3 ms·

Chicago Fed President Goolsbee says if economy deteriorates, Fed will 'fix it'

22 points by donsupreme 2y ago

ryandvm 2y ago
Don't bet against America's oligarchs. They will move Heaven and Earth to make sure the 1% don't have a bad quarter.
oldpersonintx 2y ago
the Fed thinking it can "fix" the economy is exactly how we ended up here they'll try again with rapid and deep rate cuts, and we'll be back to raging inflation and asset bubbles without the necessary wage growth at what point do people realize that the price of a forever-growing stock market is a four-digit weekly grocery bill? we're running out of corner to paint ourselves into
- duxup 2y ago
  [flagged]
- bryanlarsen 2y ago
  > how we ended up here? We ended up as an economy that survived COVID lockdowns, the supply shock, the outbreak of a de-facto war against a superpower, trade cutoff to one of the largest energy suppliers in the world, most of our trading partners tipping into recession without tipping into recession ourselves. We've got miracle makers in the Fed and White House and you all think that they're incompetent.
  - deleted 2y ago
    [deleted]
  - jgust 2y ago
    Might it be overly generous to attribute these outcomes to recent actions by people in these instituions vs. the USD still being the world reserve currency?
    - bryanlarsen 2y ago
      The Fed deserves a lot of the credit. Biden deserves credit for not screwing things up. "First do no harm", "a steady hand at the tiller". Trump has promised to meddle a lot more -- massive border tariffs, taking political control of the Fed, taking political control of the bureaucracy, etc. It's sad that not screwing things up is high praise, but it is.
- kurthr 2y ago
  LOL! I mean, I actually agree with your first comment a bit since the Fed has been reduced to a "jaw boning" organization, and they're not fixing anything. Hopefully, they don't cause a crisis. However, you both miss the goals of the Fed (yes they want long term inflation to be 2-3% without interest rates at the zero bound) and the causes of the recent "inflation". The rapid disinflation we've seen while wages increase is not a typical inflationary spiral, and neither were the supply chain disruptions that ripped through the entire world (I hear there was a pandemic). The dollar has been by far the strongest international currency for the entire run so monetary inflation this is NOT (Gold was flat from July 2020 until Feb 2024). Even then the Fed's intervention in both expanding/contracting balance sheets, and in bank regulation has had a miniscule effect relative to the pandemic spending at $4T (under Trump) and $2T (under Biden) of the US Treasury (and congress) in issuing more debt. I mean, if we've painted ourselves into a corner, then it's the biggest corner in the world (you certainly don't want to look to Asia or Europe for low debt/gdp numbers - only India seems relatively low). When geopolitical and environmental risks appear more immediate than fiscal, that's a strange and concerning place to be, and it should focus attention from the usual boogiemen. Don't talk about oil prices since it was more expensive in 2008 than any time in the last decade.
consumer451 2y ago
They certainly have a tool to stoke it. Maybe waiting this long to cut rates wasn't a bad idea.
HPsquared 2y ago
Fix it, in the sense of "match fixing".
thoiiiiiiijeow 2y ago
[flagged]
deleted 2y ago
[deleted]
JackOfCrows 2y ago
On the other hand it is genuinely hilarious that what it took to crater tech stocks was someone going "Hey are you guys ever going to make money with any of this AI crap?" "I mean, if you keep giving us billions of dollars, maybe in like a decade. But uh keep doing it, they're totally going to think any day now."
- AnthOlei 2y ago
  What’s the source of this? Where can I read more?
  - JackOfCrows 2y ago
    I mean start here: https://www.washingtonpost.com/technology/2024/04/18/ai-bubble-hype-dying-money/ https://www.washingtonpost.com/technology/2024/04/18/ai-bubb...
    - AnthOlei 2y ago
      I was under the impression that you were referring to a specific event that happened over the weekend, not a general vibe you were feeling
- gruez 2y ago
  Isn't that every bubble? The 2022 tech bubble was basically this but without the AI narrative. The 2008 GFC was partially caused by giving mortgages to increasingly flaky borrowers. The dotcom bubble was basically the AI bubble but with "the internet" instead of AI.
  - burgrchf 2y ago
    [dead]
- snakeyjake 2y ago
  >"Hey are you guys ever going to make money with any of this AI crap?" The most common answer I have heard for that question has been, so far, "AI brand ambassadors". The thought is that by sucking up every scrap of personal data on you, a company can pay an AI brand ambassador firm to create an avatar to relentlessly pummel you in every plane of your existence with marketing and very carefully obfuscated conversation in order to make you buy something. Think: autoplaying ads on every website and in every app with a "person" who starts talking to you like they know you, friend requests from strangers on every social media site you frequent who appear human and then once they trick you into engaging with them steer the conversation towards how awesome a product is, and comments and replies in media you consume that use every trick in the book to appear organic while namedropping a product or service. There are only two ways to pay for the billions of dollars all of this AI nonsense has cost and will continue to cost: making end-users pay to use it (unlikely) or bombarding end users with ads and skimming off a sliver of any sales. It's going to be a nightmare.
