4 ms·

Admittedly, I haven't read the article yet, but can you explain why they are doing this now? All indicators seem to suggest the economy is strong, so why are th

Admittedly, I haven't read the article yet, but can you explain why they are doing this now? All indicators seem to suggest the economy is strong, so why are they resorting to tactics we last heard about in 2008?

baronmunchausen 7y ago
To cut through all the econ BS, basically because they stopped doing it for a while and markets went down a lot, then short term (overnight) lending rates start to spike higher and they freaked out.
aaronblohowiak 7y ago
i don’t agree with your assessment of the indicators. We haven’t hit target inflation, because labor costs have been resisting upward pressure due to underemployment. The fed thinks it can paper over structural problems with cheap money, resulting in capital asset price inflation and increased wealth disparity...furthering barriers to real wage growth.
- deleted 7y ago
  [deleted]
coolspot 7y ago
Some think it is because elections are near. Can’t have weak market before that. Same reason why China trade deal phase 1 was signed, which doesn’t solve problems in trade with China.
- hcknwscommenter 7y ago
  > Can’t have weak market before that That is only true when the President has an (R) next to his name. (D)-type Presidents do not enjoy this privilege from the Fed.
  - nwsm 7y ago
    I wish someone would post a counterexample along with their downvote.
mdorazio 7y ago
Not sure why you think indicators suggest a strong economy - if you dig into most of them, the US isn't actually doing that great after you discount for the artificially easy money situation created by the Fed's actions for the last decade and its knock-on effects (ex. debt-funded stock buybacks).
alecco 7y ago
> All indicators seem to suggest the economy is strong It's doing great if you ignore budget deficit, multiple debt balloons (national/municipal/auto/student), and looming trillions of unfunded liabilities. What could possibly go wrong?
deleted 7y ago
[deleted]
mywittyname 7y ago
Some sectors of the economy are strong, but other sectors are doing extremely poorly. Agriculture and mining have been hit by several recessions (two consecutive quarters of negative growth) over the past four years, while sectors like finance and technology are doing very well. The mining and natural resources sector was hit by a recession in ~2015 that was worse than the 2008 crash. The problem is finance is by far the largest sector of the US economy, so when you look at aggregate GDP numbers, the US economy looks great because the modest gains in finance are more than compensating for the huge reduction in output in the smaller sectors. It's the same story for the stock market: the market cap of the stock market is heavily weighted towards technology stocks, which is compensating for the poor performance in lagging sectors.
charwalker 7y ago
Because your analysis is incorrect. The economy is flat, if that, based on stock market information. But most people don't have wealth in stock but a house or car with a 401k waiting. Real income/wages are flat, the many tariffs and economic policy choices made by the current administration has slowed if not stopped manufacturing (steel tariffs especially), the rate of auto loan defaults is at a record high (see 2008 mortgage crisis), and worse. Adding $1 trillion of debt per year is insane and would send 2008-2016 debt hawks into a tizzy yet the current admin vastly increased the deficit over the previous administration. Most of this is tax cuts from the 2017 bill which disproportionately go to corporations and super wealthy. Tax cuts for corporations do not expire whereas those for citizens will sunset. These tax cuts have led to massive stock buybacks which artificially buoy the stock market (which is why it's the only 'good' thing about the economy as a whole right now). The best news of each monthly job report, jobs gained, has been rolled back by later reports allowing the administration to trumpet growth and improvement but leave out how off the numbers really are each cycle. Also, most of the 'new' jobs are part time, low wage, low skill, or gig economy work that often doesn't pay a livable wage or is a supplement to another low paying or part time job. That pattern does not lend itself to a strong, robust economy but can create a short term projection that appears so. We recently hit a known recession indicator where the Treasury yield curve inverted. An inverted yield curve occurs when long-term yields fall below short-term yields like when 1 year bonds have higher interest than 10 year. usually the long term investment has higher returns except when analysts or brokers predict a crash is coming. Since this metric was tracked, we have entered a recession within 24 months every single time the curve has inverted. This includes the negative bond rates we saw after 2008. Today we might be paying too much attention to this indicator for it to still work that way but it's still important. For all intents and purposes, the Trump economy is not good, flat, and falling. We may see a massive correction once stock buybacks end or are banned, corporate taxes are raised by a liberal congress, or any number of policy changes. Manufacturing is set for layoffs and reductions through 2020 (see US Steel closing sites in Michigan) and I'm personally saving for a down payment on a house when the market crashes in my area. I'm curious, what indicators are you going off to think they 'all' suggest the economy is strong? It may be your sources are lying by omission or spinning information to look good when it isn't a real representation of the economy, like pointing to stock market highs that mean almost nothing. We've crossed 26000 in the Dow averages like 5 times in the current admin, that isn't stable at all but a pattern of rise/fall boom/bust that is not sustainable.

