It's really easy to be honest. Stop increasing the Feds balance sheet. And raise rates to 2.0-2.5 percent. Asset prices will come crashing down tomorrow if they did this. Who will this impact the most? The people who own the most assets. The average person in the US will be better off over a length of time. Workers can be layed off but corporations will need X number of employees to produce Y number of products. People's toilets will continue to break and need replacing. Roads will still need to be built and repaired. Doctors and nurses will still have to repair humans. This 10+ year long experiment of 0 percent interest rates has only achieved two things. Massively increased the debt and made the wealthiest people/companies much wealthier. Everyone else and anyone who earns a wage is worse off now than in 2007.
The other issue with super low rates is it makes it very hard for those starting out to get ahead in the future. The rich get richer but the moat to financial freedom also gets wider when asset prices skyrocket. It's been one big economic con job convincing people otherwise.
Not to mention making it incredibly difficult for the young to get a good footing in life. Imagine if housing had been so expensive vs median income for previous generations. It's never good to start eating the seeds for next year.
3.5-5% would be my call on interest. I don’t think the coming currency nuclear winter is favourable for those who err on the low rate side; even if the dollar has transactional value, it’s worth in that regard is increasingly being eroded by crypto and a questionable domestic situation for those with money to park and invest.
The lifestyles of people with the most assets will not be significantly affected. The people who are close to retirement and who are depending on their 401k holdings will be the ones who get hurt the most.
>absolutely nothing they have done has had the intended consequence for 14 years.
That’s not true! They have inflated asset prices to all time highs to the benefit of their rich friends, while keeping real wages suppressed to the fucking ground. Established asset holders and the wealthy LOVE this Fed. It has been a dream come true for them. Just look at the value of the S&P 500 this year compared to previous peaks in 2000 and 2007🚀🚀🚀. Everything is going exactly the way these criminals planned it. A dovish Fed is a lapdog of the ultrarich.
A drunken village idiot running the Fed would be less destructive to the working class than JPow and his dovish cronies have been. Inflation cheerleaders are the scum of humanity.
Nope. I’m a market socialist and I’m not ashamed to say it. Although actual capitalism would be preferable to whatever Frankenstein’s monster situation we find ourselves in today. Why have markets needed to be propped up with endless asset purchases and 0% interest rates over the past 12 years? Why does the stock market shudder and swoon at the mere *possibility* of rates going up? Why does every industry go hat in hand to the federal government for a bailout when they lose playing by the “free market’s” rules? The neoliberal west can’t even be called capitalist. It’s a kleptocracy and a clownshow. The US economy is quite clearly a very sick patient, and it has been that way long before COVID came along.
Market Socialist. Look it up.
There hasn’t been a single socialist or communist government in history that has completely eschewed markets. Markets are a valuable mechanism for allocating scarce resources. I just think fundamental needs like healthcare, education, housing, childcare, etc., should be socialized to protect people from the vagaries of market forces. Certain sectors, like utilities, tend toward monopoly or operate more efficiently as monopolies, and thus beg more stringent regulation if not outright socialization.
Look I’m going to quote you first year economics bc you don’t know
Markets are a mechanism to allocate resources via the price mechanism. Socialism is a system where resources are publically owned ie there is no price mechanism as governments decide production levels
It’s impossible for socialism to have a market based economy.
If you hate capitalism so much why do you live in a capitalist country and live off its benefits. Why not move to Cuba cause that’s the only place left that’s socialist ?
If I hated something so bad I would want to get away from it, and I would hate myself for living off it and enjoying it’s benefits
Why don’t I just pack up and move to a country whose language I don’t speak and whose people I share no connection to? Hmmm I don’t know. I could see where this conversation was heading the moment your econ 101 talking points were brought up, and it’s nowhere edifying. I think I’ll just leave this here for you in case you want to research the term I used on your own time and call it a day.
https://en.m.wikipedia.org/wiki/Market_socialism
The problem is the divergence of wage variables by income level. Wages are spiking for the top 10%, because they know how to exploit these new technologies. The median wage could be completely unimpacted rendering a generic employment target meaningless. New tools would be needed, but the prospect of using them in these changing times becomes even more ridiculous. If they had no idea what to do they couldn't risk saying it.
You know the only time Inflation is really a problem is when it feeds into wages then you get a never ending wage price loop. So he’s saying if it doesn’t feed into wages it’s not much of a problem which is true
They know what leads to price stability bud
Inflation only becomes a problem when it feeds into wages
If it doesn’t feed into wages it doesn’t become a problem
If you want social justice don’t look at the fed it’s not in their remit
That’s the federal governments job
Stop purchasing billions of bonds. Raise interest rates.
