4 ms·

imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greate

imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. What i really think are needed --Clinton era 4-5% rates-- are all but taboo to the market post-housing-collapse. nearly a year ago the fed was cheerleading "transient" inflation in an attempt to avoid culpability for the corporate credit bubble it created during 2008's post financial meltdown. the article is pretty fixative about 2018 but IMO this goes a long way back. Quantitative easing measures from from 2010 lke low credit and bond buyback were still going on in 2021. The coming to jesus moment for the fed that july bond buyback cessation targets would be a disaster was likely the 2021 holiday shopping slump, and we didnt start honestly talking about raising prime interest until febuary. the reason 1.9%, and the reason this is a desperate tightrope, is that the fed has the very real ability to blow up the corporate credit bubble with prime interest.

throw0101a 5y ago
> imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action? And we still have supply chain issue before all geopolitical problems even started: just try asking network vendors what their lead times are for switches and routers. For consumers, Ford is shipping cars with missing functionality: * https://arstechnica.com/cars/2022/03/ford-ships-explorers-missing-chips-for-rear-seat-hvac-controls/ https://arstechnica.com/cars/2022/03/ford-ships-explorers-mi...
- hgomersall 5y ago
  It might possibly have an effect, in the same way that anything that causes more unemployment and increases the likelihood of a recession might have an effect.
- tryptophan 5y ago
  It has everything to do with it. If they were higher, people would go bankrupt, not have money to drive, use less gas/oil, thus reducing demand, thus reducing price, thus reducing inflation.
  - colinmhayes 5y ago
    It certainly does not have everything to do with it. The answer is somewhere in the middle. Cheap money absolutely causes inflation, but so do global supply chain breakdowns.
    - mindslight 5y ago
      IMO rather than talking about ambiguous "inflation", one should be specific about what exactly is being inflated - "monetary inflation", "asset inflation", "price inflation", etc. Monetary inflation occurred when the Fed printed several trillions of dollars back in 2020, asset inflation occurred soon thereafter, and then price inflation took hold throughout 2021 as that new money trickled into consumers' hands. It doesn't particularly make sense to call the current rising oil price inflation (that would make "inflation" just a synonym for price increases), but the price of energy going up will cause broad price inflation down the line.
      - colinmhayes 5y ago
        Unless I know I'm talking to an economist I use inflation to mean price inflation, because that's what every non economist thinks it means. You are certainly right that it's ambiguous in a technical sense though.
    - chasd00 5y ago
      > but so do global supply chain breakdowns i would believe supply chain issues were major contributors to inflation if wages were not rising. It seems to me a supply chain problem causes price to go up but wages would not. The price increase by the retailer is there to pay for their price increase to the wholesaler, not to increase employee wages.
  - 5y ago
- rndphs 5y ago
  The amount of money being circulated absolutely does affect inflation (almost by definition). The Fed interest rate affects the amount of money in circulation because the Fed credit money is simply printed. This printed credit money gets spent and ends up circulating. The lower the interest rate, the easier it is to borrow, the more borrowing gets done, the more money is printed and enters circulation, which leads to inflation. Theoretically, the money needs to be paid back eventually. But as long as the Fed interest rate is below inflation, paying back can always be put off by covering the previous debt with new debt.
  - throw0101a 5y ago
    > The amount of money being circulated absolutely does affect inflation (almost by definition). No, money supply ≠ inflation. E.g., Japan M2: * https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Why do Friedman-esqe Monetarists continue to ignore velocity? * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V I personally like Cullen Roche's analogy: > But this is what so much of the money supply represents – money that has been issued and is just sitting around unused. Why is this useful? It’s like calculating your weight changes by counting how much food you have in your refrigerator. No. That’s potential calories consumed and potential weight gain. The amount of food in your fridge tells you little about your future weight changes just like the amount of money in the economy tells us little about the actual price changes in the economy. * https://www.pragcap.com/three-things-i-think-i-think-i-see-dead-mutual-funds/ https://www.pragcap.com/three-things-i-think-i-think-i-see-d... > The Fed interest rate affects the amount of money in circulation because the Fed credit money is simply printed. This printed credit money gets spent and ends up circulating. The lower the interest rate, the easier it is to borrow, the more borrowing gets done, the more money is printed and enters circulation, which leads to inflation. Things do not work like this. Money gets created through private banks by credit creation, and the only limit on that is the the risk they see in their loans being defaulted on. The Bank of England put out a primer a few years ago: > The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits. * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... Roche again from a 2011 paper, "Understanding the Modern Monetary System": * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 Banks create (hopefully) viable loans first, and then look for reserves after—assuming reserve requirements even exist, as many countries removed them decades ago.
- HWR_14 5y ago
  > How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action? Yes. Oil/Gas prices are pretty determined by OPEC voting and production of their member countries in conjunction with other macroeconomic issues. OPEC adjusts their production to take into account macroeconomic factors. The Fed rate is one of those issues.
- latchkey 5y ago
  I run several datacenters. Switches are impossible to find right now.
- fundad 5y ago
  Hiring back 10 million laid-off workers is expensive and consumers are paying the bill. The problem is wage growth at the bottom is the last thing elites want.
- syshum 5y ago
  Alot... the only reason why a middle class family can afford that new $80,000 F150 is because 0% financing over 7-8 years. Supply chain issues are being exacerbated by "free money" from the fed...

