Fed Pauses Rate Hikes But Signals More Tightening To Come - Slashdot

Posted by msmash

• • Re:

    Why would higher interest rates reduce production? Production levels are usually based on projected consumer demand.

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      Consumer demand is reduced because it costs more to buy stuff on credit -- can't buy a new laptop or car, thus can't be as productive. Industrial output is reduced because money (capital) for building new facilities, maintenance, establishing competitors, and expanding production is unavailable.

      • Re: Quit it!

        Thus fewer consumers chasing goods and lower inflation, which is how it has worked for over 100 years.

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    Nominal interest rate set by a central authority (i.e. Fed) DNE inflation. Inflation already happened in 2008 and through "quantitative easing" up and thru Covid years and "COVID relief" where they increased the money supply artificially to allow debt based spending to buy votes and funnel dollars to their oligarch/corporate supporting. It is a ponzi scheme. "Artificial demand" (for example a liberal arts college education) is caused by "artificial money" (i.e. student loans subsidized by taxpayer money) --

  • They know, they don't care

    this isn't about inflation. Inflation is driven by price gouging after 4 decades of mega mergers being approved willy nilly and zero anti-trust law enforcement.
    
    Jerome Powell just wants a recession. He's said as much, saying he won't stop until he gets 3.5 million layoffs, and that he has no plan to stop the layoffs once they get going.
    
    I suspect this has less to do with inflation and more to do with workers getting better pay and Unionizing.

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    You need to discuss this with Mr. Erdogan:)

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      I did see a pre=election interview in which he said he was doubling down on not increasing interest rates. I also see he won the election after that.

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  The actual real inflation numbers are in double digits, created by the Fed and Treasury to monetize the government debt. By the way they have practically removed the fake 'debt ceiling' (real debt ceiling is set by the lenders, not by the borrowers). US government refuses to pay its debts, so it gets yet another credit card to nove money around from one credit card to another This is not paying any debts, this means borrowing more ti avoid having to pay its debts. Paying out the debts is no longer possible, so inflation cannot be stopped, so this move by the Fed is just the admission they are a political body doing the bidding of the political rulling class to prevent the certainty of the credibt rating collapse of the US, which is the most honest and the most correct way to reset and restart the dying economy.

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    Default on the debt are you fucking insane? Think that through. In spite of it sounding like a good thing, the government will have to suddenly and severely cut back its expenditures which in turn will result in massive job losses, Greece/Zimbabwe level inflation, and probably riots as many social security payments will be reduced and salaries won't cover basic necessities. The economy will spiral into a tailspin and it can't recover because there's no capital to build manufacturing capacity or anything lik

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      > Default on the debt are you fucking insane? Think that through.

      This is not related to the post you are responding to.

      > the government will have to suddenly and severely cut back its expenditures which in turn

      This will have to happen, eventually. What that results in, is your own guesswork as it depends on the specifics of spending changes. I'm not sure where you get the idea that you are seeing something obvious, when you're missing the obvious. Probably because you're a long-lived troll that has be

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      Default will NOT result in massive inflation. First off it will destroy a lot of the money supply. Especially as it takes down banks with it. The problem will not be nobody will do work / sell stuff of money, it will be that no money can be found with which to pay them.

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        And every time that's happened governments resort to printing money.. the end result of which is inflation. Which doesn't solve the problem of there physically not being enough products to go round.

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        Sort of like how they can't just stop paying on the debt they owe (i.e. defaulting)?

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        It's not a fixed-benefit insurance payout, and it doesn't work like one, either. There has been talk for a long time about what happens if and when the Social Security Trust Fund runs out, and chief among those is sharply reducing the payments.

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      Remember when the easily manipulated wanted to play pretend communism? They had everyone stay home and just printed money for them to avoid a virus with a 99.97% survival rate.

      Sure monetary policy was always on a bad course but the COVID overreaction was the bail of straw that broke the camels back. All of this was done to destroy the economy un purpose.

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        Remember when the easily manipulated wanted to play pretend communism? They had everyone stay home and just printed money for them to avoid a virus with a 99.97% survival rate.

        You are misinformed as to the meaning of communism.

  • Re:

    The number that matters is the debt to GDP ratio [stlouisfed.org] and it's going down.

    A lot of people sound the alarm about the debt and point to that number that's in the $trillions. It's meaningless data if it isn't normalized, and the debt to GDP ratio is the generally accepted way to do that.

