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I don’t understand your argument. A guy who got his PhD 7 years after the GFC should have foreseen the impact of low interest rates. He is making a very ration

I don’t understand your argument. A guy who got his PhD 7 years after the GFC should have foreseen the impact of low interest rates. He is making a very rational argument that interest rates are rising and the share of corporate profits available for stockholders will be lower.

mellavora 4y ago
I think you are right to criticize chiefalchemist, the comment is more snark than substance. The argument, as far as I understand it, is that if the Fed knew/believed in the arguments in the linked article, they would or should have acted differently over the last 10 years. The argument falls apart because no reason is given for the Fed acting differently. The Fed does not have a mandate to maintain corporate profitability nor does it set tax rates. They are surely aware that their actions have impacts on corporations, and they surely do consider this, but their mandate is clear: The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy "so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm https://www.federalreserve.gov/monetarypolicy/monetary-polic...
- chiefalchemist 4y ago
  What the mandate is and what is actually happening are not synonymous. Congress is also supposed to oversee The Fed and how often does that happen? Referencing theory is fine. But not as a substitute for reality. It's important we see and discuss reality.
- chiefalchemist 4y ago
  The Fed has A LOT of power and influence both in the direct impact of its actions, as well as the leadership and "culture" it establishes among its group-think peers. You're naive to think otherwise. Why are you making excuses for them? Instead of holding them to the higher standard they claim to be.?
- skippyboxedhero 4y ago
  All of the things mentioned in the article impact the Fed's mandate. It is like saying that the GFC didn't impact the Fed's mandate...but, ofc, we know it did because they cut rates to zero and gave hundreds of billions out. Funny how that works: the Fed has no responsibility when stock prices go up, but when they go down...immediate action. And 2008 happened, in part, because of the cut to 1% in 03-04 (no-one understand this today, synthetic CDO issuance pre that cut cycle was non-existent and suddenly went to tens of billions overnight because there was insufficient AAA securities with yields that could fund liabilities). We are just going through the same stuff over and over. These things have very real economic effects, they lead to massive volatility in employment, instability in prices, and have led to financial distortions that undermine basic aspects of how an economy functions (interest rates/the price of money no longer means anything outside of what the govt says it does, the result has been the most epic misallocation of capital in the history of the US economy).
chiefalchemist 4y ago
He's not making an argument. He's stating the obvious. With zero sense of shame and humility. Right? So to what end? FFS, this isn't a random fluff piece on Medium. It's from the most power financial organization in the world. And we're supposed to get just nod and get behind this? I'm not speaking to the individual per. He's simply another (over-educated) representative of a mindset that creates more problems than it solves. The Fed coming out in Sept of 2022 and proposing the "argument" is comical at best. Apparently, not a single history course is requited to get those flashy degrees, nor is staying up on current events. Instead, they toss this out as something insightful and profound in a "oh we didn't see this coming sorta way"? Only the naive would buy this. The bottom line: The Fed is making decisions without a sense for the broader context and/or broader impact is negligent and irresponsible. This is too little too late.
- chrisgd 4y ago
  We don’t know that. The Fed has been saying since 2021 they were going to raise rates. Thousands of people who get paid billions of dollars mostly missed it. Powell is either going to go down in history as someone who successfully transitioned to more normal rates or he wrecked the economy. This article isn’t the commentary of the FRB
  - chiefalchemist 4y ago
    > Thousands of people who get paid billions of dollars mostly missed it. Did they? In the 2007 sense? Where are the suicides? Where are any similar indicators? Anyone who didn't recognize the signals and the pressures being created is then highly overpaid. But being overpaid seems to be what happens when you happen to be in the right place at the right time. Regardless of what we don't know. We do know the income inequality gap keeps increasing. We do know more wealth is being concentrated in fewer hands. Well, we know this. Apparently the Fed likes to pretend otherwise. Where is the data that says thousands missed it? Sure it might not be the super easy money model the Fed shamelessly provided. But I don't see anyone leaving Wall Street, etc. cause the compensation and opportunity sucks.