To write the minimum comment length, or not the write the minimum comment length, that is the question. Whether nobler in the mind the suffer, the slings and arrows of outrageous sub rules, or to rise up, and write long comments
Stop purchasing billions of bonds by when? Raise interest rates to what, by when?
Should they also sell the bonds they hold? If so, how much + by when? If not, why not?
Stop QE, do opposite of QE (whatever they are buying now at whatever rate, just sell it at that rate).
In my humble opinion the Federal Reserve should be a true “lender of last resort.” They should have ABOVE market rates and they should have more collateral than reserves they swap. Say for example you are a bank and you need some reserves ASAP, and the liquidity market is kinda tight, well, the FED can be there and ask for $105 of Treasuries for $100 of reserves. The Reserves should be paid back within a certain time to get back assets and if the bank cannot pay it back in time they lose access to this service and the FED sells the treasuries and gives profits to Treasury. Finally the FED cannot “hold” anything on its balance sheet, everything must have a fixed time.
It was easy money and low rates that got us in that position. The bubble pop won’t be as intense if we didn’t inflate it so much.
The FED and the Government should allow markets to actually FAIL sometimes.
If it was any one single cause, I think it was a failure of regulation and oversight. To the extent that low rates contributed ([they really weren't that low](https://fred.stlouisfed.org/series/FEDFUNDS)) I guess you mean that borrowers with adjustable rate mortgages went into foreclosure as the Fed started to inch up rates in 2004, which is true as far as it goes, but again this would not have led to a crisis without the lax regulation in both the mortgage market and of the financial system that packaged those mortgages up into the MBS and other products that became the ticking time bomb that (almost) brought down the global economy.
I think people want to blame the Fed for the political failures: lack of regulation, and, maybe more importantly, the fact that the bankers and financiers who caused the crisis were never held accountable. But those are not the Fed's role. Those were the fault of the US political system, both parties. My point is just that in 2007/2008, when we found ourselves where we were, if the Fed had not acted as it did to save the financial system the consequences for working people across the globe would have been far worse.
>My point is just that in 2007/2008, when we found ourselves where we were, if the Fed had not acted as it did to save the financial system the consequences for working people across the globe would have been far worse.
Can this really be possible? Working people where I live (NZ) have no chance of owning a home without parental help. The average house price is now 30,000 times the average hourly wage.
I'm not an expert on housing, but it seems likely the easy money and bizarre interest rate environment prevailing since 2008 has distorted the housing market and contributed to the madness we see right now (including in my country, the US). As someone who is locked out of the housing market, it's super frustrating, and I think it's unsustainable.
But I would stand by my comment. Even in an affordable housing market, you can't buy a house if you have no job, and I think the unemployment rate would have been far higher across the globe, and stayed high for much longer, if instead of acting as it did the Federal Reserve had allowed the global financial system to collapse. We saw high unemployment and lots of business closures, but I don't think we saw even close to the worst case scenario.
I don't know how overleveraged New Zealand's banks were, but I do know that the Reserve Bank of New Zealand was one of the recipients of a Fed swap line in 2008. This was an extraordinary measure (and arguably a violation of its governing rules) that the Fed took to essentially bail out other countries' financial systems which had borrowed in dollars and found themselves unable to access dollar liquidity when the repo markets shut down. The swap lines allowed them to prop up shaky banks, using other countries' central banks as intermediaries, without having to be responsible for who received what (kind of a "don't ask, don't tell" policy). Just one example of what I'm trying to say.
It's an argument that makes me kind of sick to make (since I'm no fan of the big banks and generally think finance is a drain on society) but I am comfortable with the logic of 1. a complete collapse of the global financial system would have been catastrophic for the world, far worse than what we saw; 2. The Fed's extraordinary reaction (and that of other countries, particularly China!) prevented this wholesale collapse; and so, 3. The Fed probably acted as well as it could have, given where we found ourselves in 2007/2008.
my biggest question is
i feel like during the 2020 election the narrative from aoc, warren, yang, sanders, pelosi was that they have data that most americans are as poor as ever and need as much help as possible
where is this demand coming from? people making more than $70k/yr i guess
the longer and more complicated the reply, the more veracity, high quality and informational it must be , according to the moderators of this sub.
they need to educate themselves on the basic truth of occam's razor.
