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Fed hikes rates as inflation worries push up bond yields

182 points by wslh 17d ago

bwb 17d ago
Get ready for a fun ride my friends :) Fun ride = Oil is going up, possibly for a long time, which will have a big inflationary effect on everything. And it appears the USA government has lost the conflict it started and effectively given control over key oil delivery channels to Iran. Not to mention Saudia facing real issues from rebel groups / Yemen (simplification). Government debt is high in several key economies, and the bond market is being saturated with AI-related bonds, as well as possibly people finally tired of lending the USA/France/UK money at low rates and demanding higher ones. And with higher interest rates and bonds rolling over it means more and more money going to pay for the debt, rather than core services. Wild cards lurking in the bushes... AI, AGI, RSI. And yonder you have a nuclear power floundering; its only source of hard currency is being rightfully degraded, and its leadership delusional. And the one to watch IMO... Russian wheat export ability: wheat prices are up considerably, and combined with inflation from oil, this is the kind of stuff that creates waves of political change like the Arab Spring.
- leptons 17d ago
  This comment isn't helpful. Please explain for those of us without a degree in economics.
  - bryanlarsen 17d ago
    bwb is likely referring to the likelihood that this will send Trump into a tremendous rage.
    - science4sail 17d ago
      I can't wait to see the next Truth Social post.
      - bwb 17d ago
        hah i know, his own man raised rates, he will probably send the military out to get Walsh
  - TrainedMonkey 17d ago
    Higher rates means USG will need to print more money to pay for $40TN debt which will increase inflation which will force higher rates.
    - darth_avocado 17d ago
      The debt is owed by the treasury, fed prints the money. What you’re describing is not how the monetary system works.
      - almost_usual 17d ago
        The Fed purchased Treasury securities during COVID QE. Those securities had low yields and cash reserves were created during those purchases. Those cash reserves are held by banks which the Fed funds rate pays interest on (what was hiked). Meanwhile the fixed rate debt from QE remains the same.
  - kadoban 17d ago
    Inflation is high, so interest rates need to go up to try to slow that, but the economy isn't doing amazing already, and higher interest rates won't help that. Not to mention the US debt is _high_ as hell and bond yields mean that's more expensive. And the country is run by a broken fool who has no interest or ability to fix any of that.
    - ihsw 17d ago
      [dead]
    - rayiner 17d ago
      > And the country is run by a broken fool who has no interest or ability to fix any of that. Trump will be gone in three years, but you'll still have an electorate that wants more free stuff while also getting tax cuts. There is zero appetite for fiscal reform in the U.S. The geometric growth rate of U.S. debt has been consistent since 2010 and will remain so when AOC is President: https://usafacts.org/answers/how-much-debt-does-the-us-have/country/united-states/ https://usafacts.org/answers/how-much-debt-does-the-us-have/...
      - nemomarx 17d ago
        You really really just need to raise taxes. Just find a way to sell that to the public (focus on the rich or large corporations or whatever outgroup you want basically)
        apparent 17d ago
        Disagree. We have a spending problem, not a tax revenue problem. No matter how much the govt brings in, it will want to spend an increasing amount more.
        ifyoubuildit 17d ago
        Is there anything that can't be solved by bigger government?
        rayiner 17d ago
  - dmoose 17d ago
    For those of us without a degree in economics the last few years have seemed a bit unhinged from reality so I will not claim any deep insight here. However, it is hard to imagine that an increase in cost of debt will not have some impact and probably in ways not anticipated by many of those with economics degrees.
  - iamnothere 17d ago
    Higher rates means financing/borrowing is more expensive. Mortgage rates will go up, possibly pushing home prices down. This is neutral for buyers because of higher rates, but bad for sellers. Loans (personal or business) will be harder to come by. Layoffs, or at least hiring freezes, are more likely. Companies will move into a defensive rather than an growth mode. Higher unemployment will lead to more desperation, and possibly consumer defaults on loans and mortgages. Government interest payments, which are already high, will become higher after future bond sales. This will compound future budgetary problems and could eventually lead to cuts in entitlements. If so, expect crime and political instability (already a problem) to rise in the future. This will take a while, though. Normally rates are increased to lower inflation by reducing the supply of money. Given the multiple concurrent problems with energy (Hormuz, Red Sea/Yanbu, Russia/Ukraine, possibly Libya as problems are starting there, China is buying aggressively) then higher rates may not be enough to stop inflation. This would create a situation where both borrowing is harder and inflation continues to rage. This is very bad and will lead to demand destruction (nobody’s buying anything because it’s too expensive and they can’t finance it anyway). This results in a severe recession at the minimum. Edit: wow, I really set off a discussion with this. See replies below for clarification on mortgage rates, which is the least important part anyways. Also, I should note that a lot of the above is a worst case scenario, if energy isn’t solved soon and especially if bonds don’t respond to the hike, leading to further hikes.
