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When historians look at this in the future I bet they’ll say there was nothing the fed could’ve done. The fed should increase rates another 200bps, I’m sure th
by endisneigh 4y ago
When historians look at this in the future I bet they’ll say there was nothing the fed could’ve done.
The fed should increase rates another 200bps, I’m sure that’ll make the winter gas prices go down.
- tiahura 4y agoThey should have started raising rates as the economy started reopening. It wasn’t real hard to see.
- zeusk 4y agoAnd should also cause plenty of pain in financial and job markets.
- duped 4y agoEconomists are looking at this today and saying there's not much the Fed can do. They have crude and big hammers. You need more than just dynamite to sculpt Mt Rushmore. Historians should be looking at Congressional inaction, and how unified obstruction from one party and division in the other made it impossible for the federal government to enact meaningful policy initiatives that could have done anything.
- thehappypm 4y agoCongressional action is a major cause of this, spending trillions.
- hnuser847 4y ago> Congressional action is a major cause of this, spending trillions. And the Fed enabling the Federal government to do so very cheaply, by purchasing a large amount of the newly created Treasuries.
- socialismisok 4y agoIt's not a primary cause, though it likely had a minor impact. We're supply side constrained.
- Axien 4y agoIt is absolutely a primary cause. Adding more demand worsens supply side issues.
- socialismisok 4y agoIf it results in demand. Not all spending by the government leads to demand. I see people blaming student loan forgiveness, for example, and like... No one has redeemed that yet and it's not clear how much that will even have an immediate effect. If someone keeps paying off their loans at the same rate they were, they won't have increased demand right away. Likewise, if people increase their savings or pay down other debts, demand isn't increased right away. It's just not as simple to draw a line to specific government spending and say "that caused inflation".
- thehappypm 4y agoMaybe for some industries, but this inflation is very broad base. A supply constraint is likely to cause inflation in individual sectors, and we certainly see that for things like new cars. But it’s hard to buy into every single sector being supply constrained at the same time.
- taylodl 4y agoReally? We've had a global pandemic wrecking supply chains all over the world, lockdowns continue in China - one of the world's largest manufacturing entities, and we have the Ukrainian War wrecking energy and food supplies. Altogether every single sector of the economy is impacted. I'm not sure why you'd think that wouldn't be the case.
- starkd 4y agoNot to mention a decade of very loose money policy.
- Axien 4y agoCongressional action made it worse. They literally injected another three trillion dollars of infrastructure spending into an already heated economy. How exactly is the fed suppose to fight the government printing presses?
- philjohn 4y agoThat $3tn is needed desperately, and spending on infrastructure is far less inflationary, especially in a supply crunch.
- ballenf 4y agoCan't wait to see the final accounting on how much of that spending makes it to actual bridges and roads and the like.
- karatinversion 4y agoThe fed is the one with the money printers. The federal government finances its operations through taxes and borrowing.
- starkd 4y agoThe congress sets fiscal policy that choose to fuel deficit spending.
- karatinversion 4y agoYes, and the deficit is equal to net government borrowing, because it is the part of expenditure financed through borrowing rather than taxes.
- acuozzo 4y agoI'm not sure I follow your line of thinking. The cause of inflation is an increase in the cost of goods and services. This is a choice that individuals within companies make. It is not a natural consequence of increasing the money supply.
- caeril 4y ago> You need more than just dynamite to sculpt Mt Rushmore. Not really. Volcker did his job with dynamite just fine. You raise interest rates above prevailing inflation rates. Easy. But the current Fed is stuck. They can't fix inflation Volcker-style (hiking to 9-10%) without destroying the bond market and kicking off a cascading debt crisis. So they're targeting a middle-ground terminal rate of 4.5% and hoping the can will be kicked long enough that it will be someone else's problem in the medium-term future. Good luck to them.
- akmarinov 4y agoDon't know why you're being downvoted. This isn't a problem that raising interest rates can fix. Raising interest rates can't create supply on inelastic demand.
- thehappypm 4y agoDemand is not inelastic. Folks with no jobs don’t buy cars and gasoline.
- akmarinov 4y agoUnemployment is at an all time low, so yeah...
- thehappypm 4y agoSo yeah.. Fed has a tool for that.. which they will keep hammering
- akmarinov 4y agoPeople still need to eat and that food gets processed and delivered with energy. They'll have to heat their homes in the coming months, all of that has been hit hard with energy prices and is something that can't be wished away with higher rates.
- thehappypm 4y agoAre you implying that people have zero control over their spending?
- akmarinov 4y agoOn inelastic products, if you've read my point above - yeah. Can you turn off your spending on food? Edit: from the report: > Increases in the shelter, food, and medical care indexes were the largest of many contributors to the monthly seasonally adjusted all items increase. Can't turn off spending for food and medical care if you want to live
- dragontamer 4y agoThe core CPI consisting of house and car prices, is absolutely affected by the interest rate environment.
- deleted 4y ago[deleted]