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They will have to raise again. The slight change in tone "The Committee anticipates that some additional policy firming may be appropriate" was to prevent large

They will have to raise again. The slight change in tone "The Committee anticipates that some additional policy firming may be appropriate" was to prevent larger panic. Inflation is not done. This soft landing is really dragging out but they are stuck between a rock and a hard place trying to avoid stagflation or massive recession. You don't unwind a decade of free money in a year without consequences.

naasking 4y ago
The Fed doesn't control inflation, and it's even questionable whether rates are the best way to mitigate it.
- throwayyy479087 4y ago
  That take requires significant citation. A century of work says you’re wrong, and 3 years of attempting MMT has showed that’s wrong as well.
  - MJsGlove 4y ago
    The user may be referencing work done on global and domestic demographics (aging populations in china and at home) and supply chain challenges highlighted by the Ukraine issues, since Ukraine is home to critical manufacturing inputs for farming + Russian exports going offline (fertilizers and oil). Ukraine won’t come online any time soon to its previous capacity and the replacement for it isn’t known yet. The story on Russia is that it is being cut off completely from the west. The work on demographics is done by Pradhan and Goodhart and of course Peter Zeihan likes to discuss the latter as well. I don’t know where Zeihan gets his sources but he consults for the military and other government agencies. In any case, I’d like to see asset markets deflate courtesy of the Fed raising rates, so I would agree with your take on the Fed holding more responsibility.
  - bryanlarsen 4y ago
    The last 3 years is proof that we haven't been attempting MMT. MMT says that taxes should rise when inflation is up.
    - JumpCrisscross 4y ago
      > MMT says that taxes should rise when inflation is up Keynes said that. In theory, fiscal policy alone can keep an economy balanced. In practice, you need an independent central bank. MMT's novel assertion is that government debt is a monetary, not fiscal, exertion. (It also asserts raising rates is stimulative, et cetera.) It's broadly criticized and empirically unsubstantiated.
      - bryanlarsen 4y ago
        > It also asserts raising rates is stimulative, et cetera. Can you cite that? That's very odd, and contradictory to the MMT works I've read.
        alxmng 4y ago
        Interest on treasury bonds or federal reserve accounts can only come from new money. The Fed has no power to do anything but create money or sell money created by the treasury. All roads lead to the money printer. 1. When central banks raise interest rates, this means governments spend more on their interest payments. This translates into increased income for bondholders. Higher incomes lead to more consumer demand, pushing up prices. Similarly, banks benefit from higher interest payments from the Federal Reserve. In other words, the interest from the higher interest rates goes to someone in the economy, and their demand increases rather than decreasing. 2. Interest rates are a cost for businesses. When central banks raise interest rates, businesses pass this new cost on to consumers in the form of higher prices, which is inflation by definition. 3. Higher interest rates make it harder to start a business and harder to hold inventory. This reduces supply, leading to higher prices aka inflation. 4. Finally, MMT economists point to the fact that there is no empirical research at all showing that higher interest rates decrease inflation. In fact, the correlation runs in the opposite direction. The above points are taken from Additionally, the following points are taken made here https://www.reddit.com/r/mmt_economics/comments/wchq55/raising_interest_rates_to_fight_inflation/ https://www.reddit.com/r/mmt_economics/comments/wchq55/raisi...
        JumpCrisscross 4y ago
  - naasking 4y ago
    First, it's self-evident that no one controls inflation, so I'll assume you're talking about the rest. Rate rises are being justified to "loosen the labour market" aka drive unemployment higher, and to suppress wages. Except labour costs are NOT the main driver of recent inflation: https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... So if employment and high wages aren't driving inflation, then suppressing them will only eventually, indirectly drive down demand to the point where corporations can no longer justify their profiteering.
    - lamontcg 4y ago
      > Except labour costs are NOT the main driver of recent inflation Wages drive spending and aggregate demand. We know that tax cuts for the rich don't do it, if you want to juice aggregate demand give everyone a $500 tax rebate. If everyone is employed and their wages are climbing they go out and buy things. > indirectly drive down demand to the point where corporations can no longer justify their profiteering. If you cut those wages that means that means that less is getting bought which means that corporations start to look at warehouses full of flat panel TVs or whatever that aren't moving fast enough, and they start to price them lower in order to move them. The corporation that sticks to their pricing model becomes the one left holding the bag with all the inventory that isn't moving. Dunno why you'd describe that as only "indirectly" affecting prices since that is directly addressing the supply and demand curve that sets the prices of the goods. The company will always try to take any profits it can.
