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Plus we pretty much lowered rates to 0. Europe's experimentation with negative interest rates yielded... well it's debatable whether it yielded anything of sub

Plus we pretty much lowered rates to 0. Europe's experimentation with negative interest rates yielded... well it's debatable whether it yielded anything of substance (pun intended). So there's pretty much nowhere else to go, and if we want to have the option to lowering rates to combat future crises... well it looks like we'll have to pay for the option. Human complacency never ceases to fuck things up. Those who seriously plan ahead are a minority, and don't control the ballot box.

dhruval 4y ago
“ Those who seriously plan ahead are a minority, and don't control the ballot box.” Sadly true. And sometimes this reduces the benefits of planning ahead. If the fed money printer will bail is out every time then it makes financial sense to splurge.
dragontamer 4y ago
On the contrary. We're not complacent. The Fed is raising rates, like it should be. Its a known fact that the Fed Rate takes months, maybe years, before its effects propagate through the economy. The 2.25% raise in just a few months is the steepest increase in decades, one of the most proactive moves ever done. -------- But we as a society need to also be proactive and understand what this means. It means higher mortgage rates, higher rates for car loans, more difficult student loans, more expensive debt. There are a couple of... other state banks... who are ignoring the issue and are dropping rates right now, despite the current state of the economy. Those are the ones who seem to have a short-sighted view on the world. USA is actually leading the charge and is more proactive than most other countries on this matter. Furthermore, our political system is talking about it, and we're right now talking about it here on news.ycombinator.com. We're all being proactive and forward looking right now. And even back in 2020, the political system had the debates and forward looking statements about inflation risk vs COVID19 recession risks. No one ever stopped looking forward. Was it perfect? No. But no one's perfect when looking into the future. But the political system absolutely discussed and decided upon what we should do. I don't think anybody was short-term thinking at any of these points, we were just trapped between bad choices. -------- For the most part, the super-low rates from 2010 through 2019 have been confirmed to be a good idea, as it kept inflation at the 2% for the duration. We were roughly on target. But we also were in a mystical time, of warped thinking of cheap money for the duration.
- scottLobster 4y ago
  I'm referring to the complacency of the last 10 years, when every time the fed even muttered about raising rates they caved to Wall St panics and politics. Those super low rates are primarily responsible for everything from the insane wealth inequality we've developed over the last 10 years to housing becoming largely unaffordable to people losing their shirts gambling on bitcoin. What kept inflation at 2% was a perfect historical moment in global growth/globalization that will not come again in our lifetimes. Now when we need to borrow and invest in our economies the most, the cheap money is nowhere to be found up because we spent it all. It was a big party, and instead of having a few drinks and going home slightly buzzed we binged out, threw up in the toilet and are now waking up in a puddle of our own making with a raging hangover. And now all of a sudden we're being proactive because we've decided drinking a glass of water might be a good idea? Yeah, it was a good idea last night. It's the only idea left now.
  - dragontamer 4y ago
    > What kept inflation at 2% was a perfect historical moment in global growth/globalization that will not come again in our lifetimes. If that "perfectly balanced 2% inflation" was pushed away with say, the central bank raising interest rates, what do you think would have happened? We would have had deflation. Which is incredibly dangerous. Its not even a question, all of that inflationary pressure (low rates, QE1, QE2, QE3, etc. etc.) the central bank pushed from 2010 through 2019 was just barely able to sustain 2% inflation... the target. ----- We probably could have afforded to rock the boat a bit more than we did those 10 years though.
    - scottLobster 4y ago
      A target chosen completely arbitrarily. Obviously deflation is playing with fire, but I see no reason why something closer to 0% inflation would have been an issue. Maybe even a quarter or two of deflation wouldn't have killed things. Things more or less cost the same year to year? People would be less incentivized to invest unless they have an idea they think will have a return that beats a savings account? Cool, maybe slow, steady growth and savings could have stored up a decent cash pile for... oh, I don't know, a pandemic and a full blown war amongst (by world standards) wealthy nations? Those fun unforeseen events that I guess those in power (in the west at least) arrogantly deemed were no longer possible? There are probably literally a thousand proverbs in a thousand languages, probably more in languages lost to time, that amount of some version of "when times are good, prepare for the bad". This is fundamental human knowledge. I guess we generally agree, I just get frustrated when institutions like the fed, who are politically insulated by design, fail to appreciate their responsibility or make full use of their privileged position. Seems like for most of the last ten years leadership in general was conflict-avoidant to a fault.

