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RANT: This inflation and coming recession is entirely on the hands of the current leadership in the Fed and Treasury. Their super-low interest rates over the ye

RANT: This inflation and coming recession is entirely on the hands of the current leadership in the Fed and Treasury. Their super-low interest rates over the years are coming full circle. We live in a centrally planned economy. My advice to the Fed is to set the Fed Funds Rate to equal inflation! This will stop the wild swings in the economy and keep inflation in check. When the Fed Funds Rate is lower than inflation there is an arbitrage opportunity for anyone who has access to this money to invest it broadly into the economy and get a positive return. I actually think this is a huge source of income inequality because only the most wealthy have access to this arbitrage opportunity, but that is another rant.

throwingrocks 4y ago
Yeah....and the inflation we're seeing elsewhere in the world is just a coincidence.
- coffeebeqn 4y ago
  EU had negative interest rates for a decade. Low interest rates during the good times is definitely a mistake You end up paying for eventually
  - kmonsen 4y ago
    That’s the thing that makes me question the whole Keynesian/ interest rate setting problem, you cannot know if you are living in good times are bad times. That requires knowledge of the future. Let’s say all of this is due to the war in Russia, or in some alternate reality China carpet bombs Taiwan, if you thought you were living in bad times before the event you are in for a rude awakening. It’s the same as black swans and cannot really work over time.
    - coffeebeqn 4y ago
      You know if unemployment is low and the economy is having solid growth at the time.
      - kmonsen 4y ago
        You mean like right now? I understand this is a bit snarky, but I think it perfectly makes my point clear. By some metrics right now looks like a golden age, by other metrics it looks like staring into the abyss.
        coffeebeqn 4y ago
        Personally I’m still divided on the current situation. I’m not sure why we as workers would view very low unemployment as anything other than amazing. Our overlords seem to hate that workers have bargaining power finally and are doing everything they can to end it
- germandiago 4y ago
  there is some truth in that rant. The inflation, btw, can be imoorted via currency exchange. For example, anything for which you pay in dollars (a strong dollar now) is more expensive. If you add the exchange rate to the fact of the inflation itself you end up paying the sum of both differences. The strong dollar is also the reason why EU has no choice but to follow the interest rate escalation from dollars: if they do not do it, people run away to buy follars because the euro suffers depreciation. Complex topic, with more ramifications than it looks at first.
- starkd 4y ago
  The US Dollar is a world currency.
- HideousKojima 4y ago
  Seeing as every single central bank has similar monetary policy to the US, and almost all governments in Europe and elsewhere injected huge amounts of cheap/free cash into their economies in attempts to counter the economic effects of lockdowns/Covid, it's anything but a coincidence. It's a confirmation that such policies do in fact cause inflation.
- FollowingTheDao 4y ago
  "Elsewhere" they have also had 0% or even negative Central Bank Interest rates. https://pearsonblog.campaignserver.co.uk/wp-content/uploads/Central-bank-interest-rates31.png https://pearsonblog.campaignserver.co.uk/wp-content/uploads/...
eloff 4y ago
Simple rules don't work with something as complex as the entire economy.
arcbyte 4y ago
Yup they should have been raising rates ~2013. US government should also have been starting to pay down debt in that time frame too. It's like blind men are at the wheel of the economy.
throw0101a 4y ago
> Their super-low interest rates over the years are coming full circle. Super-low interest rates have very little to do with it. The Fed rate has been low for over a decade and inflation has only appeared recently: * https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Similarly neither has QE done much about consumer prices. People predicted the almost end of the financial world when QE started years ago and not much has happened in the intervening years; from 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Neither does money supply: Japan's M2 has been rising for decades and they've had low inflation (and even deflation) in that same period: * https://fred.stlouisfed.org/graph/?g=PA7P https://fred.stlouisfed.org/graph/?g=PA7P The current situation is partly due to velocity and the cheques that were sent out by the Treasury (not Fed) earlier in 2022. But also due to supply-side stuff life oil (see RU) and food (see RU). An SF Fed report estimates about half of the current US inflation is on the supply side/chain side of things: * https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/how-much-do-supply-and-demand-drive-inflation/ https://www.frbsf.org/economic-research/publications/economi...

throwingrocks 4y ago

Yeah....and the inflation we're seeing elsewhere in the world is just a coincidence.

coffeebeqn 4y ago
EU had negative interest rates for a decade. Low interest rates during the good times is definitely a mistake You end up paying for eventually
- kmonsen 4y ago
  That’s the thing that makes me question the whole Keynesian/ interest rate setting problem, you cannot know if you are living in good times are bad times. That requires knowledge of the future. Let’s say all of this is due to the war in Russia, or in some alternate reality China carpet bombs Taiwan, if you thought you were living in bad times before the event you are in for a rude awakening. It’s the same as black swans and cannot really work over time.
  - coffeebeqn 4y ago
    You know if unemployment is low and the economy is having solid growth at the time.
    - kmonsen 4y ago
      You mean like right now? I understand this is a bit snarky, but I think it perfectly makes my point clear. By some metrics right now looks like a golden age, by other metrics it looks like staring into the abyss.
      - coffeebeqn 4y ago
        Personally I’m still divided on the current situation. I’m not sure why we as workers would view very low unemployment as anything other than amazing. Our overlords seem to hate that workers have bargaining power finally and are doing everything they can to end it
germandiago 4y ago
there is some truth in that rant. The inflation, btw, can be imoorted via currency exchange. For example, anything for which you pay in dollars (a strong dollar now) is more expensive. If you add the exchange rate to the fact of the inflation itself you end up paying the sum of both differences. The strong dollar is also the reason why EU has no choice but to follow the interest rate escalation from dollars: if they do not do it, people run away to buy follars because the euro suffers depreciation. Complex topic, with more ramifications than it looks at first.
starkd 4y ago
The US Dollar is a world currency.
HideousKojima 4y ago
Seeing as every single central bank has similar monetary policy to the US, and almost all governments in Europe and elsewhere injected huge amounts of cheap/free cash into their economies in attempts to counter the economic effects of lockdowns/Covid, it's anything but a coincidence. It's a confirmation that such policies do in fact cause inflation.
FollowingTheDao 4y ago
"Elsewhere" they have also had 0% or even negative Central Bank Interest rates. https://pearsonblog.campaignserver.co.uk/wp-content/uploads/Central-bank-interest-rates31.png https://pearsonblog.campaignserver.co.uk/wp-content/uploads/...

eloff 4y ago

Simple rules don't work with something as complex as the entire economy.

arcbyte 4y ago

Yup they should have been raising rates ~2013. US government should also have been starting to pay down debt in that time frame too. It's like blind men are at the wheel of the economy.

throw0101a 4y ago

> Their super-low interest rates over the years are coming full circle. Super-low interest rates have very little to do with it. The Fed rate has been low for over a decade and inflation has only appeared recently: * https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS Similarly neither has QE done much about consumer prices. People predicted the almost end of the financial world when QE started years ago and not much has happened in the intervening years; from 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Neither does money supply: Japan's M2 has been rising for decades and they've had low inflation (and even deflation) in that same period: * https://fred.stlouisfed.org/graph/?g=PA7P https://fred.stlouisfed.org/graph/?g=PA7P The current situation is partly due to velocity and the cheques that were sent out by the Treasury (not Fed) earlier in 2022. But also due to supply-side stuff life oil (see RU) and food (see RU). An SF Fed report estimates about half of the current US inflation is on the supply side/chain side of things: * https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/how-much-do-supply-and-demand-drive-inflation/ https://www.frbsf.org/economic-research/publications/economi...