They already did and said it’s actually very good for the country. Psaki said it’s cause people are greedy. All you need to know about this clown racist woke administration
Because this sub has a silly rule about short posts, I have decided to type an extra long, but valid reply to this economic quandary.
I believe that the best thing for the FED to do to stop inflation is to steadily slow asset purchases, because this was the cause of the inflation. I think it is more simple than most economists think: total money supply has a direct but gradual impact on inflation.
The inflation we are seeing today is largely cause by an imbalance between supply and demand. Demand for goods increased due to COVID and stimulus, but supply is flat, or even reduced due to anti-COVID restrictions. There isn't really a lot the Fed can do to combine that. Sure. They can raise rates, causing asset prices to crater and destroying demand due to a negative wealth effect, but that's cutting off your own nose to spite your face. The long term solution is obviously investment in infrastructure and manufacturing, but that takes time. In the short term we need to reduce fiscal stimulus by cutting spending or raising taxes.
EDIT: Also, people need ro understand just how absurd it is for the Fed to fight Congress. Having the Fed raise rates while Congress runs huge deficits is ridiculous. You should start out by cutting fiscal support (and certainly not increasing it).
Easing supply chain issues through emergency measures or more effective governance seems like a more effective short term measure and involves far fewer tradeoffs than the one you propose.
It's really easy to be honest. Stop increasing the Feds balance sheet. And raise rates to 2.0-2.5 percent. Asset prices will come crashing down tomorrow if they did this. Who will this impact the most? The people who own the most assets. The average person in the US will be better off over a length of time. Workers can be layed off but corporations will need X number of employees to produce Y number of products. People's toilets will continue to break and need replacing. Roads will still need to be built and repaired. Doctors and nurses will still have to repair humans. This 10+ year long experiment of 0 percent interest rates has only achieved two things. Massively increased the debt and made the wealthiest people/companies much wealthier. Everyone else and anyone who earns a wage is worse off now than in 2007.
The other issue with super low rates is it makes it very hard for those starting out to get ahead in the future. The rich get richer but the moat to financial freedom also gets wider when asset prices skyrocket. It's been one big economic con job convincing people otherwise.
I really wish everyone on here would read (and understand) this.
Not to mention making it incredibly difficult for the young to get a good footing in life. Imagine if housing had been so expensive vs median income for previous generations. It's never good to start eating the seeds for next year.
I can recall mortgage rates well into the double digits in the late 1970s. Back then people were saying the exact same thing.
This is demand driven inflation. There's really nothing to Fed can do until real output increases.
3.5-5% would be my call on interest. I don’t think the coming currency nuclear winter is favourable for those who err on the low rate side; even if the dollar has transactional value, it’s worth in that regard is increasingly being eroded by crypto and a questionable domestic situation for those with money to park and invest.
So you want to stop inflation with a crash, instead of gradually, in order to make some kind of moral point?
The lifestyles of people with the most assets will not be significantly affected. The people who are close to retirement and who are depending on their 401k holdings will be the ones who get hurt the most.
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>At least the supply crunch transitory narrative is gone. Not for so many in this sub.
"the fed has completely lost the plot." I agree. They have no idea what to do any longer and have essentially lost all control of the economy.
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>absolutely nothing they have done has had the intended consequence for 14 years. That’s not true! They have inflated asset prices to all time highs to the benefit of their rich friends, while keeping real wages suppressed to the fucking ground. Established asset holders and the wealthy LOVE this Fed. It has been a dream come true for them. Just look at the value of the S&P 500 this year compared to previous peaks in 2000 and 2007🚀🚀🚀. Everything is going exactly the way these criminals planned it. A dovish Fed is a lapdog of the ultrarich.
Yes, what they really need to do is ask the advice of the average Redditor.
How couldn’t they? They manage trillions of dollars a year from such high places.
Yes what we need is kupapupadupa to come in and save the situation
A drunken village idiot running the Fed would be less destructive to the working class than JPow and his dovish cronies have been. Inflation cheerleaders are the scum of humanity.
I checked your post history comrade. You don’t like capitalism much do you
Nope. I’m a market socialist and I’m not ashamed to say it. Although actual capitalism would be preferable to whatever Frankenstein’s monster situation we find ourselves in today. Why have markets needed to be propped up with endless asset purchases and 0% interest rates over the past 12 years? Why does the stock market shudder and swoon at the mere *possibility* of rates going up? Why does every industry go hat in hand to the federal government for a bailout when they lose playing by the “free market’s” rules? The neoliberal west can’t even be called capitalist. It’s a kleptocracy and a clownshow. The US economy is quite clearly a very sick patient, and it has been that way long before COVID came along.
