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My question is: What now? The feds are stuck trying to tame inflation, and the skyrocketing interest rates are crumbling regional banks. Big banks are a lot mo
by ProfessorLayton 3y ago
My question is: What now?
The feds are stuck trying to tame inflation, and the skyrocketing interest rates are crumbling regional banks. Big banks are a lot more hesitant to lend to small businesses, and many otherwise viable businesses will fail if credit freezes.
Big banks are getting even bigger as depositors flee, and concentrating risk (even more) imo.
I guess the higher interest rates are doing their job in slowing the economy down, but it's wild that we're stuck with whatever the feds do with their blunt toolset because congress is seemingly dysfunctional.
- dragonwriter 3y ago> The feds are stuck trying to tame inflation […] and many otherwise viable businesses will fail if credit freezes. That’s what “taming inflation” means. It means cooling off the economy, which means that businesses which would otherwise be viable fail, reducing demand, reducing upward pressure on prices. To the extent that unexpected banking issues accelerate this, within a fairly wide band, from a monetary policy perspective that just means the Fed can back off the brake pedal a little sooner.
- tflinton 3y agoI think more to the point was that much of this pain from the feds blunt toolset wouldn’t be necessary if congress could cooperate on a fiscal & monetary policy.
- tekknik 3y agoThis was happening prior to the monetary policy issues. This is a result of the mass amount of money spent during COVID. But interestingly it’s Congress that’s supposed to set the budget. But now you have the Senate and POTUS trying to force their say.
- Choco31415 3y agoIs there a way to help small businesses avoid failing in these situations?
- SV_BubbleTime 3y agoDon’t print money endlessly for decades? Don’t run endless government debt? Do t artificially keep rates low for almost two decades? The solution is exactly what is about to happen, a decade plus recession. But don’t worry, there is always war, which is coming.
- Choco31415 3y agoI understand that these are things to be avoided, but don’t understand how they impact small/large businesses. Do you have some resources to better understand the subject?
- 0zemp2c 3y agowhat do you want Congress to do? if they increase spending, you get more inflation, and then they have to eventually pay higher rates on their own debt if they cut spending, they can deflate the economy, and they can't attract the tax revenues to pay their own debt no good options in a society that has OD'd on debt since the mid 90s if we were honest, the President would go on TV and tell us we are just going to be poorer for a while, which is something most people already know anyway
- JumpCrisscross 3y ago> if they cut spending, they can deflate the economy, and they can't attract the tax revenues to pay their own debt This is not a serious constraint on deficit reduction.
- collegeburner 3y agocore pce just printed at 4.6 and ur worried about deflation? services inflation printed at 7.3% and ur worried about deflation? that's not a valid opinion atp. we're so far from overcorrecting its scary. spending is still up over pre corona levels. ppl still drawing down excess savings. bank crisis is a real concern and prob reads through to equivalent of a few rate hikes (slok @ apollo says 150bps, most say lower)
- rcpt 3y agoReal estate gets around $150B per year in federal tax cuts. End that. Housing goes down. Inflation fixed.
- candiddevmike 3y agoThe amount of buy and hold slumlords that don't pay any taxes is staggering. Paper losses due to depreciation yet they're wealthy as can be.
- tekknik 3y agoHow do you not pay taxes on property?
- fosk 3y agoResume student loan payments and inflation goes down in a couple of months.
- kevingadd 3y agoWhat's the logic behind this? I can't come up with an explanation.
- rurp 3y agoIf millions of people have to restart spending a chunk of their income on loan payments they will have less money to purchase other goods and services. That will reduce demand in many areas leading to relatively lower prices.
- adastra22 3y agoConsumer price inflation is generally driven by demand. Decrease N people’s monthly budget by $X, and you decrease aggregate demand by Nx$X. Student loan payments is one of the few tools the federal government has to manipulate large swaths of the population’s budgets.