baronmunchausen 7y ago

To cut through all the econ BS, basically because they stopped doing it for a while and markets went down a lot, then short term (overnight) lending rates start to spike higher and they freaked out.

aaronblohowiak 7y ago

i don’t agree with your assessment of the indicators. We haven’t hit target inflation, because labor costs have been resisting upward pressure due to underemployment. The fed thinks it can paper over structural problems with cheap money, resulting in capital asset price inflation and increased wealth disparity...furthering barriers to real wage growth.

deleted 7y ago
[deleted]

coolspot 7y ago

Some think it is because elections are near. Can’t have weak market before that. Same reason why China trade deal phase 1 was signed, which doesn’t solve problems in trade with China.

hcknwscommenter 7y ago
> Can’t have weak market before that That is only true when the President has an (R) next to his name. (D)-type Presidents do not enjoy this privilege from the Fed.
- nwsm 7y ago
  I wish someone would post a counterexample along with their downvote.

mdorazio 7y ago

Not sure why you think indicators suggest a strong economy - if you dig into most of them, the US isn't actually doing that great after you discount for the artificially easy money situation created by the Fed's actions for the last decade and its knock-on effects (ex. debt-funded stock buybacks).

alecco 7y ago

> All indicators seem to suggest the economy is strong It's doing great if you ignore budget deficit, multiple debt balloons (national/municipal/auto/student), and looming trillions of unfunded liabilities. What could possibly go wrong?

deleted 7y ago

[deleted]

mywittyname 7y ago

Some sectors of the economy are strong, but other sectors are doing extremely poorly. Agriculture and mining have been hit by several recessions (two consecutive quarters of negative growth) over the past four years, while sectors like finance and technology are doing very well. The mining and natural resources sector was hit by a recession in ~2015 that was worse than the 2008 crash. The problem is finance is by far the largest sector of the US economy, so when you look at aggregate GDP numbers, the US economy looks great because the modest gains in finance are more than compensating for the huge reduction in output in the smaller sectors. It's the same story for the stock market: the market cap of the stock market is heavily weighted towards technology stocks, which is compensating for the poor performance in lagging sectors.

charwalker 7y ago

Because your analysis is incorrect. The economy is flat, if that, based on stock market information. But most people don't have wealth in stock but a house or car with a 401k waiting. Real income/wages are flat, the many tariffs and economic policy choices made by the current administration has slowed if not stopped manufacturing (steel tariffs especially), the rate of auto loan defaults is at a record high (see 2008 mortgage crisis), and worse. Adding $1 trillion of debt per year is insane and would send 2008-2016 debt hawks into a tizzy yet the current admin vastly increased the deficit over the previous administration. Most of this is tax cuts from the 2017 bill which disproportionately go to corporations and super wealthy. Tax cuts for corporations do not expire whereas those for citizens will sunset. These tax cuts have led to massive stock buybacks which artificially buoy the stock market (which is why it's the only 'good' thing about the economy as a whole right now). The best news of each monthly job report, jobs gained, has been rolled back by later reports allowing the administration to trumpet growth and improvement but leave out how off the numbers really are each cycle. Also, most of the 'new' jobs are part time, low wage, low skill, or gig economy work that often doesn't pay a livable wage or is a supplement to another low paying or part time job. That pattern does not lend itself to a strong, robust economy but can create a short term projection that appears so. We recently hit a known recession indicator where the Treasury yield curve inverted. An inverted yield curve occurs when long-term yields fall below short-term yields like when 1 year bonds have higher interest than 10 year. usually the long term investment has higher returns except when analysts or brokers predict a crash is coming. Since this metric was tracked, we have entered a recession within 24 months every single time the curve has inverted. This includes the negative bond rates we saw after 2008. Today we might be paying too much attention to this indicator for it to still work that way but it's still important. For all intents and purposes, the Trump economy is not good, flat, and falling. We may see a massive correction once stock buybacks end or are banned, corporate taxes are raised by a liberal congress, or any number of policy changes. Manufacturing is set for layoffs and reductions through 2020 (see US Steel closing sites in Michigan) and I'm personally saving for a down payment on a house when the market crashes in my area. I'm curious, what indicators are you going off to think they 'all' suggest the economy is strong? It may be your sources are lying by omission or spinning information to look good when it isn't a real representation of the economy, like pointing to stock market highs that mean almost nothing. We've crossed 26000 in the Dow averages like 5 times in the current admin, that isn't stable at all but a pattern of rise/fall boom/bust that is not sustainable.