    - jrflo 17d ago
      Home prices are sticky on the way down, 25 basis points won't change much
      - iamnothere 17d ago
        Supply is way up and sales are way down, on average: https://wolfstreet.com/2026/09/10/sales-of-existing-single-family-homes-sag-further-supply-spikes-to-decade-high-condo-sales-drop-to-data-low-supply-spikes-to-14-year-high/ https://wolfstreet.com/2026/09/10/sales-of-existing-single-f... This could be the catalyst to lower prices if sellers get spooked, especially if gas prices keep going up.
  - theginger 17d ago
    The comment could be more about the politics of this not the economics, Donald Trump has made it clear he is very against this sort of rate rise
    - Supermancho 17d ago
      What Trump says is never clear. It's also not a reliable source for what behavior the administration (or even he) exhibits.
  - maerF0x0 17d ago
    Last time interest rates went up, Startups and SaaS went down, which many on HN 's livelihood depends.
  - Edman274 17d ago
    Stagflation is when the economy stagnates yet inflation is higher than ideal. Inflation and economic activity are typically correlated, and the conventional wisdom back in the day was that you couldn't have unemployment going up and things costing more, because it was expected that demand going down puts a downward pressure on prices. When people aren't hiring and buying but things cost more and more, life just kind of sucks. The last time this happened was in the 1970s in the aftermath of a few oil embargoes that made oil prices go through the roof and a disastrously expensive failed war in Vietnam, there was gas rationing, it sucked. You may notice a few key similarities now with oil embargoes, reduced hiring, an extremely expensive war, and rapidly expanding government debt as a result of that war. If you want a qualitative feeling about people's moods in the 70s, you can watch such movies as: Taxi Driver The Deer Hunter The Warriors Americathon Network
    - iamnothere 17d ago
      I suggest A Boy And His Dog (based on a Harlan Ellison story)
  - whateveracct 17d ago
    why are you responding to a person like it is an LLM?
- darth_avocado 17d ago
  This is the right move. Inflationary pressures due to high oil prices and tariffs are not going away anytime soon. All the economic numbers point to a need for a rate hike. Not doing so has a much larger effect on the financial system than a 25 bps rate hike. Stagflation is a bigger risk to the economy. Counterintuitively the rate hike can help lower things like mortgage rates by stabilizing the bond yields.
  - ThunderSizzle 17d ago
    We'll continue through the depression we've started since 2008. (GDP growth should be closer to 3.5%-5%, but we haven't really escaped sub-2% since 2008) - our GDP has been depressed by at least 1-2% growth since that crisis, and I think a large part of it has been the inflationary cycle we started and never stopped. The wars already put us into too much debt, Obama continued it for 8 years (granted, the deficit slowly went down, but it wasn't fixed). Trump and Biden did a huge disservice to the debt (but neither really cared much about it), and now I fear the path Bush, Obama, Trump, and Biden have laid will not be easily fixed.
    - irishcoffee 17d ago
      I agree with you. We are still paying for 2008, and compounded the problem with Covid stimuli. I sure wish we would just rip the band aid off at this point, but it might already be too late. The global economy is jacked, China needs everyone to be consumers, and that well is running dry, globally.
    - StevePrefontain 16d ago
      GDP growth is never going to be that high again. GDP growth is just per-capita GDP growth (1-1.5% per year) + population growth (used to be 1%, now is 0% or slightly negative). GDP growth of 1-1.5% will be normal going forward and could even go lower if population decline is at -.5% per year, for example.
      - ThunderSizzle 16d ago
        I did list GDP growth per capita[0], so that already was accounting for population changes. Having said that, you are depressingly very correct. A negative population growth will cause the post-2008 depression to continue even longer, and probably more agressively. [0] https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2025&locations=US&start=1961&view=chart https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2...
- baxtr 17d ago
