4 ms·

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 t

by 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.
  - SamPatt 4y ago
    What field of economic thought leads you to claim that inflation can (and should) be controlled by taxing the rich? This is an unusual claim, to say the least.
    - rsync 4y ago
      "What field of economic thought leads you to claim that inflation can (and should) be controlled by taxing the rich?" Not "the rich" per se, but he is speaking of MMT[1] which maintains that the government of a sovereign printer (sorry, Argentina) does not need taxes at all because they don't "need" the money. MMT purports that money is created by "printing" it into existence and money is destroyed by taxing it away. [1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
    - dmn322 4y ago
      When the federal reserve loans money to banks, where does that money come from? When the federal government pays its debt to the federal reserve, where does that money go?
  - rsync 4y ago
- imtringued 4y ago
  Even Fisher Black admits that there is a currency trap at 0% and he doesn't mean that the problem is that the interest rate is too low but rather that the zero lower bound is like a minimum price control that constraints the formation of interest rates and he basically predicted what the IMF blog Said about this resulting in cash and electronic bank accounts ending up with an exchange rate between them.
orbit7 4y ago
Whilst it devalues debt, I'm not sure I follow it being populist? Since it results in higher food, energy, rent prices etc and wages do not typically keep pace.
- dmn322 4y ago
  The federal reserve defines the "natural rate of unemployment" as being around 5%. This is just a number they made up that happens to be high enough to continuously erode the power of labor. If unemployment starts to dip below that, they raise the rates as quickly as possible. You can look at historical graphs of fed rate vs unemployment to verify. The rates are jacked up, it causes a recession. Unemployment increases. They reduce the rates, we recover from the recession, then they raise them as quickly as possible to stem "wage inflation" (a.k.a. people making more money) and within several months, the next recession starts. The reason the wages don't rise with the prices is because that 5% are getting hired, and the under-employed are getting more hours, and they jack up the rates as quickly as possible as soon as they sense that wages are rising. However with the increased hours, and fewer under-employed there are people who couldn't afford toilet paper who are finally able to, and that increase the prices. That's not a bad thing. More overtime has a much bigger effect than increased egg prices to most people in low wage jobs. And lower unemployment improves their working conditions as well. It's still essentially a transfer of shares to the broke, even if the wages don't directly increase. Also, a lot of the inflation that was happening this go-around was due to rich people with their PPP loans being able to speculate. Taxing the rich at a more progressive rate as was done in the 50s and 60s would be an alternative way to stem inflation besides using the fed rate. But of course they haven't touched that one in a while. It's not just trump and sanders that are populists looking for lower fed rates from the central banks. In most countries I think you'll find that the populist parties (i.e. the party with most representation among the poorest) tend toward pushing for lower interest rates and more government spending. You'll also find that those representing the rich tend to push for austerity. There's a reason for that. And it's not that the populists are all working together. You can tell they have much more disparate values than the centrist globalists who want high rates.
  - JumpCrisscross 4y ago

by dmn322 4y ago

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.
- SamPatt 4y ago
  What field of economic thought leads you to claim that inflation can (and should) be controlled by taxing the rich? This is an unusual claim, to say the least.
  - rsync 4y ago
    "What field of economic thought leads you to claim that inflation can (and should) be controlled by taxing the rich?" Not "the rich" per se, but he is speaking of MMT[1] which maintains that the government of a sovereign printer (sorry, Argentina) does not need taxes at all because they don't "need" the money. MMT purports that money is created by "printing" it into existence and money is destroyed by taxing it away. [1] https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
  - dmn322 4y ago
    When the federal reserve loans money to banks, where does that money come from? When the federal government pays its debt to the federal reserve, where does that money go?
- rsync 4y ago
imtringued 4y ago
Even Fisher Black admits that there is a currency trap at 0% and he doesn't mean that the problem is that the interest rate is too low but rather that the zero lower bound is like a minimum price control that constraints the formation of interest rates and he basically predicted what the IMF blog Said about this resulting in cash and electronic bank accounts ending up with an exchange rate between them.

orbit7 4y ago

Whilst it devalues debt, I'm not sure I follow it being populist? Since it results in higher food, energy, rent prices etc and wages do not typically keep pace.

dmn322 4y ago
The federal reserve defines the "natural rate of unemployment" as being around 5%. This is just a number they made up that happens to be high enough to continuously erode the power of labor. If unemployment starts to dip below that, they raise the rates as quickly as possible. You can look at historical graphs of fed rate vs unemployment to verify. The rates are jacked up, it causes a recession. Unemployment increases. They reduce the rates, we recover from the recession, then they raise them as quickly as possible to stem "wage inflation" (a.k.a. people making more money) and within several months, the next recession starts. The reason the wages don't rise with the prices is because that 5% are getting hired, and the under-employed are getting more hours, and they jack up the rates as quickly as possible as soon as they sense that wages are rising. However with the increased hours, and fewer under-employed there are people who couldn't afford toilet paper who are finally able to, and that increase the prices. That's not a bad thing. More overtime has a much bigger effect than increased egg prices to most people in low wage jobs. And lower unemployment improves their working conditions as well. It's still essentially a transfer of shares to the broke, even if the wages don't directly increase. Also, a lot of the inflation that was happening this go-around was due to rich people with their PPP loans being able to speculate. Taxing the rich at a more progressive rate as was done in the 50s and 60s would be an alternative way to stem inflation besides using the fed rate. But of course they haven't touched that one in a while. It's not just trump and sanders that are populists looking for lower fed rates from the central banks. In most countries I think you'll find that the populist parties (i.e. the party with most representation among the poorest) tend toward pushing for lower interest rates and more government spending. You'll also find that those representing the rich tend to push for austerity. There's a reason for that. And it's not that the populists are all working together. You can tell they have much more disparate values than the centrist globalists who want high rates.
- JumpCrisscross 4y ago