13 ms·

Core US Inflation Rises to 40-Year High, Securing Big Fed Hike

33 points by mrep 4y ago

NewLogic 4y ago
Remember everyone at the Fed who refused to raise rates last year and hand waved inflation as transitory still has their job. They only started accepting inflation as real after introducing stock trading transparency rules which forced many to start unwinding their personal portfolios [1]. [1] https://www.usnews.com/news/business/articles/2022-02-18/federal-reserve-approves-stricter-trading-rules https://www.usnews.com/news/business/articles/2022-02-18/fed...
- FooBarBizBazz 4y ago
  The rule means that they > are limited to diversified investments such as mutual funds which are wrecked by rate hikes plenty. I don't think stock-picking has much to do with this.
  - FooBarBizBazz 4y ago
    Doubling down: Suppose I were a Fed bank president who wanted to profit from advance knowledge of changes to rates. When I know rates are going to decrease, I buy a growth ETF, like VIGRX, or a tech index like QQQ. Or I buy a bigger house, safe in the knowledge that prices will go up and I can refinance soon at lower rates. And if options are allowed and I want more gains, I buy calls on ETFs like the ones I mentioned. When I know rates are going to increase, I instead simply get out and hold cash. Or if options are allowed, I buy puts on QQQ, or at least sell calls. In all of these hypothetical transactions, I have benefited from my advance knowledge of rate changes, without picking a single individual stock. I can even make an argument that these diversified trades are more reflective of rate changes, since those changes have broad impact across the economy, whereas specific stocks are confounded by all sorts of idiosyncratic things. Using these ETFs, I average out more of the random variables that aren't "interest rates". So I don't see how this new rule, which bans stock picking by people at the Fed, matters a lot. These people don't regulate specific industries; they set rates. About the only exception I can think of is bank stocks: Maybe the Fed's interactions with specific banks are significant. But apart from that -- this seems good for appearances, but does it actually accomplish much? For congresspeople on the other hand, or for people in regulatory agencies, I get it. You don't want a regulator siding with one company over another, or, indeed, from being overinvested in whatever sector they're regulating ("Let pharma get profits at all costs! What do I care about opioids?"). But for people at the Fed? It's not a crazy rule, but I also don't think it does much.
- ganoushoreilly 4y ago
  At which point they all exited at the top....
- slaw 4y ago
  First it was inflation is transitory, then inflation is good for economy, then big interest hikes are coming. So far we see tiny .75% hikes. Fed refuses to increase interest rate so it at least matches inflation.
exabrial 4y ago
We need congress to stop writing blank checks. There's almost so much rate hikes can do, but this affects more than just the USA: Rate hikes will kill third world and developing nation's economies. And no, the answer isnt "mor taxes!", because one, that literally has never worked (we've raised taxes thousands of times now), but we don't tell and alcoholic to drink more water to dilute the alcohol, we tell them to stop drinking. s/alcohol/spending/
- avgDev 4y ago
  You provided a poor example. Less money in circulation = less spending. If we disregard that alcoholism is a sickness and will trump all other spending and make you lose every penny, then increasing taxation and removing money from people by raising rates would prevent the alcoholic from buying more booze. However, the example is silly the macro economics are much more complex with individuals and businesses spanning across many different sectors.
- mindslight 4y ago
  I'd say it's fantastic news that the Fed is finally being forced to do what they should have done decades ago. The real analogy to alcohol is the economy's addiction to low rates. The agglomeration, centralization, and intermediation of everything is not merely "late stage capitalism". Rather it directly follows from the decades-long policy of creating massive amounts of new money, just dumping it into the financial industry, and then writing that action off as "value neutral" while it's anything but. Given the choice between newly created money just continuing to fuel the everything bubble or spending it on specific policies, the latter is at least more deliberate in its effects. In general, higher interest rates will slow down the economy, which is a great thing for sustainable use of natural resources. If we want to conserve resources, then we need to change our time preference to not use them all as fast as possible! It's nonsensical to give lip service to global warming, and then continue pushing the economy to run as hot as possible with speculative malinvestments enabled by ZIRP. Freedom wise, long term higher rates encourage distributed ownership of capital rather than centralized financialization. For example an escooter is merely several hundred dollars, but under ZIRP it made sense for investors to (produce and) buy thousands of them to rent out, hoping to create some kind of future revenue stream. Our society is much better off if things, especially simple consumer goods, are under private ownership rather than administered by centralizing companies.
