9 ms·

It seems the Fed is stuck in a state of overreaction. First they overshoot on money printing, then they disregard early signs of inflation, and now they're in

It seems the Fed is stuck in a state of overreaction. First they overshoot on money printing, then they disregard early signs of inflation, and now they're in a panic in the opposite direction. Seeing the news this week that Bernanke said that the Fed should be able to pull off a soft-landing now in 2022 gave me an uncomfortable déjà vu -- he said the same in 2006 and 2007, right before he raised rates enough to kick off a global financial crisis.

NDizzle 4y ago
Textbook weak leadership.
rich_sasha 4y ago
In fairness, inflation seems largely driven by energy prices, which in turn are driven by the Russian invasion of Ukraine. Not the top event I'd imagine a bank predicting well.
- khuey 4y ago
  Central banks can't produce more crude oil or refine more gasoline by manipulating rates. The only thing they can do here with that switch is tank the broader economy to destroy energy demand.
- fibers 4y ago
  no one here buys the 'putin price hike' excuse
  - rolobio 4y ago
    I was blown away when the president claimed he "has never seen anything like Putin’s tax on both food and gas". When did Putin get the ability to raise taxes in the US??
    - voidfunc 4y ago
      Bidens desperate to reframe the narrative that Dems fucked the economy before the midterms. I dont think this is going to work tho. Voters dont have enough understanding to see the cascade failures that have gotten us here over the last several years.
    - bombcar 4y ago
      When America shuts down or reduces its own oil supply, those holding the rest of the world's supply get more leverage.
      - hunterb123 4y ago
        We reduced our oil production before the invasion. Gas prices were multiplying before the invasion. Putin did not force the reduction of our own supply. The current administration did. The invasion may have been the consequence of the reduction of our production and amplified the "price hikes", but it wasn't the cause of the "price hikes", the initial action of reducing production and relying on foreign imports was.
        bombcar 4y ago
        Exactly. Russia has been a distraction to all this, and it was well in play before Ukraine kicked off.
        hindsightbias 4y ago
        The administration did not cut production. Covid did. The oil industry is dragging their feet.
        hunterb123 4y ago
        We were net exporters during covid under the last admin. This is the policy the current admin enacted that cut our production: https://www.csis.org/analysis/biden-makes-sweeping-changes-oil-and-gas-policy https://www.csis.org/analysis/biden-makes-sweeping-changes-o... Please point to something that supports your theory that "covid did it" and oil companies are "dragging their feet". - edit, at my post limit - @vel0city: Banning new leases two years ago hurt our production output. Banning new subscribers and preventing renewals would hurt your revenue, why would you think it wouldn't apply here? It seems you're trying to rationalize away the obvious change in policy and its effects because of some reason unknown to me. Would you support retracting this policy decision since in your mind it has little effect and in my mind it's the leading cause of our loss of net export status? @deeg: the article says offshore leases may not show declines for 10 years as the leases are longer, but onshore could "conceivably show up faster". Your point seems to be this policy hasn't hit us fully yet? Are you for it? How confident are you that it didn't cause the loss of our net export status?
  - Ekaros 4y ago
    Anyone honest can agree that most of the increase was return to normal. After a massive anomaly in the market. The sanctions on energy sector might be part of the blame, but most of increase was just return to normal. Just look at 2018 prices.
    - californical 4y ago
      The years leading up to Covid were an extreme bull market — increasing at a rate that high again is not a return to “normal”, it’s a return to a historically very high growth rate
- lostcolony 4y ago
  Yeah. If only we'd had some other reason to reduce our consumption of fossil fuels by now!
- hunterb123 4y ago
  then why was the administration dismissing it as temporary before the invasion? inflation was clearly caused by injecting trillions into the economy for "covid" slush funds. as far as energy goes, we were net exporters until the federal restrictions started coming in, only then did we start relying on foreign production. blaming your domestic problems on a foreign adversary is routine, but it's not accurate, helpful, or even actionable. does the "putin price hike" talking point really work on anyone? do they think we have memories of a gold fish?
  - jcadam 4y ago
    > inflation was clearly caused by injecting trillions into the economy for "covid" Yes, that juiced the demand side. At the same time, the supply side was kneecapped by shutdowns and other "mitigation" measures. More money + fewer available goods.
  - ClumsyPilot 4y ago
    > inflation was clearly caused by injecting trillions into the economy for "covid" slush funds. It was clearly caused by supply chain collapse
  - kelnos 4y ago
    I agree that we can't blame this on Putin (though he's not helping), but I think the obvious reason for much of the inflation is right in front of us: people want to buy many many things, but they just aren't available in large enough quantities. The Fed injecting money into the economy is nothing new; speaking of goldfish brain, have we so easily forgotten 2008?
    - whimsicalism 4y ago
      Easy capital means more people with the ability to demand things.
  - NDizzle 4y ago
    > does the "putin price hike" talking point really work on anyone? Unfortunately, yes it does. It works very well for a significant amount of the population. I've found that there is an incredible overlap in the number of people who think Putin is to blame and those still wearing masks in public.
- twblalock 4y ago
  Get out a calendar. Look at when the inflation started (last fall!). Then look at when the Ukraine war started. Has the Ukraine war made the inflation problem worse? Yes. Did it cause the problem? Absolutely not!
  - iso1631 4y ago
    Supply chain prices have been increasing since covid as supply shut down and takes far longer to restore than demand. Just like certain parts of inflation (lumber) shot up in 2020 when demand went through the roof as everyone started working on projects (including things like outside offices for working from home)
    - corrral 4y ago
      Housing prices in my boring-ass nothing of a city were up like 30% over a two year span, before the war started. Asset inflation had been going nuts for years before it happened. Before Covid, even. Practically since the we started to dig out of the '08 crash.