dhruval 4y ago

“ Those who seriously plan ahead are a minority, and don't control the ballot box.” Sadly true. And sometimes this reduces the benefits of planning ahead. If the fed money printer will bail is out every time then it makes financial sense to splurge.

dragontamer 4y ago

On the contrary. We're not complacent. The Fed is raising rates, like it should be. Its a known fact that the Fed Rate takes months, maybe years, before its effects propagate through the economy. The 2.25% raise in just a few months is the steepest increase in decades, one of the most proactive moves ever done. -------- But we as a society need to also be proactive and understand what this means. It means higher mortgage rates, higher rates for car loans, more difficult student loans, more expensive debt. There are a couple of... other state banks... who are ignoring the issue and are dropping rates right now, despite the current state of the economy. Those are the ones who seem to have a short-sighted view on the world. USA is actually leading the charge and is more proactive than most other countries on this matter. Furthermore, our political system is talking about it, and we're right now talking about it here on news.ycombinator.com. We're all being proactive and forward looking right now. And even back in 2020, the political system had the debates and forward looking statements about inflation risk vs COVID19 recession risks. No one ever stopped looking forward. Was it perfect? No. But no one's perfect when looking into the future. But the political system absolutely discussed and decided upon what we should do. I don't think anybody was short-term thinking at any of these points, we were just trapped between bad choices. -------- For the most part, the super-low rates from 2010 through 2019 have been confirmed to be a good idea, as it kept inflation at the 2% for the duration. We were roughly on target. But we also were in a mystical time, of warped thinking of cheap money for the duration.

scottLobster 4y ago
I'm referring to the complacency of the last 10 years, when every time the fed even muttered about raising rates they caved to Wall St panics and politics. Those super low rates are primarily responsible for everything from the insane wealth inequality we've developed over the last 10 years to housing becoming largely unaffordable to people losing their shirts gambling on bitcoin. What kept inflation at 2% was a perfect historical moment in global growth/globalization that will not come again in our lifetimes. Now when we need to borrow and invest in our economies the most, the cheap money is nowhere to be found up because we spent it all. It was a big party, and instead of having a few drinks and going home slightly buzzed we binged out, threw up in the toilet and are now waking up in a puddle of our own making with a raging hangover. And now all of a sudden we're being proactive because we've decided drinking a glass of water might be a good idea? Yeah, it was a good idea last night. It's the only idea left now.
- dragontamer 4y ago
  > What kept inflation at 2% was a perfect historical moment in global growth/globalization that will not come again in our lifetimes. If that "perfectly balanced 2% inflation" was pushed away with say, the central bank raising interest rates, what do you think would have happened? We would have had deflation. Which is incredibly dangerous. Its not even a question, all of that inflationary pressure (low rates, QE1, QE2, QE3, etc. etc.) the central bank pushed from 2010 through 2019 was just barely able to sustain 2% inflation... the target. ----- We probably could have afforded to rock the boat a bit more than we did those 10 years though.
  - scottLobster 4y ago
    A target chosen completely arbitrarily. Obviously deflation is playing with fire, but I see no reason why something closer to 0% inflation would have been an issue. Maybe even a quarter or two of deflation wouldn't have killed things. Things more or less cost the same year to year? People would be less incentivized to invest unless they have an idea they think will have a return that beats a savings account? Cool, maybe slow, steady growth and savings could have stored up a decent cash pile for... oh, I don't know, a pandemic and a full blown war amongst (by world standards) wealthy nations? Those fun unforeseen events that I guess those in power (in the west at least) arrogantly deemed were no longer possible? There are probably literally a thousand proverbs in a thousand languages, probably more in languages lost to time, that amount of some version of "when times are good, prepare for the bad". This is fundamental human knowledge. I guess we generally agree, I just get frustrated when institutions like the fed, who are politically insulated by design, fail to appreciate their responsibility or make full use of their privileged position. Seems like for most of the last ten years leadership in general was conflict-avoidant to a fault.