EdSharkey 4y ago
Fed could deflate the currency now by telling member banks to keep more in reserve. They can't steal value from the future (to drink off your lifeblood today) as the middleman if money doesn't flow. That's why that will not happen. Simple as. The party ends for the banksters when the purchasing power completely runs out on their currency. Who knows what happens now. Usually we have a big war and pandemic/plague at this stage to wipe the slate and provide cover for a currency reboot, but it appears we are fortunately not having that. Will we get free from the banksters? (Please say yes!)
- notch656a 4y ago
  Right now the reserve rate is 0%. https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
  - omeze 4y ago
    Does anyone know why raising the reserve requirements isnt an option bring discussed? My understanding was dropping it to zero was a reaction to covid, but it hasn’t been talked about as a lever since (afaik)
    - deleted 4y ago
      [deleted]
avgDev 4y ago
I cannot believe the student loan forgiveness when inflation is rampant. I am getting money back, as I paid my loans during the freeze. I'm just barely in the income level required. I believe nobody earning $125k or $250k household needs any forgiveness. I bought more things with those news(spent $12k vacation and ebikes), I know others purchasing more things due to those news and knowing that things will probably get even more expensive in the future. This bill doesn't change anything for future generations......and the timing is just awful...we need to take money away and make buying things hard not inject cash into pockets. Edit: Before anyone attacks me, I voted blue in last election.
- djanogo 4y ago
  With this "forgiveness" the "blue" bought several generation of people to vote for them. This type of "forgiveness"/"discrimination" is common in many countries, they just color it differently to make it look like it's good for society.
  - hezralig 4y ago
    Wait, you are telling me politicians did something for their base that was politically motivated to gain political leverage?
- comte7092 4y ago
  If you actually use your e-bike to displace gasoline consumption, thats probably a significant net positive on inflation. So much of this has been driven by high energy prices.
  - avgDev 4y ago
    I wont. I live in the burbs of a major city and don't feel safe riding on the street where cars travel 45mph. US just isn't very bike friendly in general. I mostly want to use the ebike to make my rides longer.
    - comte7092 4y ago
jonathan-adly 4y ago
https://archive.ph/2fnuj https://archive.ph/2fnuj
fallingfrog 4y ago
The PPP program disbursed around 800 billion dollars, most of which was forgiven. The student loan forgiveness, if it happens, would total between 440 billion and 600 billion over the next 10 years. Which one do you think is more responsible for inflation? Which one are more upset about? Who told you to be? Are those people ever going to have student loans? Did they go to college for almost free? What are their material economic interests now? Do you think they care about the next generation? Is a more educated populace going to be good or bad for their political base? Food for thought.
djohnston 4y ago
I shouldn't have paid off my loans and I should have lied to get some PPP money. Such missed opportunities :(
trasz 4y ago
Are corporate profits still going through the roof?
hellojesus 4y ago
I border on killing myself daily as a form of punishment for selling TBT a couple weeks before the Fed finally took action. Bought in at ~$21 on the very first high CPI print I saw. Then the Fed took 1.5 years to actually make the correct move, during which time it went as low as $15. Sold out when it finally, painfully climbed back up positive because the Fed started reversing course and I lost all hope. Two weeks later they finally decided to act like Keynesias and started the rate hike. Now it's in the lower $30s. Not killing myself has been difficult.
deleted 4y ago
[deleted]
ece 4y ago
The problems are on the supply side they say, we don't have much control over the supply side they say. Blunt hammers shouldn't be used here. MMTers are right. https://mobile.twitter.com/StephanieKelton/status/1483454011902726155 https://mobile.twitter.com/StephanieKelton/status/1483454011...

