics, I guess :)
  - charlesdm 8y ago
    Prices of assets coming down means margin debt gets called, and investment loans secured by, for example, shares as collateral, leading to defaults and ultimately to bankruptcy of companies with sizeable amounts of debt on its balance sheets. Now, the argument might be that it's their own fault, but that will likely leads to tens of thousands of jobs lost. And we're not talking tech jobs.
  - OGMayo46 8y ago
    > Wages are going up, employment is going up, and the price of assets are coming down Huh? Sources?
    - josefresco 8y ago
      Most likely, OP was referring to reports like this: https://www.bloomberg.com/news/articles/2018-02-02/u-s-added-200-000-jobs-in-january-wages-rise-most-since-2009 https://www.bloomberg.com/news/articles/2018-02-02/u-s-added... I'm not agreeing with the point, was just curious like you and searched.
    - phildawes 8y ago
      https://tradingeconomics.com/united-states/wages https://tradingeconomics.com/united-states/wages https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/spx:ind https://tradingeconomics.com/spx:ind
zozbot123 8y ago
> Um yeah. The Fed hiked the rates and thus crashed the economy. Some are speculating that they crashed it on purpose Seriously? I mean, look at inflation expectations - they're not that low! Late 2018 does not look anything like late 2008 - you may think that the Fed should be a bit more dovish still, but they're muddling through.
api 8y ago
Rates have been near zero forever. They were still extremely low. The fed is trying to get back to something resembling normal.
- burfog 8y ago
  There is no justification for choosing to have a poor economy be normal. This "normal" is a choice, and a bad one at that. The low interest rates of the past decade are proper.
notfromhere 8y ago
Rates were near zero for close to a decade. Fed needs to raise rates in order to have room to respond to a crisis, otherwise we won't have many monetary tools to use when another 2008 comes around. Fact that the economy is starting to sputter with rates around 2-3% signifies some serious problems that we can't use zero interest rates to paper over forever.
- BoiledCabbage 8y ago
  Not to mention putting money in the hands of the middle class also is a way out. Unfortunately the govt likely won't have that option since it just strapped itself with 1 Trillion in debt giving money to people who mainly purchase investable assets. Meaning having the ability to cut rates is even more important.
cromwellian 8y ago
You don't do stimulus in a recovery. The Trump administration wants to keep stimulating, keeping rates low and enacting a massive tax cut while deficit spending to the tune of over $900 billion. Now, normally when there's a recession, revenue drops, automatic stabilizers kick in, and the deficit goes through the roof. But ours is already high now. Normally, in a recession, we cut rates, but rates are already historically low. Normally, in a recession we try to use fiscal policy (cutting taxes, increasing spending) to offset the drop in consumption, but we already enacted a massive tax cut. So when the recession comes in 2019-2020, what will we have left? We've kept no powder dry. The government put mid-term elections over fiscal health. They raced through a bunch of policies to make them look good to their voters in the last election, still lost the House, and now we are stuck with the predictable consequences. It's not like we don't know a recession was coming anyway. If you look at 200 years of NBER data, the average business cycle averages 6-9 years before another recession. Hence recessions in 81, 90, 2000, 2008. We were due for another one anyway and the government should have been planning for this.
AnimalMuppet 8y ago
They didn't crash it on purpose to make Trump look bad. They did the responsible thing, which was to raise rates slowly once the recovery was somewhat robust. That dampened the recovery to some degree, which (presuming the timing is right) is a good thing - an undampened recovery often turns into a bubble. What the Fed did, though, in dampening the recovery a bit, is not make Trump look as good as Trump wanted. Trump wanted the economy roaring to help in the midterms, and he didn't get it. Trump may feel like that's the Fed punishing him, but it's not.

by burfog 8y ago

hopfscotch 8y ago

Christ let's talk about "who really did 9/11" next.