  - mark_l_watson 4y ago
    Thanks you, +1. If we don't take responsibility for our own problems, to me that spells trouble. I don't intend to pile on against President Biden, but his recent speech before the labor union sounded like a kid blaiming the dog for eating his homework, when he never did his homework. I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Putting Wall Street's and the War Industry's interests unapologetically before the American public's interests can only go on for so long before everything crashes.
    - johnbellone 4y ago
      > I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Anyone who can't agree with that statement isn't living in reality.
- roody15 4y ago
  Agree the Russian invasion doesn't help matters... but this is not the primary cause of inflation. The amount of money that the US has simply created and spent in last couple of years in unprecedented. The amount of money inserted into the US economy dwarfs that of the TARPP and related bailouts of 2008 by a factor of 4. You just cannot create and hand out that much cash in an economy and not expect inflation.
  - iso1631 4y ago
    If you think the dollar is worth less then no doubt that's reflected in say gold prices, which were between 1600 and 1900 from July 2011 to April 2013. They are currently 1800. If all that extra money had devalued fiat currencies globally (at roughly the same value), why hasn't gold increased?
    - jcadam 4y ago
      Smells like manipulation of PM prices.
    - fsociety999 4y ago
      Gold markets are manipulated like crazy. This article talks about it a bit https://www.bullionstar.com/blogs/ronan-manly/gold-silver-price-manipulation-the-greatest-trick-ever-pulled/ https://www.bullionstar.com/blogs/ronan-manly/gold-silver-pr... There have been a number of cases of banks being found guilty of it as well: - https://www.reuters.com/article/us-usa-metals-charges/u-s-charges-jpmorgan-metals-traders-over-alleged-market-manipulation-idUSKBN1W11BF https://www.reuters.com/article/us-usa-metals-charges/u-s-ch... - https://www.reuters.com/article/jp-morgan-spoofing-penalty-idUSKBN26K325 https://www.reuters.com/article/jp-morgan-spoofing-penalty-i... Look up naked short selling if you want to see how this works. Essentially, futures markets allow trading gold without holding any physical gold so banks can take dollars and use that to short the price of gold. It has gotten to the point where more “paper gold” is bought and sold on futures markets than physical gold that exists in the world.
      - iso1631 4y ago
- NDizzle 4y ago
  Energy prices which have LATELY, MAYBE, been driven by failed attempt of the US applying sanctions to Russia over the invasion of Ukraine. Reminder: https://www.csis.org/analysis/biden-makes-sweeping-changes-oil-and-gas-policy https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
  - colinmhayes 4y ago
    > failed attempt of the US applying sanctions to Russia over the invasion of Ukraine. Russia is now selling a fraction of the oil they were pre-war for 70 cents on the dollar. The sanctions haven't failed.
    - drewnick 4y ago
      Go look at a ruble dollar chart. Russia is making more money selling less gas.
    - NDizzle 4y ago
      A large fraction? Making $100B the first 100 days of the war, overall, with it slowly decreasing, yet new channels are opening up straight to India and China? People haven't thought this through all the way. Two days ago: https://www.bbc.com/news/business-61785111 https://www.bbc.com/news/business-61785111
    - yywwbbn 4y ago
      70 cents on the dollar when oil is at $120 is still much better than 100 cents at 50$ though.
- whimsicalism 4y ago
  But demand is higher than before?
- adrr 4y ago
  Inflation isn’t energy. It’s labor shortages, supply shortages and logistics issues. Freight has more than doubled in cost with ship times double of what they were pre pandemic. Labor rates have increased 25% and there is still significant shortages of unskilled labor and skilled labor. I talked to one major company the other day and for their distribution warehouse, 40% of the scheduled workers don’t show up on any given day even after significantly increasing wages. If you try to use automation to mitigate labor issues, lead times are 1.5 to 2 years to get the equipment due to supply shortages.
- MrRiddle 4y ago
  You mean SA not playing ball?
JumpCrisscross 4y ago
> now they're in a panic in the opposite direction Powell spoke when he didn't have to. He didn't have to speculate on inflation being transitory. He didn't have to make precise forecasts. But he did. That's left egg on the Fed's face. But calling a 75 bp rate hike panic is hyperbole.
colechristensen 4y ago
It's not overreaction, it's late reaction. Inflation hit the stock market a long time ago, inflation is now hitting consumers, the fed rate is now many percent low. What actually needed to happen is QE needed to end a lot sooner, interest rates needed to be raised moderately months ago. All of this should have been entirely predictable, but instead of "oh god this is ready to blow" when stock market valuations were way above prepandemic levels everyone was like "this is awesome, I bet it'll keep going!" There's no free lunch, you can't pump that much money into an economy that isn't doing a lot and not have consequences.
tootie 4y ago
My biggest concern is that the Fed is actually just not in the driver's seat at all right now. Raising rates is definitely the right thing to do and will at least help, but the inflationary pressures don't seem to be monetary at all. There's just no policy answers to the supply issues and if a stock market crash didn't slow down consumer demand, idk how rate cuts are going to do it. The best case is this curtails some of the wage-price spiral which is not entirely positive. Asset deflation has already happened without their help. May as well sink my savings into Luna and hope for a turnaround.
jejeyyy77 4y ago
This. Even in today's announcement, they seemed behind again claiming "American companies are in a strong position to weather through" - but we are already seeing mass layoffs and hiring freezes.
- johnbellone 4y ago
  I'd argue that a hiring freeze is an appropriate way of weathering an economic crisis. We have really only seen mass layoffs in a small handful of companies. The most recent one went on a hiring spree without any real plan to execute, e.g. new revenue.
- aisengard 4y ago
  Sure, maybe in tech, which had been in an unsustainable bubble for a long time. But unless everything changed in the last few weeks, we haven't seen this in the overall labor market, which remains as hot and labor-friendly as ever. Only interest rate bumps will put a dent into this unprecedentedly strong labor market.

