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Of course. We can't raise interest rates because we need to protect asset prices for the rich and don't want to pay more interest at the government level or on

Of course. We can't raise interest rates because we need to protect asset prices for the rich and don't want to pay more interest at the government level or on the $8T borrowed in the last decade for stock repurchases by the Fortune 500.....so let's pay workers less. Yeah, that's what's best for America. Seriously, fuck you Powell.

Doubtme 4y ago
woah we cant get too political so fast here on good ol HN. gotta think about the billionaires first before you respond. the audacity.
- kelseyfrog 4y ago
  We have to rationally debate this to death which means to present both sides as having equally valid arguments until we grow tired and give up so that nothing changes. Really though, once I hear the "Actually, this is good for wage earners" argument, I know which side has won.
  - Doubtme 4y ago
    Of course its good for people who have to work. No need for a family. Or kids. Think of all the productivity and amazing work you'll create!
- chrisco255 4y ago
  It's not just the billionaires that are going to be affected by this. Homeowners, 401K retirees, state pensions, etc, all depend on asset prices trending upward. All of this QE policy started with Bernanke in the wake of the '08 GFC. Right now the Fed has to choose between raising rates high enough to stop inflation (probably double digits) and in the process cause a depression in all asset markets or tepidly walk back the tightening and embrace stagflation (in which case, asset markets will go down in real terms, but not in nominal terms). Either way, I believe we are near the end (<10 years) of the line for the USD reserve fiat regime.
  - hamandcheese 4y ago
    > homeowners 401k/retirees, yes. Homeowners, no. As long as people can afford their mortgages (i.e. employment stays high) I couldn’t care less.
    - chrisco255 4y ago
      If interest rates go high enough to stop inflation, house prices will fall to probably half what they are now. We are already at peak all-time high unaffordability (in terms of income to price ratio) in terms of house prices as a result of this bubble. A lot of people will end up underwater. And maintaining high employment is no guarantee.
arcticbull 4y ago
> We can't raise interest rates because we need to protect asset prices for the rich... Raising interest rates is literally what Powell is proposing, and has already started carrying out. Higher interest rates have other effects too. It reduces access to, and increases the cost of, working capital for businesses. This reduces growth and cuts into how much they can spend on employees and will reduce salaries. > ... and don't want to pay more interest at the government level or on the $8T borrowed in the last decade ... This is also backwards. High inflation allows the government to get out of paying off the national debt. The national debt has in real-dollar terms gone down significantly in the last two years. [edit] (Debt-to-GDP ratio is down 10% since 2020.) > Yeah, that's what's best for America. [edit] In my opinion leaving interest rates low and letting the market set prices of goods where supply meets demand, and incentivizing adding new supply, is the right thing to do. But hey, I'm not on the Fed board, so what do I know.
- kevin_thibedeau 4y ago
  > It reduces access to, and increases the cost of, working capital for businesses. This reduces growth and cuts into how much they can spend on employees and will reduce salaries. If that were true there never would have been growth when rates were over 5%. This is all about the wealthy rigging the system to maximize their returns. They're running out of financial instruments to game after decades of lopsided policy designed to shift money into their sphere of control so now they're squirming.
  - deleted 4y ago
    [deleted]
- stefan_ 4y ago
  Why do the rich care about inflation? Isn't the point that they own all the cash flows?
  - arcticbull 4y ago
    Most rich folks aren't rich from holding dollars, they're exposed (to your point) to equity. Higher expected inflation usually means higher future nominal interest rates, and a higher future cost of capital. The DCF model used to value that equity means they get put through the ringer in exactly the way you're seeing paying out in the stock market right now.
tyrfing 4y ago
What exactly do you think the Fed's lever is here?
- lumost 4y ago
  It may be a faulty assumption that the Fed has a lever here. The Fed has been very creative in finding ways to meet its mandates while Congress and the rest of the Federal government has been paralyzed. There is no guarantee that the Fed has the right lever for all monetary problems.
jjtheblunt 4y ago
> $8T borrowed ... for stock repurchases Aren't stock repurchases funded by cash on hand, like Apple does?
- howmayiannoyyou 4y ago
  Debt is often used. But nowhere near the $8t this poster is whining about in their tantrum.
- marcus0x62 4y ago
  Apple has issued debt to buyback shares [0]. One problem many large tech companies have is that their cash is stranded overseas due, in part, to…creative…tax/accounting arrangements [1]. They lobbied [2] for years for a tax break to repatriate this cash, and eventually got a tax break on repatriation for “foreign” profits close to what they had asked for [3]. Before that law was passed, it was common to borrow to fund share buybacks due to not wanting to pay the repatriation tax. As far as I can tell, it is still common due to the low interest rate environment of the last several years. 0 - https://www.nasdaq.com/articles/apple-shores-up-%2414b-in-debt-for-share-buybacks-dividends-report-2021-02-02 https://www.nasdaq.com/articles/apple-shores-up-%2414b-in-de... 1 - https://www.news.com.au/technology/online/security/double-irish-dutch-sandwich-tax-loophole-finally-closes-after-threeyear-grace-period/news-story/2963949f4525e13a8ac2cb8339361f80 https://www.news.com.au/technology/online/security/double-ir... 2 - https://money.cnn.com/2011/02/16/news/companies/repatriation_lobby.fortune/index.htm https://money.cnn.com/2011/02/16/news/companies/repatriation... 3 - https://marketrealist.com/2018/02/cisco-bringing-67-billion-back-states/ https://marketrealist.com/2018/02/cisco-bringing-67-billion-...
