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The Fed is hitting the breaks on demand in order to slow down inflation. If they slow the demand side too fast then we enter a recession, if they manage to do

The Fed is hitting the breaks on demand in order to slow down inflation. If they slow the demand side too fast then we enter a recession, if they manage to do a soft landing the pull back demand enough that supply can catch up bringing inflation back down to a 2% range with many a small downturn or short recession. The goal is too slow down the aggregate demand in the market - whether or not we believe that it is a recession is irrelevant. Money will get more expensive, companies will be more shrewd on their spend & hiring. Whether the economy contracts and enters a technical recession - doesn't really matter - there are actual physical realities to the world and we can't just will our way into a bull or out of a bear market as nice as that sounds.

SemanticStrengh 4y ago
> The Fed is hitting the breaks on demand in order to slow down inflation. Are we watching the same news? The measure to slow down demand is to increase the VAT https://en.wikipedia.org/wiki/Value-added_tax https://en.wikipedia.org/wiki/Value-added_tax I don't remember what the Fed/SEC did the last months but it was a measure that had for effect to reduce investment in stocks (would appreciate if you could point out the name of the tax fee) Deincentivizing/diminishing investment in companies result in what? In a reduction not of demand but of production.. Enterprises will downscale their productions and are subject to auto amplifying panic hysteria. The panic sentiment do reduce demand from people (non linearly). The gap between demand and production, which is an absurd inertia that should have been anticipated during covid, is mild and most importantly is reducing quickly as time passe, unless of course media hysteria induce panic buys. most importantly, the salient absurdity of the thing is the non-locality of the discourse and of the measures. Only a limited set of companies have a deficient offer/demand ratio, e.g. a company can distribute 1 billion software copies just fine. However the panic mediatic fear of market subinvestment affect even the enterprises that have no issues matching demand, which are in fact the majorities of companies (although yes some key fundamental companies might be limited), moreover the FED/SEC measures affect them equally, and therefore the VAT measure I propose to reduce demand ( which seems incredibly more logical) should be applied locally and proportionately to how much a specific company demand/offer ratio is affected. either I'm wrong either the system is just doing absurd suboptimalities and I'm betting more on the latter than the former but please share your thoughts.
- boringg 4y ago
  FED / SEC are completely different entities with completely different roles and market functions. It's like apples and oranges. And has nothing to do with a VAT tax. I am sorry, but your comment is almost incoherent - so my response is more of a broad general definition of what the Federal Reserve is doing to help you understand the macro context a bit more. As the Fed actions are intentionally moving the markets / economy at this point. Short form - the Federal Reserve increasing the cost of money slows down demand in the entire economy as a function of the cost of money goes up. I am not talking only hard goods - we are talking services, investments etc. They want to slow down the demand side of the economy by increasing the cost of money. It's a blunt tool but it works - if it works to well we enter into a recession which is why they are in the hot seat right now. Very challenging as they have a simple lever where there is a considerable amount of factors (geopolitics, other countries central banks etc). Hope that helps.
  - SemanticStrengh 4y ago
    You are not addressing the fact that their lever deincentivize investment and therefore production, an argument worsening inflation and you are not addressing my point saying that VAT is obviously a direct measure to reduce demand, without impacting investment as directly, finally my VAT locality on the most critically underproducing sector yet non affecting the unaffected companies that produce just fine, is a third argument. This is pretty basic. The answer is more likely to be that the U.S never had a VAT and creating one has tragic political inertia and hence the FED use the wrong tool but the one it dispose.
    - junofan 4y ago
      We have that. They’re called automatic stabilizers. There are a ton of them. For example, when people make more money, they pay a higher tax rate.
    - deleted 4y ago
      [deleted]
    - boringg 4y ago

SemanticStrengh 4y ago

> The Fed is hitting the breaks on demand in order to slow down inflation. Are we watching the same news? The measure to slow down demand is to increase the VAT https://en.wikipedia.org/wiki/Value-added_tax https://en.wikipedia.org/wiki/Value-added_tax I don't remember what the Fed/SEC did the last months but it was a measure that had for effect to reduce investment in stocks (would appreciate if you could point out the name of the tax fee) Deincentivizing/diminishing investment in companies result in what? In a reduction not of demand but of production.. Enterprises will downscale their productions and are subject to auto amplifying panic hysteria. The panic sentiment do reduce demand from people (non linearly). The gap between demand and production, which is an absurd inertia that should have been anticipated during covid, is mild and most importantly is reducing quickly as time passe, unless of course media hysteria induce panic buys. most importantly, the salient absurdity of the thing is the non-locality of the discourse and of the measures. Only a limited set of companies have a deficient offer/demand ratio, e.g. a company can distribute 1 billion software copies just fine. However the panic mediatic fear of market subinvestment affect even the enterprises that have no issues matching demand, which are in fact the majorities of companies (although yes some key fundamental companies might be limited), moreover the FED/SEC measures affect them equally, and therefore the VAT measure I propose to reduce demand ( which seems incredibly more logical) should be applied locally and proportionately to how much a specific company demand/offer ratio is affected. either I'm wrong either the system is just doing absurd suboptimalities and I'm betting more on the latter than the former but please share your thoughts.

boringg 4y ago
FED / SEC are completely different entities with completely different roles and market functions. It's like apples and oranges. And has nothing to do with a VAT tax. I am sorry, but your comment is almost incoherent - so my response is more of a broad general definition of what the Federal Reserve is doing to help you understand the macro context a bit more. As the Fed actions are intentionally moving the markets / economy at this point. Short form - the Federal Reserve increasing the cost of money slows down demand in the entire economy as a function of the cost of money goes up. I am not talking only hard goods - we are talking services, investments etc. They want to slow down the demand side of the economy by increasing the cost of money. It's a blunt tool but it works - if it works to well we enter into a recession which is why they are in the hot seat right now. Very challenging as they have a simple lever where there is a considerable amount of factors (geopolitics, other countries central banks etc). Hope that helps.
- SemanticStrengh 4y ago
  You are not addressing the fact that their lever deincentivize investment and therefore production, an argument worsening inflation and you are not addressing my point saying that VAT is obviously a direct measure to reduce demand, without impacting investment as directly, finally my VAT locality on the most critically underproducing sector yet non affecting the unaffected companies that produce just fine, is a third argument. This is pretty basic. The answer is more likely to be that the U.S never had a VAT and creating one has tragic political inertia and hence the FED use the wrong tool but the one it dispose.
  - junofan 4y ago
    We have that. They’re called automatic stabilizers. There are a ton of them. For example, when people make more money, they pay a higher tax rate.
  - deleted 4y ago
    [deleted]
  - boringg 4y ago