some_random 2y ago
I would hope that the Fed President would say this, even if they don't believe it. Imagine the reverse, "hey folks, basically if the economy gets any worse we're cooked, but please keep spending money and investing and shit thank you"
- TMWNN 2y ago
  >I would hope that the Fed President would say this, even if they don't believe it. Completely disagree. It's an incredibly irresponsible thing to say. Experts know that saying that the Fed can "fix" the economy (with this one simple trick, presumably) is ridiculous. Ordinary people ... also know that that is ridiculous. They aren't stupid. They know there isn't a dial in Washington that Jerome Powell or ~~Biden~~ Harris can twist to "fix" things and, voilà, it's all better. People don't like being talked down to and do respond accordingly.
shagie 2y ago
The Fed is haunted by the ghost of inflation from the 70s and 80s. https://www.federalreservehistory.org/essays/great-inflation https://www.federalreservehistory.org/essays/great-inflation And the interest rates - https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS And you'll see in that the "ok, it's going in the right direction, cut the rate, and inflation spikes again ... " and doing this again and again. My crystal ball says that this will be a slow backing off rather than trying to revisit what the 80s had. That said, with monetary policy, there are very few knobs to turn. Fiscal policy has as many knobs to turn as they want, but is mired in politics and (not infrequently) goals that work out of alignment with the central bank's goals.
nimbius 2y ago
great. with what new parlour trick? Quantitative easing was the high speed drag fuel used to propel us to "these uncertain times." doubling down on QE for covid turned the housing market into a bulletproof bubble. Cranking interest to clinton-era levels basically tapped the brakes on inflation so a food crisis didnt threaten to dissolve the union, but it also didnt translate into a personal savings gain. return-to-work mandates have failed, so we still have the looming corporate real estate crisis with over a trillion due in the next 40 months. the average US auto loan is now somewhere beyond 80 months, and auto lending defaults have spiked as of 2023, so theres that bubble. the education lending bubble was getting some assistance until loan forgiveness was basically cancelled. theres another 1.73 trillion dollar bubble. and finally the US credit card debt rate is another 1.15 trillion dollar bubble ready to pop. https://www.npr.org/2024/05/14/1251295805/credit-cards-debt-inflation https://www.npr.org/2024/05/14/1251295805/credit-cards-debt-...
duxup 2y ago
This seems like a very run of the mill statement, is there something noteworthy here other than an opportunity for folks to riff off this on some related topics? And is it my imagination or is most of the OPs activity just cnbc submissions?
scottiebarnes 2y ago
They'll always "fix" it, until they can fix it no more. We are addicted to easy money. $35 trillion of national debt. $1 trillion in annual interest payments alone to service that debt. Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). Highest "Home Price to Median Household Income" ratio in the last 70 years, currently higher than the last housing bubble.
- burgrchf 2y ago
  [dead]
- Izkata 2y ago
  > Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). For context they target 2% per year, so cumulative over 20 years should have been around 48.6%
  - scottiebarnes 2y ago
    And recently, the firmness of the 2% target has changed. Flexible Average Inflation Targeting (FAIT) allows for the Fed to let inflation to run above 2%, with the hopeful expectation of bringing it down below it at some point. https://www.brookings.edu/articles/assessing-the-federal-reserves-new-monetary-policy-framework/ https://www.brookings.edu/articles/assessing-the-federal-res...
- wrenky 2y ago
  The Fed will always fix it as _thats what the fed does_. Debt, spending, interest payments are all treasury- The stability of the system is the fed. They often work together but I'm willing to bet the fed is very unhappy with the level of debt and unable to do anything about it. Fed just controls the money supply and interest rates in an extremely technocratic way, divorced from the government or policy making. > Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). While this is bad, if you check the cumulative inflation from 1999-2019 where inflation had essentially been "missing" in the 1-2% range the cumulative inflation is 55%. Regardless though looking at inflation numbers is only half the picture, if you look wage growth in the same period, comes out to several percentage points above inflation/price growth. Even with all the big numbers we are doing pretty well!
deleted 2y ago
[deleted]
incomingpain 2y ago
The government is needed to fix what the government caused? This seems like a terrible idea.

