5 ms·

> I guess it's strange to me how the Fed can pump every asset class to the moon, force companies to over hire to meet demand, and cause a huge inflationary prob

by juve1996 4y ago

> I guess it's strange to me how the Fed can pump every asset class to the moon, force companies to over hire to meet demand, and cause a huge inflationary problem for consumers There were no consumer inflation issues for the past decade. It took a once in a life time pandemic supply shock to cause those issues. You're being unfair. It's easy to blame the fed for all your problems. The fact is inflation was stable and the economy was just fine prior to the COVID19 pandemic. I don't think any amount of rate raises prior to 2020 would have had any appreciable impact on what we're facing now. Most of these layoffs are happening in the tech sector. Others are healthy. This isn't an economy wide problem yet. It's hard to not blame the individual companies for poor management. > Instead I find I'm invited to blame the average business or home owner for being "reckless" for hiring to meet demand for buying a home for their family, while praising the Fed for "doing what's necessary"? Give me a break. The fact is if you want what you want and want it now, and everyone else does, you have to pay. It's easy to say "oh they should've raised rates in 2017 or 2014" in 2022. It was much harder to say back then.

paulmd 4y ago
> It's easy to say "oh they should've raised rates in 2017 or 2014" in 2022. It was much harder to say back then. it's funny that you brought this up unprompted because this is the obvious counterargument - the fed really really should have been doing moderate tightening of the interest rate in 2017-2018-2019 and everybody knows it, even you. Everyone said it too, I completely do not get your "it was much harder to say it back then", this was specifically something that everyone said was a bad idea except for one individual (let's call him Individual Number One) who wanted to goose the economy to get numbers up for his re-election the following year, and instead leaned on the fed to cut interest rates instead, throwing gas onto an already-roaring fire. And then when the pandemic hit the fed had absolutely no room to maneuver. https://www.washingtonpost.com/business/2019/10/30/federal-reserve-cuts-interest-rate-third-time-this-year-effort-boost-us-economy/ https://www.washingtonpost.com/business/2019/10/30/federal-r... this was all extremely predictable, for literally everyone except Individual #1, who didn't really care.
- juve1996 4y ago
  There were plenty of times to raise rates even before the Trump administration. But there were no major negative impacts until the COVID19 pandemic. The point is it's easy for us to say this now. Had the pandemic not occurred we'd maybe still be in the position we were in 2019. You can argue for resiliency but you can't time the market. You could argue rates should've been raised in 12, 13, 14, 15, 16, 17, 18, 19. If you optimize too much for resiliency, then you overcorrect and cause recessions, which no one wants. And there'd be people just like you parroting how "i told you they shouldn't have raised rates!" Now let's look at the facts. Despite sharp rate increases, the economy still grew last quarter, inflation has is normalizing, and the job market outside of tech is still robust. Frankly, hard to think of a better outcome. The asset inflation prior to COVID19 was slightly problematic. But the inflation we face now has less to do with that and more to do with demographic shifts and larger societal changes that needed a spark to begin.
  - twblalock 4y ago
    Inflation "normalizing" is actually likely to be due to a change in the way it is measured: https://twitter.com/jasonfurman/status/1624093631929020416 https://twitter.com/jasonfurman/status/1624093631929020416
kypro 4y ago