33 points by mrep 4y ago

Remember everyone at the Fed who refused to raise rates last year and hand waved inflation as transitory still has their job. They only started accepting inflation as real after introducing stock trading transparency rules which forced many to start unwinding their personal portfolios [1]. [1] https://www.usnews.com/news/business/articles/2022-02-18/federal-reserve-approves-stricter-trading-rules https://www.usnews.com/news/business/articles/2022-02-18/fed...

FooBarBizBazz 4y ago
The rule means that they > are limited to diversified investments such as mutual funds which are wrecked by rate hikes plenty. I don't think stock-picking has much to do with this.
- FooBarBizBazz 4y ago
  Doubling down: Suppose I were a Fed bank president who wanted to profit from advance knowledge of changes to rates. When I know rates are going to decrease, I buy a growth ETF, like VIGRX, or a tech index like QQQ. Or I buy a bigger house, safe in the knowledge that prices will go up and I can refinance soon at lower rates. And if options are allowed and I want more gains, I buy calls on ETFs like the ones I mentioned. When I know rates are going to increase, I instead simply get out and hold cash. Or if options are allowed, I buy puts on QQQ, or at least sell calls. In all of these hypothetical transactions, I have benefited from my advance knowledge of rate changes, without picking a single individual stock. I can even make an argument that these diversified trades are more reflective of rate changes, since those changes have broad impact across the economy, whereas specific stocks are confounded by all sorts of idiosyncratic things. Using these ETFs, I average out more of the random variables that aren't "interest rates". So I don't see how this new rule, which bans stock picking by people at the Fed, matters a lot. These people don't regulate specific industries; they set rates. About the only exception I can think of is bank stocks: Maybe the Fed's interactions with specific banks are significant. But apart from that -- this seems good for appearances, but does it actually accomplish much? For congresspeople on the other hand, or for people in regulatory agencies, I get it. You don't want a regulator siding with one company over another, or, indeed, from being overinvested in whatever sector they're regulating ("Let pharma get profits at all costs! What do I care about opioids?"). But for people at the Fed? It's not a crazy rule, but I also don't think it does much.
ganoushoreilly 4y ago
At which point they all exited at the top....
slaw 4y ago
First it was inflation is transitory, then inflation is good for economy, then big interest hikes are coming. So far we see tiny .75% hikes. Fed refuses to increase interest rate so it at least matches inflation.

exabrial 4y ago

We need congress to stop writing blank checks. There's almost so much rate hikes can do, but this affects more than just the USA: Rate hikes will kill third world and developing nation's economies. And no, the answer isnt "mor taxes!", because one, that literally has never worked (we've raised taxes thousands of times now), but we don't tell and alcoholic to drink more water to dilute the alcohol, we tell them to stop drinking. s/alcohol/spending/

avgDev 4y ago
You provided a poor example. Less money in circulation = less spending. If we disregard that alcoholism is a sickness and will trump all other spending and make you lose every penny, then increasing taxation and removing money from people by raising rates would prevent the alcoholic from buying more booze. However, the example is silly the macro economics are much more complex with individuals and businesses spanning across many different sectors.
mindslight 4y ago
I'd say it's fantastic news that the Fed is finally being forced to do what they should have done decades ago. The real analogy to alcohol is the economy's addiction to low rates. The agglomeration, centralization, and intermediation of everything is not merely "late stage capitalism". Rather it directly follows from the decades-long policy of creating massive amounts of new money, just dumping it into the financial industry, and then writing that action off as "value neutral" while it's anything but. Given the choice between newly created money just continuing to fuel the everything bubble or spending it on specific policies, the latter is at least more deliberate in its effects. In general, higher interest rates will slow down the economy, which is a great thing for sustainable use of natural resources. If we want to conserve resources, then we need to change our time preference to not use them all as fast as possible! It's nonsensical to give lip service to global warming, and then continue pushing the economy to run as hot as possible with speculative malinvestments enabled by ZIRP. Freedom wise, long term higher rates encourage distributed ownership of capital rather than centralized financialization. For example an escooter is merely several hundred dollars, but under ZIRP it made sense for investors to (produce and) buy thousands of them to rent out, hoping to create some kind of future revenue stream. Our society is much better off if things, especially simple consumer goods, are under private ownership rather than administered by centralizing companies.