22 points by donsupreme 2y ago

Don't bet against America's oligarchs. They will move Heaven and Earth to make sure the 1% don't have a bad quarter.

the Fed thinking it can "fix" the economy is exactly how we ended up here they'll try again with rapid and deep rate cuts, and we'll be back to raging inflation and asset bubbles without the necessary wage growth at what point do people realize that the price of a forever-growing stock market is a four-digit weekly grocery bill? we're running out of corner to paint ourselves into

duxup 2y ago
[flagged]
bryanlarsen 2y ago
> how we ended up here? We ended up as an economy that survived COVID lockdowns, the supply shock, the outbreak of a de-facto war against a superpower, trade cutoff to one of the largest energy suppliers in the world, most of our trading partners tipping into recession without tipping into recession ourselves. We've got miracle makers in the Fed and White House and you all think that they're incompetent.
- deleted 2y ago
  [deleted]
- jgust 2y ago
  Might it be overly generous to attribute these outcomes to recent actions by people in these instituions vs. the USD still being the world reserve currency?
  - bryanlarsen 2y ago
    The Fed deserves a lot of the credit. Biden deserves credit for not screwing things up. "First do no harm", "a steady hand at the tiller". Trump has promised to meddle a lot more -- massive border tariffs, taking political control of the Fed, taking political control of the bureaucracy, etc. It's sad that not screwing things up is high praise, but it is.
kurthr 2y ago
LOL! I mean, I actually agree with your first comment a bit since the Fed has been reduced to a "jaw boning" organization, and they're not fixing anything. Hopefully, they don't cause a crisis. However, you both miss the goals of the Fed (yes they want long term inflation to be 2-3% without interest rates at the zero bound) and the causes of the recent "inflation". The rapid disinflation we've seen while wages increase is not a typical inflationary spiral, and neither were the supply chain disruptions that ripped through the entire world (I hear there was a pandemic). The dollar has been by far the strongest international currency for the entire run so monetary inflation this is NOT (Gold was flat from July 2020 until Feb 2024). Even then the Fed's intervention in both expanding/contracting balance sheets, and in bank regulation has had a miniscule effect relative to the pandemic spending at $4T (under Trump) and $2T (under Biden) of the US Treasury (and congress) in issuing more debt. I mean, if we've painted ourselves into a corner, then it's the biggest corner in the world (you certainly don't want to look to Asia or Europe for low debt/gdp numbers - only India seems relatively low). When geopolitical and environmental risks appear more immediate than fiscal, that's a strange and concerning place to be, and it should focus attention from the usual boogiemen. Don't talk about oil prices since it was more expensive in 2008 than any time in the last decade.

consumer451 2y ago

They certainly have a tool to stoke it. Maybe waiting this long to cut rates wasn't a bad idea.

HPsquared 2y ago

Fix it, in the sense of "match fixing".

thoiiiiiiijeow 2y ago

[flagged]

deleted 2y ago

[deleted]

JackOfCrows 2y ago

On the other hand it is genuinely hilarious that what it took to crater tech stocks was someone going "Hey are you guys ever going to make money with any of this AI crap?" "I mean, if you keep giving us billions of dollars, maybe in like a decade. But uh keep doing it, they're totally going to think any day now."

AnthOlei 2y ago
What’s the source of this? Where can I read more?
- JackOfCrows 2y ago
  I mean start here: https://www.washingtonpost.com/technology/2024/04/18/ai-bubble-hype-dying-money/ https://www.washingtonpost.com/technology/2024/04/18/ai-bubb...
  - AnthOlei 2y ago
    I was under the impression that you were referring to a specific event that happened over the weekend, not a general vibe you were feeling
gruez 2y ago
Isn't that every bubble? The 2022 tech bubble was basically this but without the AI narrative. The 2008 GFC was partially caused by giving mortgages to increasingly flaky borrowers. The dotcom bubble was basically the AI bubble but with "the internet" instead of AI.
- burgrchf 2y ago
  [dead]
snakeyjake 2y ago
>"Hey are you guys ever going to make money with any of this AI crap?" The most common answer I have heard for that question has been, so far, "AI brand ambassadors". The thought is that by sucking up every scrap of personal data on you, a company can pay an AI brand ambassador firm to create an avatar to relentlessly pummel you in every plane of your existence with marketing and very carefully obfuscated conversation in order to make you buy something. Think: autoplaying ads on every website and in every app with a "person" who starts talking to you like they know you, friend requests from strangers on every social media site you frequent who appear human and then once they trick you into engaging with them steer the conversation towards how awesome a product is, and comments and replies in media you consume that use every trick in the book to appear organic while namedropping a product or service. There are only two ways to pay for the billions of dollars all of this AI nonsense has cost and will continue to cost: making end-users pay to use it (unlikely) or bombarding end users with ads and skimming off a sliver of any sales. It's going to be a nightmare.