> There were no consumer inflation issues for the past decade. It took a once in a life time pandemic supply shock to cause those issues. You're being unfair. Not really... Inflation began spiking in late 2020 / early 2021. It was completely foreseeable given how strong economic demand was and how quickly CPI was raising that inflation would be high in 2021. When CPI shot past 2% the Fed basically told businesses and investors not to worry about rates and that they were going to allow inflation to run hot and stimulate demand. What you're saying suggests you don't understand what happen. Inflation surprised no one in 2021 the Fed was actively encouraging it for months while it was well beyond 2%. The Fed was basically telling people that if they had cash in the bank that they would continue to erode its value through inflation. This is why businesses were scrambling to spend and there was high demand for hard assets like real estate. Its simple asset allocation. If you believe your cash is going to have negative real yields for the foreseeable future then you need to get out of cash and buy stuff which can benefit from the economic demand ASAP. > The fact is inflation was stable and the economy was just fine prior to the COVID19 pandemic. I don't think any amount of rate raises prior to 2020 would have had any appreciable impact on what we're facing now. I'm actually of the opinion that monetary policy was appropriate prior to 2020. I'm not someone who believes interest rates have been too low since the GFC although I'm aware this is a common talking point of people critical of the Fed. The way I see it the Fed has a duty to keep inflation at their 2% target. The supportive monetary policy prior to 2020 was in pursuit of this goal and therefore appropriate imo so long as we care about that 2%. I disagree with what they did in 2021 and beyond precisely because they didn't do their job and disregarded their 2% inflation target in pursuit of keeping demand high. > Most of these layoffs are happening in the tech sector. Others are healthy. This isn't an economy wide problem yet. It's hard to not blame the individual companies for poor management. It's a tech problem for a reason though. Tech is naturally more interest rate sensitive than other sectors due to the funding and growth dynamics, but other rate sensitive sectors like real estate are also suffering. But the largest reason tech over invested in 2021 was because demand that was being pumped into the economy was largely being pushed into tech because of lockdowns. I'm also of the opinion this will spread into the broader economy later this year and the full cost of the Feds mistake has not yet been felt. > The fact is if you want what you want and want it now, and everyone else does, you have to pay. I guess I don't really understand what you're saying. I mean do you think it was just all a coincidence or something? Why do you think people and business all suddenly wanted to buy things at the same time? Can you think of any reason why that might of happened? Maybe people's cash was being erode by negative real yields? Maybe the government was stimulating demand via QE and fiscal stimulus? Maybe the Fed was buying hundreds of billions of dollars of assets while inflation was running above 2%? Maybe the central bank was explicitly telling people that they would continue to erode their purchasing power and couldn't give a damn about their inflation target? Honestly it's hard for me to even understand how someone can even blame stock investors, crypto investors, real estate investors, tech companies, bond investors, consumers, etc all for being too greedy without even questioning why they were all so suddenly so greedy at exactly the same time. > It's easy to say "oh they should've raised rates in 2017 or 2014" in 2022. It was much harder to say back then. As I mentioned, this is opposite to the position I hold. Rates prior to 2020 were mostly appropriate imo and if anything I believe monetary policy should have been more accommodative.