    Our ratio peaked around 135 during the Covid crisis and is back to 118 for the latest report. It would be nice to get back to around 60 where it was before the 2008 housing crisis, but sparking the kind of economic crisis that a d

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      People are being taught that government debt is like personal debt. This guy talks about opening credit cards, like the government debt is to someone else, like ours is.

      Our government debit is mostly to its citizens. We sell bonds, borrow from social security, amongst other debt, including some foreign. We pay the debit with the ever-growing amount of taxes being collected. Because this is a never-ending COUNTRY and not a person, we will never run out of money to keep paying debt. England still owes $40b to

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        The UK owed less than $4.5 billion [irishtimes.com] on World War I in 2005. I don't think the interest rates are high enough for it to have passed $40 billion since then. It paid off its World War II debt in 2006.

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        Pay down debts during boom times, so you can spend more money on citizens during the shortages.

        If we only could get the politicians to actually do that. Just ask George W Bush why he thought it was better to send everyone small checks with his name attached rather than use that money and avoid borrowing more.

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      M1 money supply is also down, and on a negative trajectory. Google M1 money supply and check the link at the FRED. Set the beginning of the time series to 2020-ish. It's drop roughly $2.5T or so from it's peak of about $21T or so. I don't think rates need further tightening, personally.

• Basically they still see too many people employed and they reserve the right to rectify that.

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    If politicians & policy makers see more citizens complaining about high prices than complaining about lack of jobs, then "stealing" from one to solve the other makes sense.

    Ideally we'd solve both, but there is no magic solution. (Well, there partly is, but it requires longer-term thinking that our political system resists, being reactionary to the Story of the Day.)

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    The idea that there's an optimal level of unemployment is one of those things that's hard to wrap your head around. The layman likes to think it should be zero, but a world of zero unemployment tends to exist only in planned economies, where output stagnates and the quality of life is not very good.

    In a market economy (not totally planned) low unemployment signals a lack of dynamism and growth. People cling to their jobs rather than start businesses, employers have to pay more and pass on the costs, you g

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      > Maybe some day we'll have some kind of Star Trek economy where there's full employment *and* innovation, but that's not where we are.

      Cmdr. Data clones do all the work.

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      I've heard this same argument in regards to rent control and why "it's bad".

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        Rent control is bad, but that's usually not the reason cited. The better argument against is that it's a price ceiling, and ECON 101 is that price ceilings create shortages. In the long run, rent control reduces the housing supply and exacerbates the problems it's trying to solve. It's sweet for the winners though. There are always winners and losers. He's gone now, but I was acquainted with a *gardener* who lived in San Francisco. That's pretty much impossible without rent control. He was a legitima

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          The flaw in your argument, as I see it, is that rent control isn't a market tool but a social tool. The free market hates any sort of regulation. But most regulations are not done for economic efficiency but as societal protections against a free market. Rent controls' goal is not market efficiency but to stabilize prices to prevent people being displaced by market forces. The flaw with rent control is not the regulation itself, but that it's applied unevenly. Also, the pressure rent control puts on sup

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    They still see high inflation, and the tool they have is the interest rate.

    See, since 2008, interest rates were near zero. That led to people (individuals, and businesses) borrowing over what they would have if interest rates were more reasonable.

    Interest rates should have climbed back starting in 2016 or so. But there was resistance to do that for whatever reasons. Trump pushed back on it, but I don't know whether the federal reserve listened to him or not. Anyways, they did not raise the rates. The sam

  • Fire one million

    This [youtube.com] is from 1995. They've been engineering recessions since at least then.

• • Re:

    ^ Donniban violence

• 1: Interest rates go up.
  2: People lose jobs.
  3: People stop buying as much stuff.
  4: Companies jack up prices to compensate for the fewer people.
  5: FED wonders about inflation.
  6: PROFIT!, go 1.

  The FED needs to look at the supply side, and getting more supply. Trying to squeeze demand by getting people unemployed isn't working, and won't work. It just means stagflation and prices spiking while companies keep raising prices, while the economy continues to shed jobs.

  • error: invalid type argument
    The error was on this line
        3: People stop buying as much stuff.
    but was caused by this line
        4: Companies jack up prices
    because this is not consistent with reality

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    • You're missing a module

      I imported monopoly.h it compiled just fine.