some_random 2y ago

I would hope that the Fed President would say this, even if they don't believe it. Imagine the reverse, "hey folks, basically if the economy gets any worse we're cooked, but please keep spending money and investing and shit thank you"

TMWNN 2y ago
>I would hope that the Fed President would say this, even if they don't believe it. Completely disagree. It's an incredibly irresponsible thing to say. Experts know that saying that the Fed can "fix" the economy (with this one simple trick, presumably) is ridiculous. Ordinary people ... also know that that is ridiculous. They aren't stupid. They know there isn't a dial in Washington that Jerome Powell or ~~Biden~~ Harris can twist to "fix" things and, voilà, it's all better. People don't like being talked down to and do respond accordingly.

shagie 2y ago

The Fed is haunted by the ghost of inflation from the 70s and 80s. https://www.federalreservehistory.org/essays/great-inflation https://www.federalreservehistory.org/essays/great-inflation And the interest rates - https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS And you'll see in that the "ok, it's going in the right direction, cut the rate, and inflation spikes again ... " and doing this again and again. My crystal ball says that this will be a slow backing off rather than trying to revisit what the 80s had. That said, with monetary policy, there are very few knobs to turn. Fiscal policy has as many knobs to turn as they want, but is mired in politics and (not infrequently) goals that work out of alignment with the central bank's goals.

nimbius 2y ago

great. with what new parlour trick? Quantitative easing was the high speed drag fuel used to propel us to "these uncertain times." doubling down on QE for covid turned the housing market into a bulletproof bubble. Cranking interest to clinton-era levels basically tapped the brakes on inflation so a food crisis didnt threaten to dissolve the union, but it also didnt translate into a personal savings gain. return-to-work mandates have failed, so we still have the looming corporate real estate crisis with over a trillion due in the next 40 months. the average US auto loan is now somewhere beyond 80 months, and auto lending defaults have spiked as of 2023, so theres that bubble. the education lending bubble was getting some assistance until loan forgiveness was basically cancelled. theres another 1.73 trillion dollar bubble. and finally the US credit card debt rate is another 1.15 trillion dollar bubble ready to pop. https://www.npr.org/2024/05/14/1251295805/credit-cards-debt-inflation https://www.npr.org/2024/05/14/1251295805/credit-cards-debt-...

duxup 2y ago

This seems like a very run of the mill statement, is there something noteworthy here other than an opportunity for folks to riff off this on some related topics? And is it my imagination or is most of the OPs activity just cnbc submissions?

scottiebarnes 2y ago

They'll always "fix" it, until they can fix it no more. We are addicted to easy money. $35 trillion of national debt. $1 trillion in annual interest payments alone to service that debt. Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). Highest "Home Price to Median Household Income" ratio in the last 70 years, currently higher than the last housing bubble.

burgrchf 2y ago
[dead]
Izkata 2y ago
> Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). For context they target 2% per year, so cumulative over 20 years should have been around 48.6%
- scottiebarnes 2y ago
  And recently, the firmness of the 2% target has changed. Flexible Average Inflation Targeting (FAIT) allows for the Fed to let inflation to run above 2%, with the hopeful expectation of bringing it down below it at some point. https://www.brookings.edu/articles/assessing-the-federal-reserves-new-monetary-policy-framework/ https://www.brookings.edu/articles/assessing-the-federal-res...
wrenky 2y ago
The Fed will always fix it as _thats what the fed does_. Debt, spending, interest payments are all treasury- The stability of the system is the fed. They often work together but I'm willing to bet the fed is very unhappy with the level of debt and unable to do anything about it. Fed just controls the money supply and interest rates in an extremely technocratic way, divorced from the government or policy making. > Cumulative inflation of 66.3% over the last 20 years (based on CPI, it's probably actually worse). While this is bad, if you check the cumulative inflation from 1999-2019 where inflation had essentially been "missing" in the 1-2% range the cumulative inflation is 55%. Regardless though looking at inflation numbers is only half the picture, if you look wage growth in the same period, comes out to several percentage points above inflation/price growth. Even with all the big numbers we are doing pretty well!

deleted 2y ago

[deleted]

incomingpain 2y ago

The government is needed to fix what the government caused? This seems like a terrible idea.