  Not sure tbh. It’s a highly non-linear system, many moving parts, people and systems adapt. It's tough to make predictions, especially about the future!
lenerdenator 17d ago
Should have been this high years ago. The country - particularly this industry, information technology - got addicted to cheap cash. Worse, people didn't want to pay any of it back in tax, so bond yields are going to go up on the debt that was issued to cover deficit spending. Should be interesting to see how this impacts the AI hyper-scalers. They were already burning through cash like a furnace and were running out of people to borrow from, thus the IPO hopes.
- trhway 17d ago
  >Should be interesting to see how this impacts the AI hyper-scalers. They were already burning through cash like a furnace and were running out of people to borrow from looks very similar to 2007-2008 - high rates plus an wide economy segment with very large debt. Now, the interesting question - did anybody "too large to fail" do (or got exposed in some other ways to) leveraged CDS on the hyperscalers bonds and private debt.
- maerF0x0 17d ago
  > want to pay any of it back in tax If they dont pay it back in tax, they pay it back in debasement of their savings and entitlements
  - SoftTalker 17d ago
    Yep, inflation is just another kind of tax, and one that's quite hard to avoid.
    - lenerdenator 16d ago
      If you look at the kind of person who makes massive donations to politicians and initiatives that are about massive tax reforms (think Missouri's recent ballot question about introducing a state sales tax and eventually sunset its income tax) you'll notice that a lot of them are very wealthy people who have very, very few people that they have to answer to in their lives. The one exception, it would seem, is the tax man, and they absolutely hate that. Market forces like inflation aren't a person exerting control over them. They're the results of humans acting within social structures. These people have control over social structures; they're the elite. They can counter that market force with some other market force. Taxes? That's cold, hard math. There's no way around it, no feeling of agency to be had. So while it might be harder to avoid, it's not the financial effect that they worry about, because they have enough money to weather that. It's the feeling of obligation and powerlessness in the face of others that they can't brook.
verelo 17d ago
Edit: Whoever the hell flagged this lol....people were complaining the parent comment wasn't helpful so I took time to write a thoughtful response with citations. You can't win around here. --- The counterintuitive part is that a lower Fed rate doesn't necessarily mean cheaper borrowing for the government. The Fed sets an overnight rate; someone lending for ten years cares about inflation and interest rates over those ten years. Keeping short-term rates low won't necessarily reassure that lender. [1] It also helps to distinguish the government's debt from a giant credit card. Existing fixed-rate bonds keep their agreed interest payments. Higher borrowing costs feed into the budget as old debt matures and gets refinanced, and as new debt is issued. The pain accumulates rather than arriving all at once. [2] Nor does a larger interest bill automatically require "printing money." Treasury borrowing and Fed money creation are separate decisions. [3] The difficult question is how to contain inflation without causing more economic damage than necessary. A large debt load makes that tradeoff more expensive; it doesn't make either option painless. [1] https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm https://www.federalreserve.gov/monetarypolicy/monetary-polic... [2] https://www.treasurydirect.gov/marketable-securities/treasury-bonds/ https://www.treasurydirect.gov/marketable-securities/treasur... [3] https://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm https://www.federalreserve.gov/faqs/how-does-the-federal-res...
- evanwolf 17d ago
  I thought bumping up the prime rate slowed consumer spending. But the recent price hikes are because supply is hosed (oil, tariffs), not that demand has been bidding up prices. So how is this supposed to help?
  - verelo 17d ago
    I mean, if predicting market behaviour was that simple, I'd be very rich by now. This is another unique moment, the beginning of the end of an empire possibly. Some unusual things are going to happen and it'll be tricky to predict reliably. Best thing we can hope for here is Trump sees an obvious way out of this: return the economy to a predicable machine, reduce spending, tax the ultra wealthy, and ditch tariffs. But I don't think much of that's likely to occur. We're in unchartered territory in many ways. Good luck.
legitster 17d ago
https://en.wikipedia.org/wiki/Stagflation https://en.wikipedia.org/wiki/Stagflation
andy_ppp 17d ago
So, during the Great Depression who ended up doing well? What can be applied to today?
- adventured 17d ago