- JustAPerson 4y ago
  A substantial portion is funded with newly issued debt. https://fortune.com/2019/08/20/stock-buybacks-debt-financed/ https://fortune.com/2019/08/20/stock-buybacks-debt-financed/ https://www.bloomberg.com/news/articles/2019-01-27/debt-financed-share-buybacks-dwindle-to-lowest-level-since-2009 https://www.bloomberg.com/news/articles/2019-01-27/debt-fina...
- anm89 4y ago
  The parent is just saying hyperbolic things to bolster their rant. Their is no direct connection between the Fed's balance sheet and buy backs. The connection you could make is that by creating generally easy financial conditions like a strong market and low rates, they enabled the atmosphere which promoted the buybacks. But this is far from a direct connection
throwawaymaths 4y ago
> Seriously, fuck you Powell. Sorry to jump on your frustration, but this has always been the point of fed inflation policy <astronaut gun meme> https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi... > It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. Fed inflation policy is, and always has been a substitute for pay cuts for laborers.
- arcticbull 4y ago
  > Fed inflation policy is, and always has been a substitute for pay cuts for laborers. No, that's Congress' fault, not the Fed. The Fed only controls the denominator. Congress controls the numerator. Inflation-adjusted minimum wage and support for unions would significantly alter the landscape. Inflation has benefits, too, and it is generally accepted that a low, fixed, predictable inflation rate is the optimal outcome. Generally all the worst periods in history have been deflationary, not inflationary.
- anm89 4y ago
  Paul Krugman also said: “The growth of the Internet will slow drastically… By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” In 2002: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." I wouldn't put too much stock in anything Krugman says.
howmayiannoyyou 4y ago
Relax. 1. Interest rates are rising and asset prices are starting to decline. Higher rates and decreasing liquidity (where we are at and headed) makes it tough for the rich to generate capital gains & fixed income. Watch how this impacts California in the coming years. 2. Inflation, particularly wage inflation, crushes small businesses. It destroys job creation. This isn't about the Fortune 500, its about main street. 3. We have to compete globally. Inflation at home means our exports are more expensive AND it also means the US Dollar has less buying power for the imports we rely on. 4. 2 of the 8 trillion you're complaining about went to main street businesses and individuals in need. Another 2 or so went to foreign banks to keep the global economic system from collapsing. About 2 trillion more just sits on the Fed balance sheet. The balance went places it shouldn't have... welcome to politics. What's best for America is to remain competitive with Europe, BRIC nations and other developing countries. The inflation & supply chain stories used to be about the US - but rapidly growing middle classes in other countries demand the same goods you enjoy, have a closer proximity to the source (in supply chain terms), and if you want your standard of living to continue then you're going to have to compete.
anm89 4y ago
This is seriously naive. The Fed doesn't set wages by committee. They are going to attempt to affect wages via rates. Wage cost spirals hurt the poor more than the rich although it hurts everbody. We already made the mistake. We already printed 4+ Trillion dollars and handed it out in a year. And we did it to mostly cheers from all sides. The time to stop this was then. Now they are going to do what they can to stop the inflation. It's their mandate to do so. So yell at congress not Powell if you don't like it.
- arcticbull 4y ago
  > We already printed 4+ Trillion dollars and handed it out in a year. This is a very incomplete model. First, the fiscal stimulus and low interest rates created the fastest exit from a depression-level event in modern history. It took about two years to get back to the point of near-complete employment. Historically this would have taken a decade. The Fed and Congress deserve credit for this. We would be so much worse off right now, facing a massive deflationary spiral and huge unemployment without that stimulus. The issue isn't that there's a ton of money floating around, although it's not helping. The issue is that there's supply chain issues, fuel, grain and neon shortages due to a land war in Europe. Everything shortages due to COVID zero lockdowns in Shanghai. And the knock-on effects from a hasty and poorly managed exit from lockdowns. The Austin airport literally ran out of avgas a few weeks ago. [1] None of that has anything to do with stimulus and everything to do with high prices. [1] https://www.aerotime.aero/articles/30609-austin-international-airport-fuel-shortage-missed-flights https://www.aerotime.aero/articles/30609-austin-internationa...
  - anm89 4y ago
    Pick one or the other. We could have taken our medicine then or now. Turns out we are going to take it now. Yelling at the void isn't going to change that.
    - arcticbull 4y ago
      You're missing my point. It wasn't ever a case of 'medicine now or then' - we took the medicine before. It worked. Then some other stuff nobody could have foreseen (for real who had land war in Europe on their 2022 bingo card) caused a separate and in many ways unrelated crisis. The mistake is blending them together into one just because they happened back to back. Further, dealing with a massive deflationary spiral and everyone being out of work is fundamentally significantly harder than tackling supply-driven inflation. Inflation rates are already coming down significantly. The last monthly CPI print came in at 3.6% annualized, and month-over-month PPI came in at 0% for services and 1.3% for goods (driven by commodities of course). You are treating the $4T as a 'liability' without considering what it purchased. You're reading half a balance sheet. Spending can be inflationary or deflationary depending on what it's used for - and so many other factors. Japan has printed huge quantities of new money since 1990 and their CPI has been ~0% for the last 30 years. [1] [1] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI

Doubtme 4y ago

woah we cant get too political so fast here on good ol HN. gotta think about the billionaires first before you respond. the audacity.

kelseyfrog 4y ago
We have to rationally debate this to death which means to present both sides as having equally valid arguments until we grow tired and give up so that nothing changes. Really though, once I hear the "Actually, this is good for wage earners" argument, I know which side has won.
- Doubtme 4y ago
  Of course its good for people who have to work. No need for a family. Or kids. Think of all the productivity and amazing work you'll create!
chrisco255 4y ago
It's not just the billionaires that are going to be affected by this. Homeowners, 401K retirees, state pensions, etc, all depend on asset prices trending upward. All of this QE policy started with Bernanke in the wake of the '08 GFC. Right now the Fed has to choose between raising rates high enough to stop inflation (probably double digits) and in the process cause a depression in all asset markets or tepidly walk back the tightening and embrace stagflation (in which case, asset markets will go down in real terms, but not in nominal terms). Either way, I believe we are near the end (<10 years) of the line for the USD reserve fiat regime.
- hamandcheese 4y ago
  > homeowners 401k/retirees, yes. Homeowners, no. As long as people can afford their mortgages (i.e. employment stays high) I couldn’t care less.
  - chrisco255 4y ago
    If interest rates go high enough to stop inflation, house prices will fall to probably half what they are now. We are already at peak all-time high unaffordability (in terms of income to price ratio) in terms of house prices as a result of this bubble. A lot of people will end up underwater. And maintaining high employment is no guarantee.

arcticbull 4y ago

> We can't raise interest rates because we need to protect asset prices for the rich... Raising interest rates is literally what Powell is proposing, and has already started carrying out. Higher interest rates have other effects too. It reduces access to, and increases the cost of, working capital for businesses. This reduces growth and cuts into how much they can spend on employees and will reduce salaries. > ... and don't want to pay more interest at the government level or on the $8T borrowed in the last decade ... This is also backwards. High inflation allows the government to get out of paying off the national debt. The national debt has in real-dollar terms gone down significantly in the last two years. [edit] (Debt-to-GDP ratio is down 10% since 2020.) > Yeah, that's what's best for America. [edit] In my opinion leaving interest rates low and letting the market set prices of goods where supply meets demand, and incentivizing adding new supply, is the right thing to do. But hey, I'm not on the Fed board, so what do I know.

