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> The big picture: This points to a conundrum. The Fed is raising rates to cool inflation. But rate hikes are driving higher rents, which are fueling inflation.

• JumpCrisscross 4y ago
  > while it should be 2% points over inflation Do you really think we solved central banking in 1992 [1], and if only you were one of the central bank chiefs we would be fine? [1] https://en.m.wikipedia.org/wiki/Taylor_rule https://en.m.wikipedia.org/wiki/Taylor_rule
  • SilasX 4y ago
    I don’t follow. The link supports the claim that interest rates should be above inflation when the latter is above target.
    • slaw 4y ago
      I understood it as rhetorical question.
      • SilasX 4y ago
        Then it's a poor use of the technique, since the parent of that comment never implied otherwise, and doesn't provide enough to extract what the argument actually is. However much or little we have or haven't "solved central banking", the comment I replied to was linking textbook knowledge that agreed with its parent. So any substantive disagreement there is unclear -- hence my comment.
    • jdoliner 4y ago
      The implication is that because this rule is from 1992 (which I guess is considered ancient history), arguing that it should be implied here is essentially saying that central banking was solved in 1992. It's a bad argument.
      • SilasX 4y ago
        But it’s a bad reply too. It just means the rule is from 1992. That gives us no way to gauge whether the rule was invalidated in the intervening times. As I like to say, we launch spacecraft based on models of celestial mechanics from the 1680s. Doesn’t make them wrong or disaster-prone. If you replied to someone that “oh you think celestial mechanics was perfected in the 1680s?”, then a lay reader should be equally confused as to why they should doubt the person you replied to. If you have a reason some rule is invalid, post it, FFS. Don’t just say it’s from $YEAR. And definitely don’t rely on ambiguity as a way to look smart and unquestionable. But of course, he’s a longtime poster, so I guess he gets a free pass.
• eushebdbsh 4y ago
  people have taken on all this cheap debt and are just realising they have to pay for it
  • atlgator 4y ago
    To be fair, the people that took on the cheap debt aren't necessarily the ones paying for it.
  • autaut 4y ago
    Do you really think that rents in New York are because of cheap debt and not because a tiny island has been captured by billions and billions of corporate luxury development, while at the same time the supply of appartamenti is choked by there being more Airbnb places than places being rented. Covid has been the greatest transfer of wealth upward in our lifetime, but sure it’s cheap personal debt.
    • lumost 4y ago
      I'm curious how viable permanent AirBnBs will be once interest rates rise. It's easy to make ends meet when the house rises at 20% per year, and 2 weekends pays for the mortgage. If the same house's mortgage costs 4x and doesn't sell for 6 months it's a less attractive deal.
    • eushebdbsh 4y ago
      i didn't say personal?
• webspaceadam 4y ago
  this is bullshit. big time
• chii 4y ago
  > But rate hikes are driving higher rents, which are fueling inflation. how is higher rents fueling inflation? People paying higher rents (but on the same income) will have to forego some spending, thus reducing demand for some goods/services. So you'd actually expect that higher rents would drive _down_ inflation!
  • roywiggins 4y ago
    Housing is part of CPI. If rents rise then the CPI will rise too, all else being equal. https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
    • chii 4y ago
      > all else being equal. if rents rise, and other CPI items also rise, then it's not true that this is "all else being equal". If other items also rise, it means that there's more money being spent, which implies that people have more money to spend, and thus, income must be rising. If rent rises are offset by costs of other items going down, then CPI won't rise - and this would happen if the rent is consuming more proportion of income, and thus, less is left available for the other CPI items. I dont know which situation we are currently in today. I suspect that income is rising, and thus, inflation is high. Increasing rates would push up rent, but not push up income, and thus the proportion of rent vs income grows higher and thus lower inflation (in the future).
  • nemothekid 4y ago
    >will have to forego some spending, thus reducing demand for some goods/services Or they will increase costs; which is (1) people (labor) demanding higher wages or (2) business increasing the costs of good to cover rent costs. Given that rent is already the biggest cost and has been growing steadily, it may be the case the other spending areas have been dialed to a minimum already.
• Aunche 4y ago
  > But rate hikes are driving higher rents This doesn't make sense to me. Rate hikes decrease spending overall, so why would rent be any different?
  • bfgoodrich 4y ago
  • aluminussoma 4y ago
    The increased rates make home mortgages unaffordable. This pushes housing demand to rents because people need to live somewhere. Rental prices increase while home prices decrease - bad, bad stagflation.
  • deathanatos 4y ago
    Demand for a place to live is much more inelastic. And rate hikes make it harder to purchase a home, by raising the cost of them. That forces out of the home-buying market those who would have bought a home at the pre-hike rate … and forces them back into the rental market. Seems to me like demand goes up. (Certainly, it makes it harder for landlords to acquire new properties, but I think corporations are going to weather it better than people — i.e., people will be forced out of that market before corporations.)
    • zormino 4y ago
      Also new mortgages and variable rate mortgages get more expensive, and landlords need to charge more to cover their costs.
• gpt5 4y ago
  >Year over year inflation is 9.3% and Fed interest rate is only 1.5%, while it should be 2% points over inflation. This ignores the realities of the market. A much lower rate than 11.3% (e.g. a 4%) would lead to a deep recession due to a shrinking money supply, which in turn would "counteract" inflation.
  • acchow 4y ago
    You don’t need to go to 11.3%. As raise rise, inflation falls (assuming real rates are non-negative, which we haven’t achieved yet)
• tmnvix 4y ago
  > But rate hikes are driving higher rents, which are fueling inflation Rate hikes appear to be doing the opposite to rents here in NZ