throw0101a 5y ago

> imo this has been a comically glacial effort, and im not sure the feds 1.9% interest target by EOY is anywhere near aggressive enough to stave off 10% or greater inflation by Q4. How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action? And we still have supply chain issue before all geopolitical problems even started: just try asking network vendors what their lead times are for switches and routers. For consumers, Ford is shipping cars with missing functionality: * https://arstechnica.com/cars/2022/03/ford-ships-explorers-missing-chips-for-rear-seat-hvac-controls/ https://arstechnica.com/cars/2022/03/ford-ships-explorers-mi...

hgomersall 5y ago
It might possibly have an effect, in the same way that anything that causes more unemployment and increases the likelihood of a recession might have an effect.
tryptophan 5y ago
It has everything to do with it. If they were higher, people would go bankrupt, not have money to drive, use less gas/oil, thus reducing demand, thus reducing price, thus reducing inflation.
- colinmhayes 5y ago
  It certainly does not have everything to do with it. The answer is somewhere in the middle. Cheap money absolutely causes inflation, but so do global supply chain breakdowns.
  - mindslight 5y ago
    IMO rather than talking about ambiguous "inflation", one should be specific about what exactly is being inflated - "monetary inflation", "asset inflation", "price inflation", etc. Monetary inflation occurred when the Fed printed several trillions of dollars back in 2020, asset inflation occurred soon thereafter, and then price inflation took hold throughout 2021 as that new money trickled into consumers' hands. It doesn't particularly make sense to call the current rising oil price inflation (that would make "inflation" just a synonym for price increases), but the price of energy going up will cause broad price inflation down the line.
    - colinmhayes 5y ago
      Unless I know I'm talking to an economist I use inflation to mean price inflation, because that's what every non economist thinks it means. You are certainly right that it's ambiguous in a technical sense though.
  - chasd00 5y ago
    > but so do global supply chain breakdowns i would believe supply chain issues were major contributors to inflation if wages were not rising. It seems to me a supply chain problem causes price to go up but wages would not. The price increase by the retailer is there to pay for their price increase to the wholesaler, not to increase employee wages.
- 5y ago
rndphs 5y ago
The amount of money being circulated absolutely does affect inflation (almost by definition). The Fed interest rate affects the amount of money in circulation because the Fed credit money is simply printed. This printed credit money gets spent and ends up circulating. The lower the interest rate, the easier it is to borrow, the more borrowing gets done, the more money is printed and enters circulation, which leads to inflation. Theoretically, the money needs to be paid back eventually. But as long as the Fed interest rate is below inflation, paying back can always be put off by covering the previous debt with new debt.
- throw0101a 5y ago
  > The amount of money being circulated absolutely does affect inflation (almost by definition). No, money supply ≠ inflation. E.g., Japan M2: * https://fred.stlouisfed.org/series/MYAGM2JPM189S https://fred.stlouisfed.org/series/MYAGM2JPM189S Japan inflation: * https://fred.stlouisfed.org/series/FPCPITOTLZGJPN https://fred.stlouisfed.org/series/FPCPITOTLZGJPN Why do Friedman-esqe Monetarists continue to ignore velocity? * https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V I personally like Cullen Roche's analogy: > But this is what so much of the money supply represents – money that has been issued and is just sitting around unused. Why is this useful? It’s like calculating your weight changes by counting how much food you have in your refrigerator. No. That’s potential calories consumed and potential weight gain. The amount of food in your fridge tells you little about your future weight changes just like the amount of money in the economy tells us little about the actual price changes in the economy. * https://www.pragcap.com/three-things-i-think-i-think-i-see-dead-mutual-funds/ https://www.pragcap.com/three-things-i-think-i-think-i-see-d... > The Fed interest rate affects the amount of money in circulation because the Fed credit money is simply printed. This printed credit money gets spent and ends up circulating. The lower the interest rate, the easier it is to borrow, the more borrowing gets done, the more money is printed and enters circulation, which leads to inflation. Things do not work like this. Money gets created through private banks by credit creation, and the only limit on that is the the risk they see in their loans being defaulted on. The Bank of England put out a primer a few years ago: > The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits. In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits. * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... Roche again from a 2011 paper, "Understanding the Modern Monetary System": * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 Banks create (hopefully) viable loans first, and then look for reserves after—assuming reserve requirements even exist, as many countries removed them decades ago.
HWR_14 5y ago
> How much of the current inflation has anything to do with interest rates? You think oil/gas prices will care much about the Fed's action? Yes. Oil/Gas prices are pretty determined by OPEC voting and production of their member countries in conjunction with other macroeconomic issues. OPEC adjusts their production to take into account macroeconomic factors. The Fed rate is one of those issues.
latchkey 5y ago
I run several datacenters. Switches are impossible to find right now.
fundad 5y ago
Hiring back 10 million laid-off workers is expensive and consumers are paying the bill. The problem is wage growth at the bottom is the last thing elites want.
syshum 5y ago
Alot... the only reason why a middle class family can afford that new $80,000 F150 is because 0% financing over 7-8 years. Supply chain issues are being exacerbated by "free money" from the fed...