- freeone3000 3y agoSo what’s this, if some people make more money it’s fine, but if everyone makes more money the entire economy tumbles? The system cannot handle actual increases in wealth for everyone? Our goal should be to have MOST people be poor so that some can remain rich?
- zdragnar 3y agoWealth is increased by what money can buy (availability and accessibility of goods), not by the number on the currency you hold. If that was the case, then Zimbabwe made a massive mistake when switched to the US dollar after having had to print 1, 10 and 100 trillion dollar notes because inflation was pushing 230,000,000 percent.
- 3y ago
- qbasic_forever 3y agoTax the rich. That is the fastest way to get excess money from inflation out of the system. All of the rhetoric about $1400 checks being the problem is just smoke and mirrors. The trillions of dollars of PPP loans, money printing for corporations, etc. was the real problem. That excess money needs to be taken back and wealth taxes would do it.
- deleted 3y ago[deleted]
- Justin_K 3y agoEvery year there are new "tax the rich" plans and some become law. Over the long haul, the government just blows the money and asks for more. Theses schemes are easy to sell to the voters but all they really do is let the government spend and waste more.
- 58028641 3y agoWhen have we taxed the rich?
- kevdragon6 3y agoIn 2020: Top 1% paid 42% of all collected income taxes. (1.5 million tax payers paid $722 Billion) Bottom 50% paid 2.25% (78 million tax payers paid $1.7 Billion) https://taxfoundation.org/publications/latest-federal-income-tax-data/ https://taxfoundation.org/publications/latest-federal-income...
- sroussey 3y agoThe top 1% of that 1% pay almost nothing. This is what gets people all riled up about. And the 99% of the top 1% are the ones that pay. Mostly because it expensive to get around taxes, something the 1% of the 1% can easily afford.
- 3y ago
- steve76 3y ago[dead]
- Barrin92 3y ago>What now? for starters adopt a Canadian style banking model. The country largely runs on 5 very tightly regulated banks that haven't gone bankrupt in a hundred years. These regional banks fall over in every little crisis and they always end up being bailed out anyway (see SV bank), so you might as well consolidate the sector for good.
- Scoundreller 3y agoLots of credit unions in Canadian traditional finance (taking deposits, making loans), and they haven't been failing left and right. I think a bigger diff is that Canada doesn't do 15/20/25 year fixed rates. Usually at most 5 years fixed and then you renegotiate and see what you can do. And a lot of variable rates.
- johngladtj 3y agoWait are you advocating for monopolies?
- Barrin92 3y agoYes. Large banks are more diversified in their portfolios, perform better, are more resilient and easier to regulate and audit by the state.
- tekknik 3y agoThe size of a bank has nothing to do with portfolio diversification. You can, as an individual, keep a well diversified portfolio of $100. Perform better is objective since you provided no metric for anybody to compare, same with resiliency. Auditing can be done electronically, even via AI now. It sounds like you’re saying since they have more monetary resources they are more stable, which is true for large companies. Banks don’t own their assets though, a customer can come at any time and remove money. In fact this was rumored to happen in Canada last year, where your 5 major banks went offline after Trudeau opened his mouth about the Freedom Convoy.
- drumhead 3y agoHonestly? They've got to let the damage happen. Were in this mess because every time we got close to a recession the central banks would cut interest rates to keep the economy going, more money would get pumped into the economy and asset prices would keep on rising. We need a recession to kill inflation, destroy unproductive assets and give us room to grow again. The aversion to recession is destroying us.
- tekknik 3y ago> The aversion to recession is destroying us. The aversion to recession comes from people disliking the idea of losing their job, house, way of life, hell maybe even their family. This is like saying some people need to suffer and lose everything for the greater good.
- gsatic 3y agoWhats next is you bank directly with the FED.
- cronix 3y agoHere's an app to access your central bank digital currency. We went ahead and converted it for you.
- tekknik 3y ago> What now? Maybe start holding at least some of your assets in gold or other currencies.