  There isn't going to be a great depression. The US is going to debase itself endlessly through spend-print-spend-print. At some point they may load up enough debt that the economy suffers a gradual heat death, in the style of Japan, wherein too much of your national capital is going to debt maintenance, sitting in a low yield blackhole sucking the dynamism out of your system (instead of going to productive use, business expansion, R&D, et al). There's absolutely nothing particularly interesting or special about the direction the US is going. It's very, very, very easy to see what's coming and has been for ~20 years (since Bush nearly doubled the size of the Federal Government and blew up our finances with simultaneous tax cuts + massive spending expansion, we've never turned back from the bleed). Gold has gone up ~10x since the early Bush years precisely because of the USD debasement, that's the reduction in value in the dollar being represented in the ultimate store of value. All of it has been remarkably predictable. I've been chirping about it forever here and there's nothing special about my insight either, this stuff is plain as day national econ 101.
  - netbioserror 17d ago
    The turning point is approaching: Interest rates will gradually overtake all other gov't expenditures. All politics will revolve around shoring up the parasitic drain on the rest of absolutely everything.
  - JMiao 17d ago
    i know what you mean. 2008 and covid taught me to stop underestimating the abilities/nerve of our financial schemers and their political representatives to kick the can down the road. but i am too anxious about it to think straight. what to do?
  - macintux 17d ago
    > since Bush nearly doubled the size of the Federal Government and blew up our finances with simultaneous tax cuts + massive spending expansion We were 10 years from paying off the national debt when Clinton left office. 10 years!
deskamess 17d ago
I wonder if Canada (BoC) will follow this. I hope not!
- ActionHank 17d ago
  They will probably wait it out to December and make a call then, but a small bump is looking more and more likely.
- onlyrealcuzzo 17d ago
  They are too concerned with their housing market to raise rates.
- bryanlarsen 16d ago
  Inflation in Canada is currently right at their 2% target rate so they are unlikely to raise ... this time.
dabinat 17d ago
Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.
- phendrenad2 17d ago
  "Global depression imminent, here's what it means for this poor American political party"
- vasco 17d ago
  Easy fix, have the democrats lose the next election and you break the spell. It's all military industrial complex anyway.
  - beej71 17d ago
    I wish they'd lost in 2020, that's for sure.
    - eej71 17d ago
      Hello similarly named account. I basically agree. I don't care for DJT, but I can see how getting his "second term" underway after his first one could have been better. His four years away allowed him to stew and plan and respond.
      - bdangubic 17d ago
        you stopped mid-sentence mate - “… to stew and plan on how to pillage as much as possible from Americans before he rides off into the sunset”
      - beej71 16d ago
        Yes. Even Trump has talked about this.
im_down_w_otp 17d ago
It bugs me that the Fed has no mechanism to really deal with supply-shock driven inflation. Prices are shooting up, but not strongly correlated to money supply at the moment. They’re shooting up because there are a dozen or more entirely capricious and totally self-inflicted supply-shocks due to bizzaro tariff “policy”, disastrous military adventurism, and general erosion of the USD the prime vessel for international trade. The Fed tightening the money supply isn’t going to materially bring prices down, because the money supply isn’t driving the price increases.
- throwawaysleep 17d ago
  Isn't the goal then demand destruction?
  - burnt-resistor 17d ago
    The net effect is demand destruction. The US shouldn't be exporting diesel when it lacks sufficient refining capacity to make up for all of the capacity destroyed or unavailable from the US war of choice with Iran. And as the price of US domestic diesel goes to $6+, oil demand is going down both because there's insufficient refining capacity and there's a general slow down in the economy from the added inflation baked-in by higher oil prices and higher diesel prices.
- baxtr 17d ago
  I thought about this as well. Maybe you have to slow down the entire economy to compensate for the missing supply.
- MarkusQ 17d ago
  > the Fed has no mechanism to really deal with supply-shock driven inflation. Inflation is just a change in the ratio of money to stuff. You can reduce inflation by increasing the stuff or reducing the money, and cause it by doing the opposite. There's no requirement that the solution is applied to "the same factor", either works. Sure, if you're wanting to assign blame or worried about externalities these things start to matter. But monetary policy is a perfectly fine tool for dealing with inflation, regardless of the cause. Note: inflation causes prices to rise, but that doesn't mean that all changes in price are caused by inflation.
Aboutplants 17d ago
Unanimous is a pleasant surprise
- AnimalMuppet 17d ago
  It is. But the data is talking rather loudly at the moment.
Sol- 17d ago
I too have very strong opinions about central bank policies.

