Posted on 03/29/2019 6:04:57 PM PDT by Moonman62
The average Fed Funds rate is around 4.8%. But everyone is getting all worked up about a rate that is less than half of that. So yeah, you might be right.
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Let’s lower your salary to the average over your lifetime.
The fed funds rate is 2.5%.
I agree. The economy doesn’t seem to be as fundamentally sound as it should be. Obama left behind an economy that was hampered in many ways but Trump has overcome much of that. The problem may lie in just the people participating in the American economy.
There are a lot of cynical, entitled liberals out there. Capitalism is a foreign, evil concept to them. Men used to be the engine of prosperity and they strove to make as much money as they could. Is it worth it anymore in the face of #MeToo at work or affirmative action everywhere you look? I look around and it seems American society has a sickness, one that reeks of complacency and bitterness.
Isn’t it amazing?
Volcker “broke the back” of inflation but...houses in the Bay Area are now $2 mil for a crappy ‘60s rancher.
Gas is $3.50 / gal...again.
Looks like the inflation thingy happened anyway: that’s what happens when you pour people into the country by the millions but don’t allow anyone to build a house because of “green space” or antipathy to developers.
I recall writing a lot of those loans back then at 17% for ordinary consumer credit. Know what it did? It took money out of seller’s pockets and put it into banker’s pockets big time. That’s all. Killing inflation? If by that you mean destroying the dreams of a generation then yeah, that’s what it did...prices may have been driven down but the overall cost stayed the same: instead of producers getting cash, the interest sellers got it.
Volcker like Miller like Powell like Yellen are patrician half wits. The trash they believe is simplistic twaddle - the cartoon BS of Keynes and other shallow, non-mathematical philosopher kings who try to describe economics verbally. We had a couple of smart guys - Greenspan and Bernanke - but they were just groupies of the game, hip to the way the con is run.
> Let’s lower your salary to the average over your lifetime. <
If you factored in inflation, that would actually be a raise.
Inflation is a generalized rise in all prices. It’s a monetary phenomenon caused by excessive growth of the money supply. At least that’s Milton Friedman’s definition, and I suppose it is shared by his acolyte Ben Bernanke.
Silicon Valley real estate is the result of tech millionaires who have the money to bid up prices. $3.50 Cali gas is due to taxes and AQMD rules. Gasoline averages only $2.70 nationally.
Killing inflation saved people on fixed incomes from being ruined. Anyone who didn’t own inflation hedges was getting poorer.
Verbal, non-mathematical economists include Adam Smith, David Ricardo, Ludwig von Mises and Joseph Schumpeter. They seem pretty smart to me. The Keynesians who think that economies operate in a mechanical fashion in line with their IS-LM graphs don’t impress me nearly as much.
the increased interest rates also affected the national debt. Even with the increased income tax revenue from the booming economy, the increased interest on the debt caused the debt to grow faster than it could be paid off.
It wasn’t and that’s why Trump warned the Fed. Economies around the world are slowing down and may be heading into recession. At least the Fed have decided not to raise for the rest of 2019.
I can’t tell whether the establishment loves power so much that they are willing to destroy the country to retain control over us - or do they hate us so much that they enjoy destroying the country because it harms productive, decent Americans?
Trump is completely wrong about this.
Inflation had been running over 2.5% for most of 2018 when the Fed made its last 0.25% hike in December.
Over the last five months, inflation has dropped to near zero.
I think the Fed’s timing - for the last hike and for the current pause - has been quite good.
The current Fed Funds rate is 2.50%. That’s just 0.75% above the rate one year ago.
In my opinion, most professional investors and corporate executives do not make significant changes to their long term strategy based on a 0.75% rate increase.
I would also point out that long term rates are still very attractive.
The Ten Year Treasury Bond is 2.4%.
That is just 1.0% above the all time historical low of 1.4% in July 2016.
The Three Month Treasury was paying 15.6% (annually) in 1981.
The inflation rate was 13.5% in 1980.
But who appointed the head of the Fed? Why did Trump pick a swamp guy?
Gosh - sounds good until one questions why the Fed would try to put the brakes on a non-robust economy.....
>>>Gosh - sounds good until one questions why the Fed would try to put the brakes on a non-robust economy.
Perhaps they bought into the Administration’s claims that we would see 5% annual GDP growth.
In order...
- If inflation is only caused by an excessive growth in money supply, what caused stagflation in ‘71? Answer: decontrolling gold and the associated decrease in market value of the dollar once it was floated. Further inflation of the ‘70s was a result of that: the Arabs wanted more money for the juice underneath the sand, and asset holders demanded more increasingly worthless dollars from buyers.