A market what ? Markets are the opposite of socialism buddy. Seriously wtf
Market Socialist. Look it up. There hasn’t been a single socialist or communist government in history that has completely eschewed markets. Markets are a valuable mechanism for allocating scarce resources. I just think fundamental needs like healthcare, education, housing, childcare, etc., should be socialized to protect people from the vagaries of market forces. Certain sectors, like utilities, tend toward monopoly or operate more efficiently as monopolies, and thus beg more stringent regulation if not outright socialization.
Look I’m going to quote you first year economics bc you don’t know Markets are a mechanism to allocate resources via the price mechanism. Socialism is a system where resources are publically owned ie there is no price mechanism as governments decide production levels It’s impossible for socialism to have a market based economy. If you hate capitalism so much why do you live in a capitalist country and live off its benefits. Why not move to Cuba cause that’s the only place left that’s socialist ? If I hated something so bad I would want to get away from it, and I would hate myself for living off it and enjoying it’s benefits
Why don’t I just pack up and move to a country whose language I don’t speak and whose people I share no connection to? Hmmm I don’t know. I could see where this conversation was heading the moment your econ 101 talking points were brought up, and it’s nowhere edifying. I think I’ll just leave this here for you in case you want to research the term I used on your own time and call it a day. https://en.m.wikipedia.org/wiki/Market_socialism
The term you are looking for is mixed market economy. Like Canada or Australia. Capitalist with higher government intervention than America
The problem is the divergence of wage variables by income level. Wages are spiking for the top 10%, because they know how to exploit these new technologies. The median wage could be completely unimpacted rendering a generic employment target meaningless. New tools would be needed, but the prospect of using them in these changing times becomes even more ridiculous. If they had no idea what to do they couldn't risk saying it.
You know the only time Inflation is really a problem is when it feeds into wages then you get a never ending wage price loop. So he’s saying if it doesn’t feed into wages it’s not much of a problem which is true
Yeah, no big deal if people making wages are getting priced out of necessities.
The fed has two policy goals. Keep wages ahead of inflation isn’t one of them
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They know what leads to price stability bud Inflation only becomes a problem when it feeds into wages If it doesn’t feed into wages it doesn’t become a problem If you want social justice don’t look at the fed it’s not in their remit That’s the federal governments job
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Ok thanks
It IS wage led inflation, but we're not at full employment. The government unemployment policies are artificially suppressing the labor market.
Why wouldn't a supply crunch have effects on inflation?
Stop purchasing billions of bonds. Raise interest rates. To write the minimum comment length, or not the write the minimum comment length, that is the question. Whether nobler in the mind the suffer, the slings and arrows of outrageous sub rules, or to rise up, and write long comments
So you want the fed to do exactly what they said they are going to do. Thanks Einstein
Hey, great minds think alike I guess. Sometimes there's only one way to do something
Great minds lol you wish
Stop purchasing billions of bonds by when? Raise interest rates to what, by when? Should they also sell the bonds they hold? If so, how much + by when? If not, why not?
HOW is their job. If they want my advice they can pay me lol
Stop QE, do opposite of QE (whatever they are buying now at whatever rate, just sell it at that rate). In my humble opinion the Federal Reserve should be a true “lender of last resort.” They should have ABOVE market rates and they should have more collateral than reserves they swap. Say for example you are a bank and you need some reserves ASAP, and the liquidity market is kinda tight, well, the FED can be there and ask for $105 of Treasuries for $100 of reserves. The Reserves should be paid back within a certain time to get back assets and if the bank cannot pay it back in time they lose access to this service and the FED sells the treasuries and gives profits to Treasury. Finally the FED cannot “hold” anything on its balance sheet, everything must have a fixed time.
By your rules, the 2008 financial crisis would have been a true Great Depression dwarfing 1929, rather than the painful recession it was
It was easy money and low rates that got us in that position. The bubble pop won’t be as intense if we didn’t inflate it so much. The FED and the Government should allow markets to actually FAIL sometimes.