mellavora 4y ago

I think you are right to criticize chiefalchemist, the comment is more snark than substance. The argument, as far as I understand it, is that if the Fed knew/believed in the arguments in the linked article, they would or should have acted differently over the last 10 years. The argument falls apart because no reason is given for the Fed acting differently. The Fed does not have a mandate to maintain corporate profitability nor does it set tax rates. They are surely aware that their actions have impacts on corporations, and they surely do consider this, but their mandate is clear: The Federal Reserve Act mandates that the Federal Reserve conduct monetary policy "so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm https://www.federalreserve.gov/monetarypolicy/monetary-polic...

chiefalchemist 4y ago
What the mandate is and what is actually happening are not synonymous. Congress is also supposed to oversee The Fed and how often does that happen? Referencing theory is fine. But not as a substitute for reality. It's important we see and discuss reality.
chiefalchemist 4y ago
The Fed has A LOT of power and influence both in the direct impact of its actions, as well as the leadership and "culture" it establishes among its group-think peers. You're naive to think otherwise. Why are you making excuses for them? Instead of holding them to the higher standard they claim to be.?
skippyboxedhero 4y ago
All of the things mentioned in the article impact the Fed's mandate. It is like saying that the GFC didn't impact the Fed's mandate...but, ofc, we know it did because they cut rates to zero and gave hundreds of billions out. Funny how that works: the Fed has no responsibility when stock prices go up, but when they go down...immediate action. And 2008 happened, in part, because of the cut to 1% in 03-04 (no-one understand this today, synthetic CDO issuance pre that cut cycle was non-existent and suddenly went to tens of billions overnight because there was insufficient AAA securities with yields that could fund liabilities). We are just going through the same stuff over and over. These things have very real economic effects, they lead to massive volatility in employment, instability in prices, and have led to financial distortions that undermine basic aspects of how an economy functions (interest rates/the price of money no longer means anything outside of what the govt says it does, the result has been the most epic misallocation of capital in the history of the US economy).

chiefalchemist 4y ago

He's not making an argument. He's stating the obvious. With zero sense of shame and humility. Right? So to what end? FFS, this isn't a random fluff piece on Medium. It's from the most power financial organization in the world. And we're supposed to get just nod and get behind this? I'm not speaking to the individual per. He's simply another (over-educated) representative of a mindset that creates more problems than it solves. The Fed coming out in Sept of 2022 and proposing the "argument" is comical at best. Apparently, not a single history course is requited to get those flashy degrees, nor is staying up on current events. Instead, they toss this out as something insightful and profound in a "oh we didn't see this coming sorta way"? Only the naive would buy this. The bottom line: The Fed is making decisions without a sense for the broader context and/or broader impact is negligent and irresponsible. This is too little too late.

chrisgd 4y ago
We don’t know that. The Fed has been saying since 2021 they were going to raise rates. Thousands of people who get paid billions of dollars mostly missed it. Powell is either going to go down in history as someone who successfully transitioned to more normal rates or he wrecked the economy. This article isn’t the commentary of the FRB
- chiefalchemist 4y ago
  > Thousands of people who get paid billions of dollars mostly missed it. Did they? In the 2007 sense? Where are the suicides? Where are any similar indicators? Anyone who didn't recognize the signals and the pressures being created is then highly overpaid. But being overpaid seems to be what happens when you happen to be in the right place at the right time. Regardless of what we don't know. We do know the income inequality gap keeps increasing. We do know more wealth is being concentrated in fewer hands. Well, we know this. Apparently the Fed likes to pretend otherwise. Where is the data that says thousands missed it? Sure it might not be the super easy money model the Fed shamelessly provided. But I don't see anyone leaving Wall Street, etc. cause the compensation and opportunity sucks.