182 points by wslh 17d ago

bwb 17d ago

Get ready for a fun ride my friends :) Fun ride = Oil is going up, possibly for a long time, which will have a big inflationary effect on everything. And it appears the USA government has lost the conflict it started and effectively given control over key oil delivery channels to Iran. Not to mention Saudia facing real issues from rebel groups / Yemen (simplification). Government debt is high in several key economies, and the bond market is being saturated with AI-related bonds, as well as possibly people finally tired of lending the USA/France/UK money at low rates and demanding higher ones. And with higher interest rates and bonds rolling over it means more and more money going to pay for the debt, rather than core services. Wild cards lurking in the bushes... AI, AGI, RSI. And yonder you have a nuclear power floundering; its only source of hard currency is being rightfully degraded, and its leadership delusional. And the one to watch IMO... Russian wheat export ability: wheat prices are up considerably, and combined with inflation from oil, this is the kind of stuff that creates waves of political change like the Arab Spring.

leptons 17d ago
This comment isn't helpful. Please explain for those of us without a degree in economics.
- bryanlarsen 17d ago
  bwb is likely referring to the likelihood that this will send Trump into a tremendous rage.
  - science4sail 17d ago
    I can't wait to see the next Truth Social post.
    - bwb 17d ago
      hah i know, his own man raised rates, he will probably send the military out to get Walsh
- TrainedMonkey 17d ago
  Higher rates means USG will need to print more money to pay for $40TN debt which will increase inflation which will force higher rates.
  - darth_avocado 17d ago
    The debt is owed by the treasury, fed prints the money. What you’re describing is not how the monetary system works.
    - almost_usual 17d ago
      The Fed purchased Treasury securities during COVID QE. Those securities had low yields and cash reserves were created during those purchases. Those cash reserves are held by banks which the Fed funds rate pays interest on (what was hiked). Meanwhile the fixed rate debt from QE remains the same.
- kadoban 17d ago
  Inflation is high, so interest rates need to go up to try to slow that, but the economy isn't doing amazing already, and higher interest rates won't help that. Not to mention the US debt is _high_ as hell and bond yields mean that's more expensive. And the country is run by a broken fool who has no interest or ability to fix any of that.
  - ihsw 17d ago
    [dead]
  - rayiner 17d ago
    > And the country is run by a broken fool who has no interest or ability to fix any of that. Trump will be gone in three years, but you'll still have an electorate that wants more free stuff while also getting tax cuts. There is zero appetite for fiscal reform in the U.S. The geometric growth rate of U.S. debt has been consistent since 2010 and will remain so when AOC is President: https://usafacts.org/answers/how-much-debt-does-the-us-have/country/united-states/ https://usafacts.org/answers/how-much-debt-does-the-us-have/...
    - nemomarx 17d ago
      You really really just need to raise taxes. Just find a way to sell that to the public (focus on the rich or large corporations or whatever outgroup you want basically)
      - apparent 17d ago
        Disagree. We have a spending problem, not a tax revenue problem. No matter how much the govt brings in, it will want to spend an increasing amount more.
      - ifyoubuildit 17d ago
        Is there anything that can't be solved by bigger government?
      - rayiner 17d ago
- dmoose 17d ago
  For those of us without a degree in economics the last few years have seemed a bit unhinged from reality so I will not claim any deep insight here. However, it is hard to imagine that an increase in cost of debt will not have some impact and probably in ways not anticipated by many of those with economics degrees.
- iamnothere 17d ago
  Higher rates means financing/borrowing is more expensive. Mortgage rates will go up, possibly pushing home prices down. This is neutral for buyers because of higher rates, but bad for sellers. Loans (personal or business) will be harder to come by. Layoffs, or at least hiring freezes, are more likely. Companies will move into a defensive rather than an growth mode. Higher unemployment will lead to more desperation, and possibly consumer defaults on loans and mortgages. Government interest payments, which are already high, will become higher after future bond sales. This will compound future budgetary problems and could eventually lead to cuts in entitlements. If so, expect crime and political instability (already a problem) to rise in the future. This will take a while, though. Normally rates are increased to lower inflation by reducing the supply of money. Given the multiple concurrent problems with energy (Hormuz, Red Sea/Yanbu, Russia/Ukraine, possibly Libya as problems are starting there, China is buying aggressively) then higher rates may not be enough to stop inflation. This would create a situation where both borrowing is harder and inflation continues to rage. This is very bad and will lead to demand destruction (nobody’s buying anything because it’s too expensive and they can’t finance it anyway). This results in a severe recession at the minimum. Edit: wow, I really set off a discussion with this. See replies below for clarification on mortgage rates, which is the least important part anyways. Also, I should note that a lot of the above is a worst case scenario, if energy isn’t solved soon and especially if bonds don’t respond to the hike, leading to further hikes.
