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> For the private sector, many homeowners and corporations have longer-term fixed debt, and only some portion of it matures each quarter and gets refinanced at

> For the private sector, many homeowners and corporations have longer-term fixed debt, and only some portion of it matures each quarter and gets refinanced at higher rates. As more private debt matures and gets refinanced at higher rates, this will continue to serve as a disinflationary and recessionary force on the economy, especially for sectors that are more sensitive to interest rates. The one thing I don't get and could have been missing in the past... a lot of the corporations and private things, like farms operate on debt. Now maybe it's a bit reductionist, but if you're a farmer operating on debt, if interest rates go up you need to increase prices to cover operating expenses. And this get compounded all the way up to the end consumer as every step in the supply chain marks up by a fixed percent, and because everything is getting more expensive decided lets mark up by a larger percent. So higher interest rates really could be contributing to inflation. And it's just creating a cycle. And with the current levels of debt never seen before in history, it's unlike other periods.

Red_Leaves_Flyy 3y ago
This is very similar in thought to the messy knock on effects of adjusting the federal minimum wage or poverty level. Inflation has a significant effect on the poverty level, adding in a strong labor market and cost of living crisis is making the limits of current social programs ever more apparent. That junkie you pass everyday on your way to work since the pandemic “ended” is one human sacrifice for bad policy. If tomorrow minimum wage goes to a rational and dignified one, say, $25/hr, the federal poverty line will have to adjust. When the poverty line goes up their budgets reach goes down. Knock on effects could make quite the mess and cause a lot of needless suffering. If I was dictator for a decade I’d scrap the whole system and have piles of cash ready to throw at the problems as they pile up, mostly pulled from and staffed by the existing budgets and programs with a fix the problem, document it thoroughly, but be diligent or go to jail policy. Like PPP loans but with accountability and prison for fraudsters. Once the big fires are out and local teams are on top of their communities problems the real work rebuilding a sane, efficient, and equitable system could start.
- winddude 3y ago
  > This is very similar in thought to the messy knock on effects of adjusting the federal minimum maybe "sounds like" increasing minimum wages goes directly into consumer pockets. Increased costs due to interest rates do no go directly into consumers pockets. For example you look at the avg farmer, mortgage on the fields, loans on the equipment, and often lines of credit from suppliers for seeds, fertiliser and pesticides. All of a sudden the cost of all of those have increased directly related to interest, even if they raise the sale price of their crop or livestock, they won't make more income. And that money isn't going back into the system like wage increases. And this compounds up the chain, the company moving the grain from the fields has loans on their trucks, so they raise costs. The middle men are marking it up by a percentage, so that compounds the costs. Than the distributors, and processors, also likely running on lines of credit, now with increased cost directly due to interest, but also marking up by a percentage, that's compounding. Every step that interest rates compounds with every markup and causes an increase all the way to the shelves. Food and housing, are the two largest drivers of inflation, and also the cost is most directly effected by increasing interest rates. Building now costs more, and builders are also building less supply, because they build with lines of credit. Everything is much more dependant on debt than ever before.
  - Red_Leaves_Flyy 3y ago
    I don’t think we’re disagreeing. I’m pointing out similarities and was trying to infer in you the interconnectedness of these parts of the economy. The knock on effects of increased interest rates cascade, just like the effects of increasing minimum wage, which necessarily demand an increase of the poverty line. To put this all together with a bow: Interest rates increase Cost of living increases Wages increase Minimum wage increases Poverty line increases Off of each line above are costs dependent on them that will react higher, with risk and premium margin, to account for them. The fed is trying to get ahead of an inflationary spiral by causing just enough pain in markets to arrest price increases long enough to establish a semblance of price stability at which point they should hold to cement stability before gradually easing rates, if nothing else necessitates holds or hikes. excess profit taxes would’ve been a far less damaging tool to arrest inflation but American politicians are so thoroughly captured by the capital class that this was not even considered. Shame on Congress for this. It is important to note that EPT would not stop inflation, but would stop price gouging in its tracks so Congress could use fiscal policy to address pockets of inflation. Classic example of using the wrong tool. Once again the most vulnerable are suffering to prevent even a plateauing of profit to the capital class. I also think it’s important to note that I’m arguing against my class interests in saying all this. I benefit greatly from policies like these and will continue to both profit off of these policies while advocating for their sunset.

Red_Leaves_Flyy 3y ago

This is very similar in thought to the messy knock on effects of adjusting the federal minimum wage or poverty level. Inflation has a significant effect on the poverty level, adding in a strong labor market and cost of living crisis is making the limits of current social programs ever more apparent. That junkie you pass everyday on your way to work since the pandemic “ended” is one human sacrifice for bad policy. If tomorrow minimum wage goes to a rational and dignified one, say, $25/hr, the federal poverty line will have to adjust. When the poverty line goes up their budgets reach goes down. Knock on effects could make quite the mess and cause a lot of needless suffering. If I was dictator for a decade I’d scrap the whole system and have piles of cash ready to throw at the problems as they pile up, mostly pulled from and staffed by the existing budgets and programs with a fix the problem, document it thoroughly, but be diligent or go to jail policy. Like PPP loans but with accountability and prison for fraudsters. Once the big fires are out and local teams are on top of their communities problems the real work rebuilding a sane, efficient, and equitable system could start.

winddude 3y ago
> This is very similar in thought to the messy knock on effects of adjusting the federal minimum maybe "sounds like" increasing minimum wages goes directly into consumer pockets. Increased costs due to interest rates do no go directly into consumers pockets. For example you look at the avg farmer, mortgage on the fields, loans on the equipment, and often lines of credit from suppliers for seeds, fertiliser and pesticides. All of a sudden the cost of all of those have increased directly related to interest, even if they raise the sale price of their crop or livestock, they won't make more income. And that money isn't going back into the system like wage increases. And this compounds up the chain, the company moving the grain from the fields has loans on their trucks, so they raise costs. The middle men are marking it up by a percentage, so that compounds the costs. Than the distributors, and processors, also likely running on lines of credit, now with increased cost directly due to interest, but also marking up by a percentage, that's compounding. Every step that interest rates compounds with every markup and causes an increase all the way to the shelves. Food and housing, are the two largest drivers of inflation, and also the cost is most directly effected by increasing interest rates. Building now costs more, and builders are also building less supply, because they build with lines of credit. Everything is much more dependant on debt than ever before.
- Red_Leaves_Flyy 3y ago
  I don’t think we’re disagreeing. I’m pointing out similarities and was trying to infer in you the interconnectedness of these parts of the economy. The knock on effects of increased interest rates cascade, just like the effects of increasing minimum wage, which necessarily demand an increase of the poverty line. To put this all together with a bow: Interest rates increase Cost of living increases Wages increase Minimum wage increases Poverty line increases Off of each line above are costs dependent on them that will react higher, with risk and premium margin, to account for them. The fed is trying to get ahead of an inflationary spiral by causing just enough pain in markets to arrest price increases long enough to establish a semblance of price stability at which point they should hold to cement stability before gradually easing rates, if nothing else necessitates holds or hikes. excess profit taxes would’ve been a far less damaging tool to arrest inflation but American politicians are so thoroughly captured by the capital class that this was not even considered. Shame on Congress for this. It is important to note that EPT would not stop inflation, but would stop price gouging in its tracks so Congress could use fiscal policy to address pockets of inflation. Classic example of using the wrong tool. Once again the most vulnerable are suffering to prevent even a plateauing of profit to the capital class. I also think it’s important to note that I’m arguing against my class interests in saying all this. I benefit greatly from policies like these and will continue to both profit off of these policies while advocating for their sunset.