kevin_thibedeau 4y ago
> It reduces access to, and increases the cost of, working capital for businesses. This reduces growth and cuts into how much they can spend on employees and will reduce salaries. If that were true there never would have been growth when rates were over 5%. This is all about the wealthy rigging the system to maximize their returns. They're running out of financial instruments to game after decades of lopsided policy designed to shift money into their sphere of control so now they're squirming.
- deleted 4y ago
  [deleted]
stefan_ 4y ago
Why do the rich care about inflation? Isn't the point that they own all the cash flows?
- arcticbull 4y ago
  Most rich folks aren't rich from holding dollars, they're exposed (to your point) to equity. Higher expected inflation usually means higher future nominal interest rates, and a higher future cost of capital. The DCF model used to value that equity means they get put through the ringer in exactly the way you're seeing paying out in the stock market right now.

tyrfing 4y ago

What exactly do you think the Fed's lever is here?

lumost 4y ago
It may be a faulty assumption that the Fed has a lever here. The Fed has been very creative in finding ways to meet its mandates while Congress and the rest of the Federal government has been paralyzed. There is no guarantee that the Fed has the right lever for all monetary problems.

jjtheblunt 4y ago

> $8T borrowed ... for stock repurchases Aren't stock repurchases funded by cash on hand, like Apple does?

howmayiannoyyou 4y ago
Debt is often used. But nowhere near the $8t this poster is whining about in their tantrum.
marcus0x62 4y ago
Apple has issued debt to buyback shares [0]. One problem many large tech companies have is that their cash is stranded overseas due, in part, to…creative…tax/accounting arrangements [1]. They lobbied [2] for years for a tax break to repatriate this cash, and eventually got a tax break on repatriation for “foreign” profits close to what they had asked for [3]. Before that law was passed, it was common to borrow to fund share buybacks due to not wanting to pay the repatriation tax. As far as I can tell, it is still common due to the low interest rate environment of the last several years. 0 - https://www.nasdaq.com/articles/apple-shores-up-%2414b-in-debt-for-share-buybacks-dividends-report-2021-02-02 https://www.nasdaq.com/articles/apple-shores-up-%2414b-in-de... 1 - https://www.news.com.au/technology/online/security/double-irish-dutch-sandwich-tax-loophole-finally-closes-after-threeyear-grace-period/news-story/2963949f4525e13a8ac2cb8339361f80 https://www.news.com.au/technology/online/security/double-ir... 2 - https://money.cnn.com/2011/02/16/news/companies/repatriation_lobby.fortune/index.htm https://money.cnn.com/2011/02/16/news/companies/repatriation... 3 - https://marketrealist.com/2018/02/cisco-bringing-67-billion-back-states/ https://marketrealist.com/2018/02/cisco-bringing-67-billion-...
JustAPerson 4y ago
A substantial portion is funded with newly issued debt. https://fortune.com/2019/08/20/stock-buybacks-debt-financed/ https://fortune.com/2019/08/20/stock-buybacks-debt-financed/ https://www.bloomberg.com/news/articles/2019-01-27/debt-financed-share-buybacks-dwindle-to-lowest-level-since-2009 https://www.bloomberg.com/news/articles/2019-01-27/debt-fina...
anm89 4y ago
The parent is just saying hyperbolic things to bolster their rant. Their is no direct connection between the Fed's balance sheet and buy backs. The connection you could make is that by creating generally easy financial conditions like a strong market and low rates, they enabled the atmosphere which promoted the buybacks. But this is far from a direct connection

throwawaymaths 4y ago

> Seriously, fuck you Powell. Sorry to jump on your frustration, but this has always been the point of fed inflation policy <astronaut gun meme> https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-inflation/ https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi... > It goes like this: even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. Fed inflation policy is, and always has been a substitute for pay cuts for laborers.