  - jrflo 17d ago
    Home prices are sticky on the way down, 25 basis points won't change much
    - iamnothere 17d ago
      Supply is way up and sales are way down, on average: https://wolfstreet.com/2026/09/10/sales-of-existing-single-family-homes-sag-further-supply-spikes-to-decade-high-condo-sales-drop-to-data-low-supply-spikes-to-14-year-high/ https://wolfstreet.com/2026/09/10/sales-of-existing-single-f... This could be the catalyst to lower prices if sellers get spooked, especially if gas prices keep going up.
- theginger 17d ago
  The comment could be more about the politics of this not the economics, Donald Trump has made it clear he is very against this sort of rate rise
  - Supermancho 17d ago
    What Trump says is never clear. It's also not a reliable source for what behavior the administration (or even he) exhibits.
- maerF0x0 17d ago
  Last time interest rates went up, Startups and SaaS went down, which many on HN 's livelihood depends.
- Edman274 17d ago
  Stagflation is when the economy stagnates yet inflation is higher than ideal. Inflation and economic activity are typically correlated, and the conventional wisdom back in the day was that you couldn't have unemployment going up and things costing more, because it was expected that demand going down puts a downward pressure on prices. When people aren't hiring and buying but things cost more and more, life just kind of sucks. The last time this happened was in the 1970s in the aftermath of a few oil embargoes that made oil prices go through the roof and a disastrously expensive failed war in Vietnam, there was gas rationing, it sucked. You may notice a few key similarities now with oil embargoes, reduced hiring, an extremely expensive war, and rapidly expanding government debt as a result of that war. If you want a qualitative feeling about people's moods in the 70s, you can watch such movies as: Taxi Driver The Deer Hunter The Warriors Americathon Network
  - iamnothere 17d ago
    I suggest A Boy And His Dog (based on a Harlan Ellison story)
- whateveracct 17d ago
  why are you responding to a person like it is an LLM?
darth_avocado 17d ago
This is the right move. Inflationary pressures due to high oil prices and tariffs are not going away anytime soon. All the economic numbers point to a need for a rate hike. Not doing so has a much larger effect on the financial system than a 25 bps rate hike. Stagflation is a bigger risk to the economy. Counterintuitively the rate hike can help lower things like mortgage rates by stabilizing the bond yields.
- ThunderSizzle 17d ago
  We'll continue through the depression we've started since 2008. (GDP growth should be closer to 3.5%-5%, but we haven't really escaped sub-2% since 2008) - our GDP has been depressed by at least 1-2% growth since that crisis, and I think a large part of it has been the inflationary cycle we started and never stopped. The wars already put us into too much debt, Obama continued it for 8 years (granted, the deficit slowly went down, but it wasn't fixed). Trump and Biden did a huge disservice to the debt (but neither really cared much about it), and now I fear the path Bush, Obama, Trump, and Biden have laid will not be easily fixed.
  - irishcoffee 17d ago
    I agree with you. We are still paying for 2008, and compounded the problem with Covid stimuli. I sure wish we would just rip the band aid off at this point, but it might already be too late. The global economy is jacked, China needs everyone to be consumers, and that well is running dry, globally.
  - StevePrefontain 16d ago
    GDP growth is never going to be that high again. GDP growth is just per-capita GDP growth (1-1.5% per year) + population growth (used to be 1%, now is 0% or slightly negative). GDP growth of 1-1.5% will be normal going forward and could even go lower if population decline is at -.5% per year, for example.
    - ThunderSizzle 16d ago
      I did list GDP growth per capita[0], so that already was accounting for population changes. Having said that, you are depressingly very correct. A negative population growth will cause the post-2008 depression to continue even longer, and probably more agressively. [0] https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2025&locations=US&start=1961&view=chart https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?end=2...
baxtr 17d ago
Not sure tbh. It’s a highly non-linear system, many moving parts, people and systems adapt. It's tough to make predictions, especially about the future!