NDizzle 4y ago

Textbook weak leadership.

rich_sasha 4y ago

In fairness, inflation seems largely driven by energy prices, which in turn are driven by the Russian invasion of Ukraine. Not the top event I'd imagine a bank predicting well.

khuey 4y ago
Central banks can't produce more crude oil or refine more gasoline by manipulating rates. The only thing they can do here with that switch is tank the broader economy to destroy energy demand.
fibers 4y ago
no one here buys the 'putin price hike' excuse
- rolobio 4y ago
  I was blown away when the president claimed he "has never seen anything like Putin’s tax on both food and gas". When did Putin get the ability to raise taxes in the US??
  - voidfunc 4y ago
    Bidens desperate to reframe the narrative that Dems fucked the economy before the midterms. I dont think this is going to work tho. Voters dont have enough understanding to see the cascade failures that have gotten us here over the last several years.
  - bombcar 4y ago
    When America shuts down or reduces its own oil supply, those holding the rest of the world's supply get more leverage.
    - hunterb123 4y ago
      We reduced our oil production before the invasion. Gas prices were multiplying before the invasion. Putin did not force the reduction of our own supply. The current administration did. The invasion may have been the consequence of the reduction of our production and amplified the "price hikes", but it wasn't the cause of the "price hikes", the initial action of reducing production and relying on foreign imports was.
      - bombcar 4y ago
        Exactly. Russia has been a distraction to all this, and it was well in play before Ukraine kicked off.
      - hindsightbias 4y ago
        The administration did not cut production. Covid did. The oil industry is dragging their feet.
        hunterb123 4y ago
        We were net exporters during covid under the last admin. This is the policy the current admin enacted that cut our production: https://www.csis.org/analysis/biden-makes-sweeping-changes-oil-and-gas-policy https://www.csis.org/analysis/biden-makes-sweeping-changes-o... Please point to something that supports your theory that "covid did it" and oil companies are "dragging their feet". - edit, at my post limit - @vel0city: Banning new leases two years ago hurt our production output. Banning new subscribers and preventing renewals would hurt your revenue, why would you think it wouldn't apply here? It seems you're trying to rationalize away the obvious change in policy and its effects because of some reason unknown to me. Would you support retracting this policy decision since in your mind it has little effect and in my mind it's the leading cause of our loss of net export status? @deeg: the article says offshore leases may not show declines for 10 years as the leases are longer, but onshore could "conceivably show up faster". Your point seems to be this policy hasn't hit us fully yet? Are you for it? How confident are you that it didn't cause the loss of our net export status?
- Ekaros 4y ago
  Anyone honest can agree that most of the increase was return to normal. After a massive anomaly in the market. The sanctions on energy sector might be part of the blame, but most of increase was just return to normal. Just look at 2018 prices.
  - californical 4y ago
    The years leading up to Covid were an extreme bull market — increasing at a rate that high again is not a return to “normal”, it’s a return to a historically very high growth rate
lostcolony 4y ago
Yeah. If only we'd had some other reason to reduce our consumption of fossil fuels by now!
hunterb123 4y ago
then why was the administration dismissing it as temporary before the invasion? inflation was clearly caused by injecting trillions into the economy for "covid" slush funds. as far as energy goes, we were net exporters until the federal restrictions started coming in, only then did we start relying on foreign production. blaming your domestic problems on a foreign adversary is routine, but it's not accurate, helpful, or even actionable. does the "putin price hike" talking point really work on anyone? do they think we have memories of a gold fish?
- jcadam 4y ago
  > inflation was clearly caused by injecting trillions into the economy for "covid" Yes, that juiced the demand side. At the same time, the supply side was kneecapped by shutdowns and other "mitigation" measures. More money + fewer available goods.
- ClumsyPilot 4y ago
  > inflation was clearly caused by injecting trillions into the economy for "covid" slush funds. It was clearly caused by supply chain collapse
- kelnos 4y ago
  I agree that we can't blame this on Putin (though he's not helping), but I think the obvious reason for much of the inflation is right in front of us: people want to buy many many things, but they just aren't available in large enough quantities. The Fed injecting money into the economy is nothing new; speaking of goldfish brain, have we so easily forgotten 2008?
  - whimsicalism 4y ago
    Easy capital means more people with the ability to demand things.
- NDizzle 4y ago
  > does the "putin price hike" talking point really work on anyone? Unfortunately, yes it does. It works very well for a significant amount of the population. I've found that there is an incredible overlap in the number of people who think Putin is to blame and those still wearing masks in public.
