Posted on 07/07/2025 6:07:41 PM PDT by Angelino97
Trumps’ call to lower interest rates, rewards borrowers at the expense of savers.
Reducing the cost of borrowing will stimulate economic activity and lessen the burden of existing debt, but reckless borrowing encouraged by low rates is a big part of the reason that we have this huge debt problem to begin with.
It's a Milton Friedman talking point.
“It’s a Milton Friedman talking point.”
FALSE!
No.
Need to hold at the current rate or even increase by 50 or 100 basis points to get back to “reality”. The Fed was a decade/years too late in raising rates after the 2008 “GFC”.
Milton Friedman famously stated that “inflation is always and everywhere a monetary phenomenon,” meaning it is primarily caused by an increase in the money supply outpacing economic output. He argued that government spending plays a significant role in creating inflation, as only governments can print money.
Recession, by definition, pretty much has a negative growth rate.
I could go as high as 0.25 as an Inflation Target.
[I know that the only way out of the Yuge Debt of/for America is to inflate the currency, with actual economic growth alongside.]
Interest rates need to be larger than inflation.
Yes. Next question?
In the consumer Market interest rates are theoretically based on risk as well as return. Higher risk borrowers pay higher rates of interest to justify the risk to the lender. This has also been distorted by government interference in a number of ways.
I’m so tired of people whining about the interest rates. They are not high. Anyone remember when interest rates were truly high? Think back to 1980 before Reagan got hold of the economy.
The drastic cuts started after 9/11 to jump start the economy. Excessively low rates caused banks to start charging their b.s. fees for everything including paper clips (j/k)
0% interest rate should never be a goal. ! Some people are on fixed incomes and are using CDs interest rates to supplement SS.
One interest rate that should be slashed is credit card rates which are criminal imo. I don’t have running balances on CCs anymore but I’m not young anymore either. Younger people get hammered by those rates some into bankruptcy. Although a different type of credit, it is still a short term loan.
Items from the thread:
“Interest rates should be 3% above inflation! And the inflation target should be 0%.”
Except that sentence 1 did not attach to sentence 2. Inflation in the latest PCE was ticked up to 2.8%. So . . . that is calling for Fed Funds of 5.8%.
BTW has anyone ever done a historical calendar analysis to determine how often Fed targets are hit? Say, within 6 months of declaring it?
What creates inflation? Buyers being more urgent than sellers — which is a pretty easy configuration to see in food.
Not really clear how the Fed Funds rate addresses urgency to eat.
1) Inflation is at 2.4%, about half of the interest rate.
2) During Democrats’ time in office, the overnight lending rate has gone WAY below inflation, stuck at zero for almost of Obama AND Biden’s entire time in office, while quantitative easing meant the government was buying all of the government-issued debt.
3) The very time it would make sense to allow inflation to exceed interest rates would be if inflation were artificially boosted by importers passing on tariffs, since that would mean that any present inflation is not indicative of future inflation.
I remember when banks returned my canceled checks.
Then banks started keeping my canceled checks "for my convenience," and instead sent me a photocopied page showing my canceled checks.
They said I could still receive my canceled checks for a $2 monthly service charge.
Then banks stopped sending me photocopies of my canceled checks, or even my bank statements. They wanted me to go "paperless." Once again "for my convenience."
Every time some corporation (banks, airlines, hotels, insurance companies) change their policies "for my convenience," it becomes both less convenient and more expensive.
Lowering interest rates is like a hit of crack cocaine. It feels good for a while. Then it leads to destructive long term consequences.
They are lower than they were in the 1980’s and 1990’s but we managed.
Kids today just want excuses for failing to thrive. Always an excuse.
Amazing isn’t it? Amazing how an “independent” and supposedly apolitical FED can raise rates in every Republican presidency and send them crashing down for every democrap.
Too high? Maybe by a point but not by too much. What we need are steady and normal rates. I would never loan money at the very low rates we have seen. In fact, I did not, even to my own son. The roller coaster we have ridden for more than 70 years has not helped anyone. The FED has hardly done what they claim they intend since we have had multiple rounds of upset in the economy. Hardly stable at all.
Right...
Yep, about right, we'll probably have two .25 basis point cuts this year, sounds right.
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