EdSharkey 4y ago

Fed could deflate the currency now by telling member banks to keep more in reserve. They can't steal value from the future (to drink off your lifeblood today) as the middleman if money doesn't flow. That's why that will not happen. Simple as. The party ends for the banksters when the purchasing power completely runs out on their currency. Who knows what happens now. Usually we have a big war and pandemic/plague at this stage to wipe the slate and provide cover for a currency reboot, but it appears we are fortunately not having that. Will we get free from the banksters? (Please say yes!)

notch656a 4y ago
Right now the reserve rate is 0%. https://www.federalreserve.gov/monetarypolicy/reservereq.htm https://www.federalreserve.gov/monetarypolicy/reservereq.htm
- omeze 4y ago
  Does anyone know why raising the reserve requirements isnt an option bring discussed? My understanding was dropping it to zero was a reaction to covid, but it hasn’t been talked about as a lever since (afaik)
  - deleted 4y ago
    [deleted]

avgDev 4y ago

I cannot believe the student loan forgiveness when inflation is rampant. I am getting money back, as I paid my loans during the freeze. I'm just barely in the income level required. I believe nobody earning $125k or $250k household needs any forgiveness. I bought more things with those news(spent $12k vacation and ebikes), I know others purchasing more things due to those news and knowing that things will probably get even more expensive in the future. This bill doesn't change anything for future generations......and the timing is just awful...we need to take money away and make buying things hard not inject cash into pockets. Edit: Before anyone attacks me, I voted blue in last election.

djanogo 4y ago
With this "forgiveness" the "blue" bought several generation of people to vote for them. This type of "forgiveness"/"discrimination" is common in many countries, they just color it differently to make it look like it's good for society.
- hezralig 4y ago
  Wait, you are telling me politicians did something for their base that was politically motivated to gain political leverage?
comte7092 4y ago
If you actually use your e-bike to displace gasoline consumption, thats probably a significant net positive on inflation. So much of this has been driven by high energy prices.
- avgDev 4y ago
  I wont. I live in the burbs of a major city and don't feel safe riding on the street where cars travel 45mph. US just isn't very bike friendly in general. I mostly want to use the ebike to make my rides longer.
  - comte7092 4y ago

jonathan-adly 4y ago

https://archive.ph/2fnuj https://archive.ph/2fnuj

fallingfrog 4y ago

The PPP program disbursed around 800 billion dollars, most of which was forgiven. The student loan forgiveness, if it happens, would total between 440 billion and 600 billion over the next 10 years. Which one do you think is more responsible for inflation? Which one are more upset about? Who told you to be? Are those people ever going to have student loans? Did they go to college for almost free? What are their material economic interests now? Do you think they care about the next generation? Is a more educated populace going to be good or bad for their political base? Food for thought.

djohnston 4y ago

I shouldn't have paid off my loans and I should have lied to get some PPP money. Such missed opportunities :(

trasz 4y ago

Are corporate profits still going through the roof?

hellojesus 4y ago

I border on killing myself daily as a form of punishment for selling TBT a couple weeks before the Fed finally took action. Bought in at ~$21 on the very first high CPI print I saw. Then the Fed took 1.5 years to actually make the correct move, during which time it went as low as $15. Sold out when it finally, painfully climbed back up positive because the Fed started reversing course and I lost all hope. Two weeks later they finally decided to act like Keynesias and started the rate hike. Now it's in the lower $30s. Not killing myself has been difficult.

deleted 4y ago

[deleted]

ece 4y ago

The problems are on the supply side they say, we don't have much control over the supply side they say. Blunt hammers shouldn't be used here. MMTers are right. https://mobile.twitter.com/StephanieKelton/status/1483454011902726155 https://mobile.twitter.com/StephanieKelton/status/1483454011...