lenerdenator 17d ago

Should have been this high years ago. The country - particularly this industry, information technology - got addicted to cheap cash. Worse, people didn't want to pay any of it back in tax, so bond yields are going to go up on the debt that was issued to cover deficit spending. Should be interesting to see how this impacts the AI hyper-scalers. They were already burning through cash like a furnace and were running out of people to borrow from, thus the IPO hopes.

trhway 17d ago
>Should be interesting to see how this impacts the AI hyper-scalers. They were already burning through cash like a furnace and were running out of people to borrow from looks very similar to 2007-2008 - high rates plus an wide economy segment with very large debt. Now, the interesting question - did anybody "too large to fail" do (or got exposed in some other ways to) leveraged CDS on the hyperscalers bonds and private debt.
maerF0x0 17d ago
> want to pay any of it back in tax If they dont pay it back in tax, they pay it back in debasement of their savings and entitlements
- SoftTalker 17d ago
  Yep, inflation is just another kind of tax, and one that's quite hard to avoid.
  - lenerdenator 16d ago
    If you look at the kind of person who makes massive donations to politicians and initiatives that are about massive tax reforms (think Missouri's recent ballot question about introducing a state sales tax and eventually sunset its income tax) you'll notice that a lot of them are very wealthy people who have very, very few people that they have to answer to in their lives. The one exception, it would seem, is the tax man, and they absolutely hate that. Market forces like inflation aren't a person exerting control over them. They're the results of humans acting within social structures. These people have control over social structures; they're the elite. They can counter that market force with some other market force. Taxes? That's cold, hard math. There's no way around it, no feeling of agency to be had. So while it might be harder to avoid, it's not the financial effect that they worry about, because they have enough money to weather that. It's the feeling of obligation and powerlessness in the face of others that they can't brook.

verelo 17d ago

Edit: Whoever the hell flagged this lol....people were complaining the parent comment wasn't helpful so I took time to write a thoughtful response with citations. You can't win around here. --- The counterintuitive part is that a lower Fed rate doesn't necessarily mean cheaper borrowing for the government. The Fed sets an overnight rate; someone lending for ten years cares about inflation and interest rates over those ten years. Keeping short-term rates low won't necessarily reassure that lender. [1] It also helps to distinguish the government's debt from a giant credit card. Existing fixed-rate bonds keep their agreed interest payments. Higher borrowing costs feed into the budget as old debt matures and gets refinanced, and as new debt is issued. The pain accumulates rather than arriving all at once. [2] Nor does a larger interest bill automatically require "printing money." Treasury borrowing and Fed money creation are separate decisions. [3] The difficult question is how to contain inflation without causing more economic damage than necessary. A large debt load makes that tradeoff more expensive; it doesn't make either option painless. [1] https://www.federalreserve.gov/monetarypolicy/monetary-policy-what-are-its-goals-how-does-it-work.htm https://www.federalreserve.gov/monetarypolicy/monetary-polic... [2] https://www.treasurydirect.gov/marketable-securities/treasury-bonds/ https://www.treasurydirect.gov/marketable-securities/treasur... [3] https://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm https://www.federalreserve.gov/faqs/how-does-the-federal-res...

evanwolf 17d ago
I thought bumping up the prime rate slowed consumer spending. But the recent price hikes are because supply is hosed (oil, tariffs), not that demand has been bidding up prices. So how is this supposed to help?
- verelo 17d ago
  I mean, if predicting market behaviour was that simple, I'd be very rich by now. This is another unique moment, the beginning of the end of an empire possibly. Some unusual things are going to happen and it'll be tricky to predict reliably. Best thing we can hope for here is Trump sees an obvious way out of this: return the economy to a predicable machine, reduce spending, tax the ultra wealthy, and ditch tariffs. But I don't think much of that's likely to occur. We're in unchartered territory in many ways. Good luck.

legitster 17d ago

https://en.wikipedia.org/wiki/Stagflation https://en.wikipedia.org/wiki/Stagflation

andy_ppp 17d ago

So, during the Great Depression who ended up doing well? What can be applied to today?