      - roflyear 4y ago
        Rent increases drove inflation
      - naasking 4y ago
        > Dunno why you'd describe that as only "indirectly" affecting prices since that is directly addressing the supply and demand curve that sets the prices of the goods. The company will always try to take any profits it can. It's an interesting double standard that you seem perfectly willing to tolerate this greedy behaviour from corporations, but not when it's individual people getting better wages and being employed. Here's a thought: instead of capping employment and driving down wages, why not cap profits and so drive down incentives to take any profits they can?
  - roflyear 4y ago
    Primarily rate increases don't even correlate with less borrowing (meaning less credit) so how can they correlate with something ten steps down the line, being inflation?!
- tootie 4y ago
  Nobody can possibly "control" inflation. They do have the single biggest mitigating tool and, more importantly, operate largely independent of political influence and election cycles. The result is a swirl of media attention. Congress could fix inflation, but getting them to do it is such a slow and uphill battle, that nobody bothers asking them. During the 2007 crisis, every time Congress dragged Ben Bernanke in to testify he spent most of time begging Congress to take action because the Fed was nearly powerless. But berating him is a lot easier than writing bills.
  - seunosewa 4y ago
    What action did he want them to take?
    - tootie 4y ago
      Raise taxes and build more housing
      - seunosewa 4y ago
        You want the govt to build housing?
  - naasking 4y ago
    Isn't it interesting that the biggest mitigating tool is "loosening the labour market", which is thinly veiled code for "make people unemployed so we can pay them less", despite the fact that corporate profiteering and not wages are behind most of the recent inflation: https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... Maybe claw back the money supply from corporations instead of the labour market. If instead of having only one tool, they also had this complementary tool, maybe we'd see better policies.
    - tootie 4y ago
      All things the Fed has zero authority over. That article says it has policy suggestions and then has a single half-baked thought at the end over what that policy might actually be. Right now, unemployment remains rock bottom. Fed policy is to raise rates until inflation comes down with as little impact on unemployment as possible. That's exactly what they're doing. Idk what else you expect them to do. Cut rates? Like they've been doing in Turkey?
- roflyear 4y ago
  US will not go back to price controls. That would make sense, but can you imagine the cries of socialism?
  - naasking 4y ago
    So increase corporate taxes, even up to capping profits. That's effectively what raising rates does to employment and wages. Capital has had all the control for too long.
koolba 4y ago
> Inflation is not done. Inflation is never going to be done without some kind of structural change to how we govern ourselves. It’s the only politically acceptable out to deal with massive over spending by the federal government. There’s no political will to raise taxes to cover desired spending, and no political will to lower spending to match taxes. So the only answer is for the debt itself to be devalued.
- dragonwriter 4y ago
  > Inflation is never going to be done without some kind of structural change to how we govern ourselves. I think the reference was to “above target” inflation, not “above 0 inflation”. Yes, as long as we have policy based on the experience that slight deflation is worse than slight inflation, we will have a structural bias toward slight inflation.
  - eloff 4y ago
    Slight inflation is not going to cut it to balance the federal budget.
    - dragonwriter 4y ago
      Why would anyone care about balancing the budget? To the extent that debt (or debt-service cost) to GDP matters, balancing the budget is way outside of what is needed to address it. The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget.
      - pclmulqdq 4y ago
        I think OP is suggesting that inflation is a product of the introduction of additional dollars to the system, which are mainly added thanks to the government's imbalanced budget (which dwarfs the effects of bank lending on money creation). This is a probably-not-too-wrong but also extremely contentious theory about how the economy works. Most of the people who run the fed and the treasury today subscribe to the idea of modern monetary theory, which does not agree. It's looking more correct now than it has ever looked in the past, though.