twblalock 4y ago
Get out a calendar. Look at when the inflation started (last fall!). Then look at when the Ukraine war started. Has the Ukraine war made the inflation problem worse? Yes. Did it cause the problem? Absolutely not!
- iso1631 4y ago
  Supply chain prices have been increasing since covid as supply shut down and takes far longer to restore than demand. Just like certain parts of inflation (lumber) shot up in 2020 when demand went through the roof as everyone started working on projects (including things like outside offices for working from home)
  - corrral 4y ago
    Housing prices in my boring-ass nothing of a city were up like 30% over a two year span, before the war started. Asset inflation had been going nuts for years before it happened. Before Covid, even. Practically since the we started to dig out of the '08 crash.
- mark_l_watson 4y ago
  Thanks you, +1. If we don't take responsibility for our own problems, to me that spells trouble. I don't intend to pile on against President Biden, but his recent speech before the labor union sounded like a kid blaiming the dog for eating his homework, when he never did his homework. I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Putting Wall Street's and the War Industry's interests unapologetically before the American public's interests can only go on for so long before everything crashes.
  - johnbellone 4y ago
    > I will probably make a bunch of people here mad at me, but there is so much to blame on both political parties. Anyone who can't agree with that statement isn't living in reality.
roody15 4y ago
Agree the Russian invasion doesn't help matters... but this is not the primary cause of inflation. The amount of money that the US has simply created and spent in last couple of years in unprecedented. The amount of money inserted into the US economy dwarfs that of the TARPP and related bailouts of 2008 by a factor of 4. You just cannot create and hand out that much cash in an economy and not expect inflation.
- iso1631 4y ago
  If you think the dollar is worth less then no doubt that's reflected in say gold prices, which were between 1600 and 1900 from July 2011 to April 2013. They are currently 1800. If all that extra money had devalued fiat currencies globally (at roughly the same value), why hasn't gold increased?
  - jcadam 4y ago
    Smells like manipulation of PM prices.
  - fsociety999 4y ago
    Gold markets are manipulated like crazy. This article talks about it a bit https://www.bullionstar.com/blogs/ronan-manly/gold-silver-price-manipulation-the-greatest-trick-ever-pulled/ https://www.bullionstar.com/blogs/ronan-manly/gold-silver-pr... There have been a number of cases of banks being found guilty of it as well: - https://www.reuters.com/article/us-usa-metals-charges/u-s-charges-jpmorgan-metals-traders-over-alleged-market-manipulation-idUSKBN1W11BF https://www.reuters.com/article/us-usa-metals-charges/u-s-ch... - https://www.reuters.com/article/jp-morgan-spoofing-penalty-idUSKBN26K325 https://www.reuters.com/article/jp-morgan-spoofing-penalty-i... Look up naked short selling if you want to see how this works. Essentially, futures markets allow trading gold without holding any physical gold so banks can take dollars and use that to short the price of gold. It has gotten to the point where more “paper gold” is bought and sold on futures markets than physical gold that exists in the world.
    - iso1631 4y ago
NDizzle 4y ago
Energy prices which have LATELY, MAYBE, been driven by failed attempt of the US applying sanctions to Russia over the invasion of Ukraine. Reminder: https://www.csis.org/analysis/biden-makes-sweeping-changes-oil-and-gas-policy https://www.csis.org/analysis/biden-makes-sweeping-changes-o...
- colinmhayes 4y ago
  > failed attempt of the US applying sanctions to Russia over the invasion of Ukraine. Russia is now selling a fraction of the oil they were pre-war for 70 cents on the dollar. The sanctions haven't failed.
  - drewnick 4y ago
    Go look at a ruble dollar chart. Russia is making more money selling less gas.
  - NDizzle 4y ago
    A large fraction? Making $100B the first 100 days of the war, overall, with it slowly decreasing, yet new channels are opening up straight to India and China? People haven't thought this through all the way. Two days ago: https://www.bbc.com/news/business-61785111 https://www.bbc.com/news/business-61785111
  - yywwbbn 4y ago
    70 cents on the dollar when oil is at $120 is still much better than 100 cents at 50$ though.
whimsicalism 4y ago
But demand is higher than before?
adrr 4y ago
Inflation isn’t energy. It’s labor shortages, supply shortages and logistics issues. Freight has more than doubled in cost with ship times double of what they were pre pandemic. Labor rates have increased 25% and there is still significant shortages of unskilled labor and skilled labor. I talked to one major company the other day and for their distribution warehouse, 40% of the scheduled workers don’t show up on any given day even after significantly increasing wages. If you try to use automation to mitigate labor issues, lead times are 1.5 to 2 years to get the equipment due to supply shortages.
MrRiddle 4y ago
You mean SA not playing ball?