JewsDidIt 8y ago
See my username for the answer.

ergothus 8y ago

There's an argument to be made that if you cant raise rates much above the incredible low rate this far into a recovery, then your economy has bigger problems to deal with. Without denying your statements of the power the Fed has, I havent seen anything odd about the timing, frequency, nor quantity that the fed has raised rates lately. You didn't address the argument of the quote you made (that the rate needed to raise) nor did you supply evidence to support your implication that the fed was willing to tank the economy to hurt Trump.

disgruntledphd2 8y ago
Like, I don't really get why people are so worried. Wages are going up, employment is going up, and the price of assets are coming down. This is pretty good for most of the population. It's really only the small fraction (of which I am a member) that have equities that have really lost anything. Inflation is still reasonably low, so PPP is going up. I just don't get it. Mind you, a few years back I didn't really understand how unemployment was bad, wages were poor, asset prices were too damn high and everyone was talking about this "recovery". I probably just don't understand macroeconomics, I guess :)
- charlesdm 8y ago
  Prices of assets coming down means margin debt gets called, and investment loans secured by, for example, shares as collateral, leading to defaults and ultimately to bankruptcy of companies with sizeable amounts of debt on its balance sheets. Now, the argument might be that it's their own fault, but that will likely leads to tens of thousands of jobs lost. And we're not talking tech jobs.
- OGMayo46 8y ago
  > Wages are going up, employment is going up, and the price of assets are coming down Huh? Sources?
  - josefresco 8y ago
    Most likely, OP was referring to reports like this: https://www.bloomberg.com/news/articles/2018-02-02/u-s-added-200-000-jobs-in-january-wages-rise-most-since-2009 https://www.bloomberg.com/news/articles/2018-02-02/u-s-added... I'm not agreeing with the point, was just curious like you and searched.
  - phildawes 8y ago
    https://tradingeconomics.com/united-states/wages https://tradingeconomics.com/united-states/wages https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/united-states/employment-rate https://tradingeconomics.com/spx:ind https://tradingeconomics.com/spx:ind

zozbot123 8y ago

> Um yeah. The Fed hiked the rates and thus crashed the economy. Some are speculating that they crashed it on purpose Seriously? I mean, look at inflation expectations - they're not that low! Late 2018 does not look anything like late 2008 - you may think that the Fed should be a bit more dovish still, but they're muddling through.

api 8y ago

Rates have been near zero forever. They were still extremely low. The fed is trying to get back to something resembling normal.

burfog 8y ago
There is no justification for choosing to have a poor economy be normal. This "normal" is a choice, and a bad one at that. The low interest rates of the past decade are proper.

notfromhere 8y ago

Rates were near zero for close to a decade. Fed needs to raise rates in order to have room to respond to a crisis, otherwise we won't have many monetary tools to use when another 2008 comes around. Fact that the economy is starting to sputter with rates around 2-3% signifies some serious problems that we can't use zero interest rates to paper over forever.

BoiledCabbage 8y ago
Not to mention putting money in the hands of the middle class also is a way out. Unfortunately the govt likely won't have that option since it just strapped itself with 1 Trillion in debt giving money to people who mainly purchase investable assets. Meaning having the ability to cut rates is even more important.

cromwellian 8y ago

You don't do stimulus in a recovery. The Trump administration wants to keep stimulating, keeping rates low and enacting a massive tax cut while deficit spending to the tune of over $900 billion. Now, normally when there's a recession, revenue drops, automatic stabilizers kick in, and the deficit goes through the roof. But ours is already high now. Normally, in a recession, we cut rates, but rates are already historically low. Normally, in a recession we try to use fiscal policy (cutting taxes, increasing spending) to offset the drop in consumption, but we already enacted a massive tax cut. So when the recession comes in 2019-2020, what will we have left? We've kept no powder dry. The government put mid-term elections over fiscal health. They raced through a bunch of policies to make them look good to their voters in the last election, still lost the House, and now we are stuck with the predictable consequences. It's not like we don't know a recession was coming anyway. If you look at 200 years of NBER data, the average business cycle averages 6-9 years before another recession. Hence recessions in 81, 90, 2000, 2008. We were due for another one anyway and the government should have been planning for this.

AnimalMuppet 8y ago

They didn't crash it on purpose to make Trump look bad. They did the responsible thing, which was to raise rates slowly once the recovery was somewhat robust. That dampened the recovery to some degree, which (presuming the timing is right) is a good thing - an undampened recovery often turns into a bubble. What the Fed did, though, in dampening the recovery a bit, is not make Trump look as good as Trump wanted. Trump wanted the economy roaring to help in the midterms, and he didn't get it. Trump may feel like that's the Fed punishing him, but it's not.