paulmd 4y ago

> It's easy to say "oh they should've raised rates in 2017 or 2014" in 2022. It was much harder to say back then. it's funny that you brought this up unprompted because this is the obvious counterargument - the fed really really should have been doing moderate tightening of the interest rate in 2017-2018-2019 and everybody knows it, even you. Everyone said it too, I completely do not get your "it was much harder to say it back then", this was specifically something that everyone said was a bad idea except for one individual (let's call him Individual Number One) who wanted to goose the economy to get numbers up for his re-election the following year, and instead leaned on the fed to cut interest rates instead, throwing gas onto an already-roaring fire. And then when the pandemic hit the fed had absolutely no room to maneuver. https://www.washingtonpost.com/business/2019/10/30/federal-reserve-cuts-interest-rate-third-time-this-year-effort-boost-us-economy/ https://www.washingtonpost.com/business/2019/10/30/federal-r... this was all extremely predictable, for literally everyone except Individual #1, who didn't really care.

juve1996 4y ago
There were plenty of times to raise rates even before the Trump administration. But there were no major negative impacts until the COVID19 pandemic. The point is it's easy for us to say this now. Had the pandemic not occurred we'd maybe still be in the position we were in 2019. You can argue for resiliency but you can't time the market. You could argue rates should've been raised in 12, 13, 14, 15, 16, 17, 18, 19. If you optimize too much for resiliency, then you overcorrect and cause recessions, which no one wants. And there'd be people just like you parroting how "i told you they shouldn't have raised rates!" Now let's look at the facts. Despite sharp rate increases, the economy still grew last quarter, inflation has is normalizing, and the job market outside of tech is still robust. Frankly, hard to think of a better outcome. The asset inflation prior to COVID19 was slightly problematic. But the inflation we face now has less to do with that and more to do with demographic shifts and larger societal changes that needed a spark to begin.
- twblalock 4y ago
  Inflation "normalizing" is actually likely to be due to a change in the way it is measured: https://twitter.com/jasonfurman/status/1624093631929020416 https://twitter.com/jasonfurman/status/1624093631929020416

kypro 4y ago

> There were no consumer inflation issues for the past decade. It took a once in a life time pandemic supply shock to cause those issues. You're being unfair. Not really... Inflation began spiking in late 2020 / early 2021. It was completely foreseeable given how strong economic demand was and how quickly CPI was raising that inflation would be high in 2021. When CPI shot past 2% the Fed basically told businesses and investors not to worry about rates and that they were going to allow inflation to run hot and stimulate demand. What you're saying suggests you don't understand what happen. Inflation surprised no one in 2021 the Fed was actively encouraging it for months while it was well beyond 2%. The Fed was basically telling people that if they had cash in the bank that they would continue to erode its value through inflation. This is why businesses were scrambling to spend and there was high demand for hard assets like real estate. Its simple asset allocation. If you believe your cash is going to have negative real yields for the foreseeable future then you need to get out of cash and buy stuff which can benefit from the economic demand ASAP. > The fact is inflation was stable and the economy was just fine prior to the COVID19 pandemic. I don't think any amount of rate raises prior to 2020 would have had any appreciable impact on what we're facing now. I'm actually of the opinion that monetary policy was appropriate prior to 2020. I'm not someone who believes interest rates have been too low since the GFC although I'm aware this is a common talking point of people critical of the Fed. The way I see it the Fed has a duty to keep inflation at their 2% target. The supportive monetary policy prior to 2020 was in pursuit of this goal and therefore appropriate imo so long as we care about that 2%. I disagree with what they did in 2021 and beyond precisely because they didn't do their job and disregarded their 2% inflation target in pursuit of keeping demand high. > Most of these layoffs are happening in the tech sector. Others are healthy. This isn't an economy wide problem yet. It's hard to not blame the individual companies for poor management. It's a tech problem for a reason though. Tech is naturally more interest rate sensitive than other sectors due to the funding and growth dynamics, but other rate sensitive sectors like real estate are also suffering. But the largest reason tech over invested in 2021 was because demand that was being pumped into the economy was largely being pushed into tech because of lockdowns. I'm also of the opinion this will spread into the broader economy later this year and the full cost of the Feds mistake has not yet been felt. > The fact is if you want what you want and want it now, and everyone else does, you have to pay. I guess I don't really understand what you're saying. I mean do you think it was just all a coincidence or something? Why do you think people and business all suddenly wanted to buy things at the same time? Can you think of any reason why that might of happened? Maybe people's cash was being erode by negative real yields? Maybe the government was stimulating demand via QE and fiscal stimulus? Maybe the Fed was buying hundreds of billions of dollars of assets while inflation was running above 2%? Maybe the central bank was explicitly telling people that they would continue to erode their purchasing power and couldn't give a damn about their inflation target? Honestly it's hard for me to even understand how someone can even blame stock investors, crypto investors, real estate investors, tech companies, bond investors, consumers, etc all for being too greedy without even questioning why they were all so suddenly so greedy at exactly the same time. > It's easy to say "oh they should've raised rates in 2017 or 2014" in 2022. It was much harder to say back then. As I mentioned, this is opposite to the position I hold. Rates prior to 2020 were mostly appropriate imo and if anything I believe monetary policy should have been more accommodative.