Like Persistent Inflation, New Home Sales Rise 4.1% MoM In April Despite M2 Money Collapse (Taylor Rule Suggests Target Rate Of 11.78%, So The Fed Is STILL Overstimulating Markets)

Confounded Interest ^ | 05/23/2023 | Anthony B. Sanders

[Kaiser8408a]

Remember when former Fed Chair and current Treasury Secretary Janet Yellen said that inflation was transitory? As usual, Yellen was wrong. Look at April’s new home sales. Up 4.1% since March even through M2 Money growth has collapsed.

The Taylor Rule, based on Core CPI of 5.25% (persistent, not transitory inflation Janet) suggest a Fed target rate of 11.78%. The Fed is at 5.25% and likely to pause rate hikes and maybe even lower rates again.

[Kaiser8408a]

Under biden The Fed will still act to protect Democrats.

[cymbeline]

“Under biden The Fed will still act to protect Democrats.”

Doesn’t that mean they’re still handing out too much money?

Isn’t “overstimulation” a way of saying “allowing excessive borrowing”, which is done by holding down rates, which in turn is done by inflationary money creation?

[TomGuy]

(So The Fed Is STILL Overstimulating Markets)

Pre-GWB economic collapse starting in 2007 and massive bail-outs, interest rates were historically in the 4% to 8% range. Even now the FED rate is low.

Too many got too used to cheap money.

[dangus]

“Like persistent inflation...” What an idiot! New home sales units rose, but new home PRICES collapsed. In dollars, new sales plummeted.

As for the Taylor Rule, it uses lagging indicators so it will ALWAYS crash the economy. In fact, never in the entire history of the federal reserve has the federal reserve managed to pull off a soft landing without a disastrous crash. Even with that said, raising interests rates might be a reasonable way of controlling the economy except that long before major corporations feel ANY pain whatsoever, rising rates cause defaults on adjustable-rate mortgages and loan-dependent small businesses including farms. Making it so farmers can’t afford to plant their crops is about the most harmful and least effective way imaginable to control inflation, so the real way anything cools off is that the housing market crashes so badly and so hyper-cyclically that unemployment in the construction industry hurts the broader economy.

[frogjerk]

Why does the FED touch rates anyway?

The Great Nobel Laureate Dr. Milton Friedman:

https://www.youtube.com/watch?v=B_nGEj8wIP0

Recorded at University of San Diego & San Diego Chamber of Commerce ©1978

27:16 min

"In the United States, we have also had, and in most countries, a third less important factor that has contributed to excessive increases in the quantity of money, and that has been mistaken policies by the central bank."

"Professor Siegan referred to the mistake of the Federal Reserve Bank in the late '20s and early '30s. From 1929 to 1933 the quantity of money in the United States went down by a third, and that was a major factor that produced the catastrophe. That was the great mistake of the Federal Reserve. It learned from that mistake. Government agencies, like people, don't always make the same mistake the next time; they make a different one. And since that period, the central banks have tended to make the mistake in the opposite direction. Their mistake has almost always been caused by confusing their function, by thinking that they had something to do with interest rates instead of recognizing that their real function was to control the quantity of money."

[dangus]

The federal reserve DOES have a tool to reduce inflation: unload their assets. Investors buying those assets will drive their value down (allowing bonds to rise more than loans) and their investment dollars will be removed from the market. But instead they gave half a trillion to the investor class to drive inflation UP.