adventured 17d ago
There isn't going to be a great depression. The US is going to debase itself endlessly through spend-print-spend-print. At some point they may load up enough debt that the economy suffers a gradual heat death, in the style of Japan, wherein too much of your national capital is going to debt maintenance, sitting in a low yield blackhole sucking the dynamism out of your system (instead of going to productive use, business expansion, R&D, et al). There's absolutely nothing particularly interesting or special about the direction the US is going. It's very, very, very easy to see what's coming and has been for ~20 years (since Bush nearly doubled the size of the Federal Government and blew up our finances with simultaneous tax cuts + massive spending expansion, we've never turned back from the bleed). Gold has gone up ~10x since the early Bush years precisely because of the USD debasement, that's the reduction in value in the dollar being represented in the ultimate store of value. All of it has been remarkably predictable. I've been chirping about it forever here and there's nothing special about my insight either, this stuff is plain as day national econ 101.
- netbioserror 17d ago
  The turning point is approaching: Interest rates will gradually overtake all other gov't expenditures. All politics will revolve around shoring up the parasitic drain on the rest of absolutely everything.
- JMiao 17d ago
  i know what you mean. 2008 and covid taught me to stop underestimating the abilities/nerve of our financial schemers and their political representatives to kick the can down the road. but i am too anxious about it to think straight. what to do?
- macintux 17d ago
  > since Bush nearly doubled the size of the Federal Government and blew up our finances with simultaneous tax cuts + massive spending expansion We were 10 years from paying off the national debt when Clinton left office. 10 years!

deskamess 17d ago

I wonder if Canada (BoC) will follow this. I hope not!

ActionHank 17d ago
They will probably wait it out to December and make a call then, but a small bump is looking more and more likely.
onlyrealcuzzo 17d ago
They are too concerned with their housing market to raise rates.
bryanlarsen 16d ago
Inflation in Canada is currently right at their 2% target rate so they are unlikely to raise ... this time.

dabinat 17d ago

Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it. This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.

phendrenad2 17d ago
"Global depression imminent, here's what it means for this poor American political party"
vasco 17d ago
Easy fix, have the democrats lose the next election and you break the spell. It's all military industrial complex anyway.
- beej71 17d ago
  I wish they'd lost in 2020, that's for sure.
  - eej71 17d ago
    Hello similarly named account. I basically agree. I don't care for DJT, but I can see how getting his "second term" underway after his first one could have been better. His four years away allowed him to stew and plan and respond.
    - bdangubic 17d ago
      you stopped mid-sentence mate - “… to stew and plan on how to pillage as much as possible from Americans before he rides off into the sunset”
    - beej71 16d ago
      Yes. Even Trump has talked about this.

im_down_w_otp 17d ago

It bugs me that the Fed has no mechanism to really deal with supply-shock driven inflation. Prices are shooting up, but not strongly correlated to money supply at the moment. They’re shooting up because there are a dozen or more entirely capricious and totally self-inflicted supply-shocks due to bizzaro tariff “policy”, disastrous military adventurism, and general erosion of the USD the prime vessel for international trade. The Fed tightening the money supply isn’t going to materially bring prices down, because the money supply isn’t driving the price increases.

throwawaysleep 17d ago
Isn't the goal then demand destruction?
- burnt-resistor 17d ago
  The net effect is demand destruction. The US shouldn't be exporting diesel when it lacks sufficient refining capacity to make up for all of the capacity destroyed or unavailable from the US war of choice with Iran. And as the price of US domestic diesel goes to $6+, oil demand is going down both because there's insufficient refining capacity and there's a general slow down in the economy from the added inflation baked-in by higher oil prices and higher diesel prices.
baxtr 17d ago
I thought about this as well. Maybe you have to slow down the entire economy to compensate for the missing supply.
MarkusQ 17d ago
> the Fed has no mechanism to really deal with supply-shock driven inflation. Inflation is just a change in the ratio of money to stuff. You can reduce inflation by increasing the stuff or reducing the money, and cause it by doing the opposite. There's no requirement that the solution is applied to "the same factor", either works. Sure, if you're wanting to assign blame or worried about externalities these things start to matter. But monetary policy is a perfectly fine tool for dealing with inflation, regardless of the cause. Note: inflation causes prices to rise, but that doesn't mean that all changes in price are caused by inflation.

Aboutplants 17d ago

Unanimous is a pleasant surprise

AnimalMuppet 17d ago
It is. But the data is talking rather loudly at the moment.

Sol- 17d ago

I too have very strong opinions about central bank policies.