6 ms·

Some like them, more hate them.

by chalst 4y ago

intrasight 4y ago
My smart friends - rich and poor - universally approve of the rate hikes, because they understand, like me, that price stability is their primary mandate. Many also believe, like me, that the Fed really screwed this up in the last few years. If by "PTB" you mean the market, then of course it hates rate hikes. Also just hates uncertainty.
- dmn322 4y ago
  Seems like a convenient coincidence that all your "smart" friends agree with you lol. Actually the fed has a dual mandates: price stability and unemployment. Price stability can also be achieved by taxation. And in this case the massive inflation we saw was mostly due to supply chain issues. So many businesses shut down during the pandemic. Others were hanging on by a thread. Which sounds like it will help supply chains recover? Increasing interest rates for loans? Or keeping access to lots of liquidity? Hmmm, seems like if we're wanting to expand capacity again, we want liquidity. Then prices can go back down due to capacity going back to normal, rather than artificially reducing demand by getting everyone fired. If we need critical immediate measures to stem inflation, then we can raise taxes. Get some of that PPP money back. Make everyone who was speculating on housing sell their investment homes. That will drive inflation back down without starving the recovering supply chains.
  - intrasight 4y ago
    I did say "primary mandate". I don't think that is controversial. >then we can raise taxes I totally agree that raising taxes is the right thing to do (as do my smart friends and most economists ;) ). But that's not the lever the Fed has. And of course it's politically untenable. > Make everyone who was speculating on housing sell their investment homes. Agree there too. But that's not the lever the Fed has.
dmn322 4y ago
The powers that be love them. They raise the rates whenever they think they can afford to. Money is like equity. Raising the rates is essentially a way for them to consolidate more equity. They distributed more equity than they were comfortable with as stimulus during covid, and now they're calling it back. The pattern has been going on since the 70s at least. They made up the BS idea of "natural rate of unemployment" to justify it and gave a nobel prize to the guy who said to keep the unemployment at 5% to keep down "wage inflation"... a.k.a.. people getting paid more. Pay hasn't tracked productivity ever since. Look at the unemployment vs fed rate charts. Letting your currency inflate is a populist move for a reason. It's not because people are dumb, it's because while it devalues people's savings, it puts money in the pockets of people without savings, and devalues debt as well. It was used previously in Portugal, Italy and Greece to spur exports whenever the economies were hitting a rough spot. Once they got on the Euro and the powers that be wouldn't inflate, they were screwed, and Germany was able to buy up a bunch of their assets and essentially takes tribute via interest rates on their loans now. It skims off the productivity of their economies. Raising the rates helps them skim more. Libertartian types tend to have savings. They like to spin a story that justifies what they sense... that raising rates is good for them. It is good for them. People are really good a sniffing out their incentives, even if they don't quite know why. It's also good for the powers that be though.
- SamPatt 4y ago
  Libertarian types don't have a preference for high interest rates because they have savings. They have a preference for the interest rate to be set by the market freely, instead of being intentionally manipulated up and down by central planners and causing havoc in the economy. The reason they currently support higher rates is twofold: 1) The Fed has kept rates artificially low for an irresponsibly long period of time, leading to inflation and other economic distortions, and 2) The only way to get inflation (which is pernicious) under control is with higher rates.
  - dmn322 4y ago
    You can control inflation with taxes, and it's a more fiscally responsible way to do it. As for "irresponsibly low" and "(which is pernicious)"... these are your value judgements that you've arrived at based on your perspective. That's fine, but other people have other perspectives. To someone with debt who wants a well-lubricated economy, or to someone who makes money off of exports, it's not irresponsible at all. If you look at the history of fed rates vs unemployment and recessions, it's a very clear trend that the fed rate has to stay lower longer for a recovery, and it takes less raising of the rates to put us back in a recession. Why would this be? Maybe because it's not the appropriate tool to be using to control inflation. Maybe it's not because the fed is being irresponsible, but it's doing what it has to to keep the economy afloat and that's less and less effective because the country refuses to do what it has to, which is raise taxes on the rich.