JumpCrisscross 4y ago

> now they're in a panic in the opposite direction Powell spoke when he didn't have to. He didn't have to speculate on inflation being transitory. He didn't have to make precise forecasts. But he did. That's left egg on the Fed's face. But calling a 75 bp rate hike panic is hyperbole.

colechristensen 4y ago

It's not overreaction, it's late reaction. Inflation hit the stock market a long time ago, inflation is now hitting consumers, the fed rate is now many percent low. What actually needed to happen is QE needed to end a lot sooner, interest rates needed to be raised moderately months ago. All of this should have been entirely predictable, but instead of "oh god this is ready to blow" when stock market valuations were way above prepandemic levels everyone was like "this is awesome, I bet it'll keep going!" There's no free lunch, you can't pump that much money into an economy that isn't doing a lot and not have consequences.

tootie 4y ago

My biggest concern is that the Fed is actually just not in the driver's seat at all right now. Raising rates is definitely the right thing to do and will at least help, but the inflationary pressures don't seem to be monetary at all. There's just no policy answers to the supply issues and if a stock market crash didn't slow down consumer demand, idk how rate cuts are going to do it. The best case is this curtails some of the wage-price spiral which is not entirely positive. Asset deflation has already happened without their help. May as well sink my savings into Luna and hope for a turnaround.

jejeyyy77 4y ago

This. Even in today's announcement, they seemed behind again claiming "American companies are in a strong position to weather through" - but we are already seeing mass layoffs and hiring freezes.

johnbellone 4y ago
I'd argue that a hiring freeze is an appropriate way of weathering an economic crisis. We have really only seen mass layoffs in a small handful of companies. The most recent one went on a hiring spree without any real plan to execute, e.g. new revenue.
aisengard 4y ago
Sure, maybe in tech, which had been in an unsustainable bubble for a long time. But unless everything changed in the last few weeks, we haven't seen this in the overall labor market, which remains as hot and labor-friendly as ever. Only interest rate bumps will put a dent into this unprecedentedly strong labor market.