arcticbull 4y ago
> Fed inflation policy is, and always has been a substitute for pay cuts for laborers. No, that's Congress' fault, not the Fed. The Fed only controls the denominator. Congress controls the numerator. Inflation-adjusted minimum wage and support for unions would significantly alter the landscape. Inflation has benefits, too, and it is generally accepted that a low, fixed, predictable inflation rate is the optimal outcome. Generally all the worst periods in history have been deflationary, not inflationary.
anm89 4y ago
Paul Krugman also said: “The growth of the Internet will slow drastically… By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” In 2002: "To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble." I wouldn't put too much stock in anything Krugman says.

howmayiannoyyou 4y ago

Relax. 1. Interest rates are rising and asset prices are starting to decline. Higher rates and decreasing liquidity (where we are at and headed) makes it tough for the rich to generate capital gains & fixed income. Watch how this impacts California in the coming years. 2. Inflation, particularly wage inflation, crushes small businesses. It destroys job creation. This isn't about the Fortune 500, its about main street. 3. We have to compete globally. Inflation at home means our exports are more expensive AND it also means the US Dollar has less buying power for the imports we rely on. 4. 2 of the 8 trillion you're complaining about went to main street businesses and individuals in need. Another 2 or so went to foreign banks to keep the global economic system from collapsing. About 2 trillion more just sits on the Fed balance sheet. The balance went places it shouldn't have... welcome to politics. What's best for America is to remain competitive with Europe, BRIC nations and other developing countries. The inflation & supply chain stories used to be about the US - but rapidly growing middle classes in other countries demand the same goods you enjoy, have a closer proximity to the source (in supply chain terms), and if you want your standard of living to continue then you're going to have to compete.

anm89 4y ago

This is seriously naive. The Fed doesn't set wages by committee. They are going to attempt to affect wages via rates. Wage cost spirals hurt the poor more than the rich although it hurts everbody. We already made the mistake. We already printed 4+ Trillion dollars and handed it out in a year. And we did it to mostly cheers from all sides. The time to stop this was then. Now they are going to do what they can to stop the inflation. It's their mandate to do so. So yell at congress not Powell if you don't like it.

arcticbull 4y ago
> We already printed 4+ Trillion dollars and handed it out in a year. This is a very incomplete model. First, the fiscal stimulus and low interest rates created the fastest exit from a depression-level event in modern history. It took about two years to get back to the point of near-complete employment. Historically this would have taken a decade. The Fed and Congress deserve credit for this. We would be so much worse off right now, facing a massive deflationary spiral and huge unemployment without that stimulus. The issue isn't that there's a ton of money floating around, although it's not helping. The issue is that there's supply chain issues, fuel, grain and neon shortages due to a land war in Europe. Everything shortages due to COVID zero lockdowns in Shanghai. And the knock-on effects from a hasty and poorly managed exit from lockdowns. The Austin airport literally ran out of avgas a few weeks ago. [1] None of that has anything to do with stimulus and everything to do with high prices. [1] https://www.aerotime.aero/articles/30609-austin-international-airport-fuel-shortage-missed-flights https://www.aerotime.aero/articles/30609-austin-internationa...
- anm89 4y ago
  Pick one or the other. We could have taken our medicine then or now. Turns out we are going to take it now. Yelling at the void isn't going to change that.
  - arcticbull 4y ago
    You're missing my point. It wasn't ever a case of 'medicine now or then' - we took the medicine before. It worked. Then some other stuff nobody could have foreseen (for real who had land war in Europe on their 2022 bingo card) caused a separate and in many ways unrelated crisis. The mistake is blending them together into one just because they happened back to back. Further, dealing with a massive deflationary spiral and everyone being out of work is fundamentally significantly harder than tackling supply-driven inflation. Inflation rates are already coming down significantly. The last monthly CPI print came in at 3.6% annualized, and month-over-month PPI came in at 0% for services and 1.3% for goods (driven by commodities of course). You are treating the $4T as a 'liability' without considering what it purchased. You're reading half a balance sheet. Spending can be inflationary or deflationary depending on what it's used for - and so many other factors. Japan has printed huge quantities of new money since 1990 and their CPI has been ~0% for the last 30 years. [1] [1] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI https://fred.stlouisfed.org/series/JPNCPIALLMINMEI