Some like them, more hate them.

by chalst 4y ago

Some like them, more hate them.

My smart friends - rich and poor - universally approve of the rate hikes, because they understand, like me, that price stability is their primary mandate. Many also believe, like me, that the Fed really screwed this up in the last few years. If by "PTB" you mean the market, then of course it hates rate hikes. Also just hates uncertainty.

dmn322 4y ago
Seems like a convenient coincidence that all your "smart" friends agree with you lol. Actually the fed has a dual mandates: price stability and unemployment. Price stability can also be achieved by taxation. And in this case the massive inflation we saw was mostly due to supply chain issues. So many businesses shut down during the pandemic. Others were hanging on by a thread. Which sounds like it will help supply chains recover? Increasing interest rates for loans? Or keeping access to lots of liquidity? Hmmm, seems like if we're wanting to expand capacity again, we want liquidity. Then prices can go back down due to capacity going back to normal, rather than artificially reducing demand by getting everyone fired. If we need critical immediate measures to stem inflation, then we can raise taxes. Get some of that PPP money back. Make everyone who was speculating on housing sell their investment homes. That will drive inflation back down without starving the recovering supply chains.
- intrasight 4y ago
  I did say "primary mandate". I don't think that is controversial. >then we can raise taxes I totally agree that raising taxes is the right thing to do (as do my smart friends and most economists ;) ). But that's not the lever the Fed has. And of course it's politically untenable. > Make everyone who was speculating on housing sell their investment homes. Agree there too. But that's not the lever the Fed has.

dmn322 4y ago

The powers that be love them. They raise the rates whenever they think they can afford to. Money is like equity. Raising the rates is essentially a way for them to consolidate more equity. They distributed more equity than they were comfortable with as stimulus during covid, and now they're calling it back. The pattern has been going on since the 70s at least. They made up the BS idea of "natural rate of unemployment" to justify it and gave a nobel prize to the guy who said to keep the unemployment at 5% to keep down "wage inflation"... a.k.a.. people getting paid more. Pay hasn't tracked productivity ever since. Look at the unemployment vs fed rate charts. Letting your currency inflate is a populist move for a reason. It's not because people are dumb, it's because while it devalues people's savings, it puts money in the pockets of people without savings, and devalues debt as well. It was used previously in Portugal, Italy and Greece to spur exports whenever the economies were hitting a rough spot. Once they got on the Euro and the powers that be wouldn't inflate, they were screwed, and Germany was able to buy up a bunch of their assets and essentially takes tribute via interest rates on their loans now. It skims off the productivity of their economies. Raising the rates helps them skim more. Libertartian types tend to have savings. They like to spin a story that justifies what they sense... that raising rates is good for them. It is good for them. People are really good a sniffing out their incentives, even if they don't quite know why. It's also good for the powers that be though.

SamPatt 4y ago
Libertarian types don't have a preference for high interest rates because they have savings. They have a preference for the interest rate to be set by the market freely, instead of being intentionally manipulated up and down by central planners and causing havoc in the economy. The reason they currently support higher rates is twofold: 1) The Fed has kept rates artificially low for an irresponsibly long period of time, leading to inflation and other economic distortions, and 2) The only way to get inflation (which is pernicious) under control is with higher rates.
- dmn322 4y ago
  You can control inflation with taxes, and it's a more fiscally responsible way to do it. As for "irresponsibly low" and "(which is pernicious)"... these are your value judgements that you've arrived at based on your perspective. That's fine, but other people have other perspectives. To someone with debt who wants a well-lubricated economy, or to someone who makes money off of exports, it's not irresponsible at all. If you look at the history of fed rates vs unemployment and recessions, it's a very clear trend that the fed rate has to stay lower longer for a recovery, and it takes less raising of the rates to put us back in a recession. Why would this be? Maybe because it's not the appropriate tool to be using to control inflation. Maybe it's not because the fed is being irresponsible, but it's doing what it has to to keep the economy afloat and that's less and less effective because the country refuses to do what it has to, which is raise taxes on the rich.