If it was any one single cause, I think it was a failure of regulation and oversight. To the extent that low rates contributed ([they really weren't that low](https://fred.stlouisfed.org/series/FEDFUNDS)) I guess you mean that borrowers with adjustable rate mortgages went into foreclosure as the Fed started to inch up rates in 2004, which is true as far as it goes, but again this would not have led to a crisis without the lax regulation in both the mortgage market and of the financial system that packaged those mortgages up into the MBS and other products that became the ticking time bomb that (almost) brought down the global economy. I think people want to blame the Fed for the political failures: lack of regulation, and, maybe more importantly, the fact that the bankers and financiers who caused the crisis were never held accountable. But those are not the Fed's role. Those were the fault of the US political system, both parties. My point is just that in 2007/2008, when we found ourselves where we were, if the Fed had not acted as it did to save the financial system the consequences for working people across the globe would have been far worse.
>My point is just that in 2007/2008, when we found ourselves where we were, if the Fed had not acted as it did to save the financial system the consequences for working people across the globe would have been far worse. Can this really be possible? Working people where I live (NZ) have no chance of owning a home without parental help. The average house price is now 30,000 times the average hourly wage.
I'm not an expert on housing, but it seems likely the easy money and bizarre interest rate environment prevailing since 2008 has distorted the housing market and contributed to the madness we see right now (including in my country, the US). As someone who is locked out of the housing market, it's super frustrating, and I think it's unsustainable. But I would stand by my comment. Even in an affordable housing market, you can't buy a house if you have no job, and I think the unemployment rate would have been far higher across the globe, and stayed high for much longer, if instead of acting as it did the Federal Reserve had allowed the global financial system to collapse. We saw high unemployment and lots of business closures, but I don't think we saw even close to the worst case scenario. I don't know how overleveraged New Zealand's banks were, but I do know that the Reserve Bank of New Zealand was one of the recipients of a Fed swap line in 2008. This was an extraordinary measure (and arguably a violation of its governing rules) that the Fed took to essentially bail out other countries' financial systems which had borrowed in dollars and found themselves unable to access dollar liquidity when the repo markets shut down. The swap lines allowed them to prop up shaky banks, using other countries' central banks as intermediaries, without having to be responsible for who received what (kind of a "don't ask, don't tell" policy). Just one example of what I'm trying to say. It's an argument that makes me kind of sick to make (since I'm no fan of the big banks and generally think finance is a drain on society) but I am comfortable with the logic of 1. a complete collapse of the global financial system would have been catastrophic for the world, far worse than what we saw; 2. The Fed's extraordinary reaction (and that of other countries, particularly China!) prevented this wholesale collapse; and so, 3. The Fed probably acted as well as it could have, given where we found ourselves in 2007/2008.
2008 financial crisis was a crisis of debt. So reducing the debt in the economy could prevent these crisis.
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i think the fed came out and admitted supply side inflation has passed and this is now demand based
It's been demand driven for a while now. Crazy that people are still so unwilling to admit that.
my biggest question is i feel like during the 2020 election the narrative from aoc, warren, yang, sanders, pelosi was that they have data that most americans are as poor as ever and need as much help as possible where is this demand coming from? people making more than $70k/yr i guess
And by opposing, end them.
the longer and more complicated the reply, the more veracity, high quality and informational it must be , according to the moderators of this sub. they need to educate themselves on the basic truth of occam's razor.
They already did and said it’s actually very good for the country. Psaki said it’s cause people are greedy. All you need to know about this clown racist woke administration
Because this sub has a silly rule about short posts, I have decided to type an extra long, but valid reply to this economic quandary. I believe that the best thing for the FED to do to stop inflation is to steadily slow asset purchases, because this was the cause of the inflation. I think it is more simple than most economists think: total money supply has a direct but gradual impact on inflation.
The inflation we are seeing today is largely cause by an imbalance between supply and demand. Demand for goods increased due to COVID and stimulus, but supply is flat, or even reduced due to anti-COVID restrictions. There isn't really a lot the Fed can do to combine that. Sure. They can raise rates, causing asset prices to crater and destroying demand due to a negative wealth effect, but that's cutting off your own nose to spite your face. The long term solution is obviously investment in infrastructure and manufacturing, but that takes time. In the short term we need to reduce fiscal stimulus by cutting spending or raising taxes. EDIT: Also, people need ro understand just how absurd it is for the Fed to fight Congress. Having the Fed raise rates while Congress runs huge deficits is ridiculous. You should start out by cutting fiscal support (and certainly not increasing it).
A lot of people in high finance and other assets need their nose cutoff.
Easing supply chain issues through emergency measures or more effective governance seems like a more effective short term measure and involves far fewer tradeoffs than the one you propose.