  • I heard an interesting observation that a lot of the price increases are driven by price-gouging rather than supply shortages since the price stayed high after supply chain blockages cleared, and continued to rise. Oil prices are well off peak levels as well and doesn't account for the rising prices in the various goods and services. Essentially, companies observe that consumers expect that prices are going up in this inflationary period, therefore they've got a greenflag to raise prices on consumers. Normally you'd hope that a competitor would undercut them by selling cheaper and stealing their share, but having also recognized the opportunity to raise prices and their margins, they too are taking advantage of the opportunity to raise prices rather than attempt to take market share. The incredible growth in corporate profits and margins is both evidence and incentive for this behavior.

    If this observation holds true then, raising interest rates doesn't stop the price inflation, because supply shortage wasn't the cause of the price inflation anyway, it was market sentiment that everyone can raise their prices. So the main tool of the Fed to combat inflation may not be relevant to the type of inflation we're seeing today. In which case, new tools for combating price inflation may be needed. Price manipulation is heavily frowned upon because in the past it was foolishly wielded to disastrous results by setting prices below cost of production, causing supply shortages and skyrockets blackmarket pricing. However, if price ceilings are set to curb unjustiable price growth in an inflationary period, at a level where it's still profitable to continue producing at existing margin levels, then hypothetically it'd be possible to stop inflation more directly. The challenge of course is figuring out how to implement such a mechanism without the many many unintended consequences it could incur if such direct action is carelessly applied.

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    • Re:

      Nope - if the reason prices are going up is sentiment and not actual supply constraints than raising rates IS the way to fight inflation. You making financing expensive and people stop buying luxuries because they can't service the debt. - Less money supply to chase the same relative amount of goods.

      If on the other other hand inflation is being driven by actual supply constraints - than just raise unemployment undermine revenue which impairs production and makes the supply constraint worse and inflates pri

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      Maybe, but even once the supply chain blockage has cleared there's a lot of firms who are still who need to raise prices to deal with previous price increases.

      Companies will always charge what they can, they don't become more or less greedy during high inflation.

      If a firm is making money it seems very doubtful a firm would prioritize short-term profits over taking additional market share.

      The entire point of market economics is that price signals are the best mechanism we have for running the economy.

      Price m

      • Re:

        The problem with high inflation is your money doesn't hold its value. So when you get it, you spend it fast. This creates a demand for things to spend money on because businesses want to get rid of it, and drives up prices further.

        This is one of the problems with a free economy, it's dynamically unstable. Inflation drives demand which in turn leads to higher prices. And it works in reverse, too: Deflation incentivizes people to hold on to money, decreasing demand, which leads to even lower prices.
        So as

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          Sure, modern economies have a lot of regulations governing the banks and markets since, left to their own, there are some really nasty recessions.

          But that doesn't mean you can regulate so extensively/well that you will never get a recession.

          And it certainly doesn't mean, what the poster seemed to suggest, that you can start implementing price controls without some really nasty side effects.

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      Except that there were objectively supply shortages. Did you not live through those times of bare shelves and contractors who had to delay work because they couldn't get the required parts/supplies?

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      Oh, price controls are coming, no question about it. What you heard about 'price gouging' is all nonsense, but I guarantee that price controls are coming, the people will be demanding them, the governments will be setting them and the products will disappear and will be available on the black markets for the higher prices but not through the normal channels.

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    You have a broken logic unit showing symptoms between step 3 and 4. When people quit spending, producers don't increase prices. That is such a ridiculous notion

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      I'd render it instead that prices are moderated by how many dollars are chasing the supply of goods. Reduce the dollars chasing the goods and the price goes down, and eventually if it becomes unprofitable, people stop producing. This reduces the number of goods available and then prices go up, perhaps, presuming stable demand, which is almost never the case. Demand is elastic, often based on price.

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      The main prices that are going up here are fuel, housing and food, all with record profits, even adjusting for inflation and all things that are hard to cut back on, with things like fuel having an affect on most everything.
      I'm paying more for gas then when it was $150 a barrel, rent is going up at like 20% a year here and groceries are a big inflation leader, 10+% a year, with the farmers, packers and shippers not making high profits, at that the farmers are in danger of going out of business, trucking see

  • Re:

    The Fed (not "FED") doesn't have many direct tools to affect supply. They can't even really affect unemployment all that directly. All they can do is affect borrowing costs and hope that it affects other things.

    Employment numbers are outright defying expectations of just about every economist. The labor force participation rate is still going up, we're seeing record numbers of people working (around 161 million over the last few months), the number of unemployed is relatively stable at around 6 million (giv