naasking 4y ago

The Fed doesn't control inflation, and it's even questionable whether rates are the best way to mitigate it.

throwayyy479087 4y ago
That take requires significant citation. A century of work says you’re wrong, and 3 years of attempting MMT has showed that’s wrong as well.
- MJsGlove 4y ago
  The user may be referencing work done on global and domestic demographics (aging populations in china and at home) and supply chain challenges highlighted by the Ukraine issues, since Ukraine is home to critical manufacturing inputs for farming + Russian exports going offline (fertilizers and oil). Ukraine won’t come online any time soon to its previous capacity and the replacement for it isn’t known yet. The story on Russia is that it is being cut off completely from the west. The work on demographics is done by Pradhan and Goodhart and of course Peter Zeihan likes to discuss the latter as well. I don’t know where Zeihan gets his sources but he consults for the military and other government agencies. In any case, I’d like to see asset markets deflate courtesy of the Fed raising rates, so I would agree with your take on the Fed holding more responsibility.
- bryanlarsen 4y ago
  The last 3 years is proof that we haven't been attempting MMT. MMT says that taxes should rise when inflation is up.
  - JumpCrisscross 4y ago
    > MMT says that taxes should rise when inflation is up Keynes said that. In theory, fiscal policy alone can keep an economy balanced. In practice, you need an independent central bank. MMT's novel assertion is that government debt is a monetary, not fiscal, exertion. (It also asserts raising rates is stimulative, et cetera.) It's broadly criticized and empirically unsubstantiated.
    - bryanlarsen 4y ago
      > It also asserts raising rates is stimulative, et cetera. Can you cite that? That's very odd, and contradictory to the MMT works I've read.
      - alxmng 4y ago
        Interest on treasury bonds or federal reserve accounts can only come from new money. The Fed has no power to do anything but create money or sell money created by the treasury. All roads lead to the money printer. 1. When central banks raise interest rates, this means governments spend more on their interest payments. This translates into increased income for bondholders. Higher incomes lead to more consumer demand, pushing up prices. Similarly, banks benefit from higher interest payments from the Federal Reserve. In other words, the interest from the higher interest rates goes to someone in the economy, and their demand increases rather than decreasing. 2. Interest rates are a cost for businesses. When central banks raise interest rates, businesses pass this new cost on to consumers in the form of higher prices, which is inflation by definition. 3. Higher interest rates make it harder to start a business and harder to hold inventory. This reduces supply, leading to higher prices aka inflation. 4. Finally, MMT economists point to the fact that there is no empirical research at all showing that higher interest rates decrease inflation. In fact, the correlation runs in the opposite direction. The above points are taken from Additionally, the following points are taken made here https://www.reddit.com/r/mmt_economics/comments/wchq55/raising_interest_rates_to_fight_inflation/ https://www.reddit.com/r/mmt_economics/comments/wchq55/raisi...
      - JumpCrisscross 4y ago
- naasking 4y ago
  First, it's self-evident that no one controls inflation, so I'll assume you're talking about the rest. Rate rises are being justified to "loosen the labour market" aka drive unemployment higher, and to suppress wages. Except labour costs are NOT the main driver of recent inflation: https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... So if employment and high wages aren't driving inflation, then suppressing them will only eventually, indirectly drive down demand to the point where corporations can no longer justify their profiteering.
  - lamontcg 4y ago
    > Except labour costs are NOT the main driver of recent inflation Wages drive spending and aggregate demand. We know that tax cuts for the rich don't do it, if you want to juice aggregate demand give everyone a $500 tax rebate. If everyone is employed and their wages are climbing they go out and buy things. > indirectly drive down demand to the point where corporations can no longer justify their profiteering. If you cut those wages that means that means that less is getting bought which means that corporations start to look at warehouses full of flat panel TVs or whatever that aren't moving fast enough, and they start to price them lower in order to move them. The corporation that sticks to their pricing model becomes the one left holding the bag with all the inventory that isn't moving. Dunno why you'd describe that as only "indirectly" affecting prices since that is directly addressing the supply and demand curve that sets the prices of the goods. The company will always try to take any profits it can.
    - roflyear 4y ago
      Rent increases drove inflation
    - naasking 4y ago
      > Dunno why you'd describe that as only "indirectly" affecting prices since that is directly addressing the supply and demand curve that sets the prices of the goods. The company will always try to take any profits it can. It's an interesting double standard that you seem perfectly willing to tolerate this greedy behaviour from corporations, but not when it's individual people getting better wages and being employed. Here's a thought: instead of capping employment and driving down wages, why not cap profits and so drive down incentives to take any profits they can?
- roflyear 4y ago
  Primarily rate increases don't even correlate with less borrowing (meaning less credit) so how can they correlate with something ten steps down the line, being inflation?!
tootie 4y ago
Nobody can possibly "control" inflation. They do have the single biggest mitigating tool and, more importantly, operate largely independent of political influence and election cycles. The result is a swirl of media attention. Congress could fix inflation, but getting them to do it is such a slow and uphill battle, that nobody bothers asking them. During the 2007 crisis, every time Congress dragged Ben Bernanke in to testify he spent most of time begging Congress to take action because the Fed was nearly powerless. But berating him is a lot easier than writing bills.
- seunosewa 4y ago
  What action did he want them to take?
  - tootie 4y ago
    Raise taxes and build more housing
    - seunosewa 4y ago
      You want the govt to build housing?
- naasking 4y ago
  Isn't it interesting that the biggest mitigating tool is "loosening the labour market", which is thinly veiled code for "make people unemployed so we can pay them less", despite the fact that corporate profiteering and not wages are behind most of the recent inflation: https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ https://www.epi.org/blog/corporate-profits-have-contributed-... Maybe claw back the money supply from corporations instead of the labour market. If instead of having only one tool, they also had this complementary tool, maybe we'd see better policies.
  - tootie 4y ago
    All things the Fed has zero authority over. That article says it has policy suggestions and then has a single half-baked thought at the end over what that policy might actually be. Right now, unemployment remains rock bottom. Fed policy is to raise rates until inflation comes down with as little impact on unemployment as possible. That's exactly what they're doing. Idk what else you expect them to do. Cut rates? Like they've been doing in Turkey?
roflyear 4y ago
US will not go back to price controls. That would make sense, but can you imagine the cries of socialism?
- naasking 4y ago
  So increase corporate taxes, even up to capping profits. That's effectively what raising rates does to employment and wages. Capital has had all the control for too long.