- Silicon Valley is only an extreme case of overall price inflation. Recall that 10 years ago now the entire real estate market had collapsed nationwide. But prices are now above where they were. The reason is partly monetary policy - Helicopter Ben dumping bags of cash into the system - but also demand: another 20 million people have come into the country in that time span legally and illegally. They all need a place to sleep. Unfortunately building houses is a difficult process in most American cities - a legacy of the 70’s No-Growth movement. So a house that cost $40K in 1970 in a place like say Manhattan Beach, CA now sells for $2 million...just like Palo Alto. It’s a lack of SUPPLY caused by regulation and physical limitations like land scarcity. But mostly regulation: raze the SFD’s and build townhomes or 10 story condoplexes on the same land, presto: more supply. Or stop Mass Immigration, which is my solution.
- Maybe beating down inflation for pensioners was high on Volcker’s list. That’s nice. The smarter ones were putting their savings into CDs bearing 8-12% back then. Those were your inflation hedges. Me? I was facing 12% interest to build a house. Couldn’t do it: the payment was half my earnings. And I wasn’t poor. It was far cheaper to rent.
There’s another point that a lot of people don’t recall but in the mid-70s women started coming into the workforce in large numbers. So now we had two wage earners bidding on housing: No problem to pay 5-10% higher, the two income family could afford it. But now that’s all priced in, and ONLY two income families can afford houses in most cases. Two generations ago that wasn’t true. Remember?
Volcker was using simplistic measures to attack a multi-faceted problem. He had a tiger by the tail that he didn’t understand: an economy based on a fiat money system is a non-linear system with multiple feedback and feedforward loops unaccounted for by “classical” theory. The Australian economist Steve Keen is the first to actually build a model of sufficient complexity and even he doesn’t account for all the influences. Fisher and Minsky got started with relatively simple models but at least they were on the right track. Friedman was aligned more with them. Comment: just because you understand a system doesn’t make it good. We still need to get away from the credit based fiat system or else the system will continue with routine oscillations. It’s not a breakdown of the system when that happens, it’s a feature.
Trump is completely wrong about this.
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You have a reputation on FR for being anti-Trump.
Inflation is tame because of economic growth.
The Fed has greatly increased the deficit because we have to pay a lot more to service the debt that was piled high to prop up the Obama economy. The Fed’s manipulated interest rates have also strengthened the dollar too much and are working against Trump’s trade policies.
That goes against everything the “all-knowing” Fed says it stands for...pure politics driving the ass-hats.
If you factored in inflation, that would actually be a raise.
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I doubt it.
The point is interest rates should reflect the current market, not an average calculated over many years. The best way to measure this is the current yield curve.
And your salary should reflect your current market value, not an average value calculated over many years.
The anti-Capitalist hate the natural distribution of wealth, represented by the basic form of the bell curve. This distribution is a natural function of nature. They hate that on one end of the curve is poverty and on the other end is wealth. They don’t accept nature and if nature causes any kind of pain, they want to fight it and the forces that cause it to happen. In the case of the natural distribution of wealth, represented by the bell curve, they want to compress it so it has a even distribution. We are the enemy because we are part of a system that rewards winners and does not favor equal outcome. Equal outcome does not happen anywhere in nature, but it is the con artist politicians who make the suckeres think it and want it. It is the politicians that want to destroy Capitalism and those who defend it because it is part of nature.
Notice they are fighting nature in regards to Climate Change. In this case, they are putting all the blame on humans as if it is not a part of a natural process out of our control. Once again, it is the con artists who are making the suckers think we can stop climate change by changing human activity. Again, the enemy is Capitalism and those who defend it. We who are smart, see through this game. We know who the real enemies are and they are not Capitalism or Mother Nature.
IMO.
“- If inflation is only caused by an excessive growth in money supply, what caused stagflation in ‘71? Answer: decontrolling gold and the associated decrease in market value of the dollar once it was floated. “
That’s no different than what I’ve been saying about inflation. Inflation is a monetary phenomenon that results when the growth of the money supply exceeds the growth of the GDP. That’s basic Milton Friedman, Anna Schwarz Monetarism, which real work experience appears to validate.
A hidden inflation had already been going on with the dollar throughout the ‘60s due to the dollar being caught in the Triffin Dilemma. There had been a dual gold market throughout the ‘60s, an “official” market for governments at the low pegged rate, and a free market where gold was trading much higher.
The French decided not to play along with valuing their dollar balances at the official rate and began demanding actual gold in exchange for their dollar holdings. This would not end well for us if other countries followed France’s lead.
Nixon’s response to this was to abandon Bretton Woods and the dollar’s last official peg to gold. That threw gasoline on the inflation that had been simmering out of view of the public during most of the 1960s. Had the post 1971 Fed followed a quantity of money rule the inflation might have been lower. But they didn’t, until Volcker became their chairman.
Stagflation is inflation plus a stagnant economy. The supply-side diagnosis was that over-regulation and too high taxation were preventing the Production Possibility Frontier Curve from shifting to the right; meaning that any of the usual Keynesian injection of new money into the system would go straight to inflation while adding nothing to economic growth. And that’s what was happening.
The Reagan plan was to free the Production Frontier by slashing gov’t regulations while cutting tax rates, and supporting Volcker’s war on inflation by radically halting credit growth. Which is what Volcker did until August 1982, after which the economy took off without the inflation of the ‘70s.
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