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Inflation is the most destablising thing in an economy. It would be wise to keep raising interest rates until inflation gets back to 2/3% even if that causes a

Inflation is the most destablising thing in an economy. It would be wise to keep raising interest rates until inflation gets back to 2/3% even if that causes a recession.

bjornsing 4y ago
I agree. But many Swedes are heavily indebted (with mortgages), and their parents made a fortune from negative real interest rates in the 70-ties + the asset bubble of the 2000s. Now they want the same. Understandable. The Swedish Riksbank (actually the oldest central bank in the world) is formally independent, but everything is politics in Sweden. I would not be surprised if the indebted middle class come out on top here.
- bullen 4y ago
  That's a simplification, they didn't make a fortune from the inflation on things being higher than the interest rate, they made it from salary increases. I looked at my SBAB account and indeed I have 0.50% on that now. So maybe we'll see another salary inflation event, but as long as food/electricity and fuel is rising faster than your salary there is still a BIG problem (right now you got 2% vs. 6%)! How can they raise salaries while debt is becoming more expensive? Well you need to increase productivity, how do you do that; you consume more energy. The inflation we have now isn't really monetary at all, it's scarcity inflation. And that never ends, because energy is finite! Any way you turn this thing; it's the end of the financial system, because no matter what they do they cannot print energy.
  - bjornsing 4y ago
    > That's a simplification, they didn't make a fortune from the inflation on things being higher than the interest rate, they made it from salary increases. I don’t really see the distinction. There was an energy angle to it in the 70ties too (the oil crisis). Whenever there is significant price inflation there will be salary inflation too, sooner or later.
    - bullen 4y ago
      No, in the 70s Nixon had just removed the gold standard, the real reason for the salary inflation WAS to convince people that the newly invented petrodollar had value by increasing the interest rate AND the salary to compete with the gold price; by extracting more energy from the Saudis to do the work. Without the petrodollar and expedient Saudi oil, raising interest rates to fight a "permanent for the rest of eternity" physical lack of energy is going to go terribly wrong. I suspect they will stop at 1% in Sweden when all households/businesses start to fail (because we have more debt than in the 70s) and then we'll get cashless UBI, which will lead to monetary inflation on top of the scarcity inflation. > Whenever there is significant price inflation there will be salary inflation too, sooner or later. You better be damn sure about that, because othervise when the music stops you got nowhere to sit!
chewz 4y ago
FOMC members are paid 250 thousand dollars per diner not by American savers but by bankers and high asset value types. FED will go back to inflating asset bubbles at the first opportunity.

Inflation is the most destablising thing in an economy. It would be wise to keep raising interest rates until inflation gets back to 2/3% even if that causes a recession.

bjornsing 4y ago

I agree. But many Swedes are heavily indebted (with mortgages), and their parents made a fortune from negative real interest rates in the 70-ties + the asset bubble of the 2000s. Now they want the same. Understandable. The Swedish Riksbank (actually the oldest central bank in the world) is formally independent, but everything is politics in Sweden. I would not be surprised if the indebted middle class come out on top here.

bullen 4y ago
That's a simplification, they didn't make a fortune from the inflation on things being higher than the interest rate, they made it from salary increases. I looked at my SBAB account and indeed I have 0.50% on that now. So maybe we'll see another salary inflation event, but as long as food/electricity and fuel is rising faster than your salary there is still a BIG problem (right now you got 2% vs. 6%)! How can they raise salaries while debt is becoming more expensive? Well you need to increase productivity, how do you do that; you consume more energy. The inflation we have now isn't really monetary at all, it's scarcity inflation. And that never ends, because energy is finite! Any way you turn this thing; it's the end of the financial system, because no matter what they do they cannot print energy.
- bjornsing 4y ago
  > That's a simplification, they didn't make a fortune from the inflation on things being higher than the interest rate, they made it from salary increases. I don’t really see the distinction. There was an energy angle to it in the 70ties too (the oil crisis). Whenever there is significant price inflation there will be salary inflation too, sooner or later.
  - bullen 4y ago
    No, in the 70s Nixon had just removed the gold standard, the real reason for the salary inflation WAS to convince people that the newly invented petrodollar had value by increasing the interest rate AND the salary to compete with the gold price; by extracting more energy from the Saudis to do the work. Without the petrodollar and expedient Saudi oil, raising interest rates to fight a "permanent for the rest of eternity" physical lack of energy is going to go terribly wrong. I suspect they will stop at 1% in Sweden when all households/businesses start to fail (because we have more debt than in the 70s) and then we'll get cashless UBI, which will lead to monetary inflation on top of the scarcity inflation. > Whenever there is significant price inflation there will be salary inflation too, sooner or later. You better be damn sure about that, because othervise when the music stops you got nowhere to sit!

chewz 4y ago

FOMC members are paid 250 thousand dollars per diner not by American savers but by bankers and high asset value types. FED will go back to inflating asset bubbles at the first opportunity.