koolba 4y ago

> Inflation is not done. Inflation is never going to be done without some kind of structural change to how we govern ourselves. It’s the only politically acceptable out to deal with massive over spending by the federal government. There’s no political will to raise taxes to cover desired spending, and no political will to lower spending to match taxes. So the only answer is for the debt itself to be devalued.

dragonwriter 4y ago
> Inflation is never going to be done without some kind of structural change to how we govern ourselves. I think the reference was to “above target” inflation, not “above 0 inflation”. Yes, as long as we have policy based on the experience that slight deflation is worse than slight inflation, we will have a structural bias toward slight inflation.
- eloff 4y ago
  Slight inflation is not going to cut it to balance the federal budget.
  - dragonwriter 4y ago
    Why would anyone care about balancing the budget? To the extent that debt (or debt-service cost) to GDP matters, balancing the budget is way outside of what is needed to address it. The concerns are, in the short-term, ability to pay debt service out of current revenue, and, in the longer term, assuring the GDP grows faster than debt. Neither of those requires balancing the budget.
    - pclmulqdq 4y ago
      I think OP is suggesting that inflation is a product of the introduction of additional dollars to the system, which are mainly added thanks to the government's imbalanced budget (which dwarfs the effects of bank lending on money creation). This is a probably-not-too-wrong but also extremely contentious theory about how the economy works. Most of the people who run the fed and the treasury today subscribe to the idea of modern monetary theory, which does not agree. It's looking more correct now than it has ever looked in the past, though.