Posted on 01/17/2022 8:11:41 AM PST by millenial4freedom
I know this is discussed frequently on here, but wanted to gather your input. Do you actually think the Fed will carry on with its plan to raise rates? Even though it can potentially trigger a stock market correction/housing correction? If this scenario plays out, I can see it making Biden/Democrats even more unpopular heading into the midterms. On the other hand, if the Fed doesn't raise rates and remains complacent, inflation could continue raging. Either way, it seems like Biden/Democrats/the Swamp are on the losing end of this.
I don’t believe deflation is a possibility. Some people look at metrics that are no longer relevant, like velocity of money, and are convinced deflation is coming. Then I remind them we are in new territory with direct government payments to the voters with money from thin air, bypassing the banks altogether. The voting public is officially hooked on these payouts, and will punish those that don’t offer them in the future.
Totally agree. Bubbles are great for those that wait for them to pop or can orchestrate their popping.
Hi.
On one hand you have a possibility of hyper inflation. On the other you have a possibility of recession and deflation.
My guess, the Fed starts “culling” its balance sheet.
An increase of 25 basis points March 2022.
5.56mm
“Who knows when the Rubicon is crossed?
This isn’t a snarky inquiry; I’m very interested in this stuff, but will never get a full grasp, I don’t think.”
I too have a great interest in economics. I’ll address why we won’t ever have this down to an equation. Economics is non-linear and, all of the myriad elements in play react with one another. The circumstances of what happened in 2008 or 1929 may be exactly the same today as far as we can tell, but we won’t get exactly the same result. We might get the opposite, or a sideways result. You’ll often see terms in economics articles like “unexpectedly.” This isn’t the politically unexpectedly meant to let Democrats off the hook for something they did. I think it means that there are so many factors in play that no computer on Earth could figure them all and even if it did, they change with respect to one another. It may be that oil is cheaper this time, or there’s more grain supplies than last time, or simply that the world is a nicer or nastier place than before.
You shake the dice, blow on them, and throw.
“He’s been making an interesting case that since the money for the stimulus was borrowed both domestically and from overseas dollar reserves, that it wasn’t really money printing. “
That’s the treasury dept. No they don’t print money, they can only borrow. It’s the fed that prints the money.
But the fed is not allowed to buy newly minted treasuries but they can buy publicly held ones, and in doing so prints money which is injected into the economy which in turn allows the public to buy newly minted treasuries.
“Mortgage rates have already risen.
Arbitrarily. They front-running what they perceive to be an increase of the FFR.”
That’s not right. Mortgage rates are set by adding a spread of about 1.5% to the current 10yr Bond rate.
That rate has risen and mortgage rates have of course risen with it. There’s no “front-running”.
So the fed both in terms of interest rates and buying assets is injecting tons of money into the economy, ie increasing the money supply, right?
So how does that stack up with your assertion that...
“the monetary system is in danger of slipping into deflation”?
“Bubbles are great for those that wait for them to pop or can orchestrate their popping.”
Over time things work out for those who study and learn that the economy has its seasons, like the weather. You also have to ignore a lot of scare tactics by people what make money off the fear of others.
Yep, there is far more market manipulation than actual altruism, even on the TV shows.
“So how does that stack up with your assertion that...
“the monetary system is in danger of slipping into deflation”?
Because the things you are talking about don’t relate to each other the way you think they do.
An economy of fictions, entities in place of Persons.
I agree with you....but those are also good reasons for doing it if your intent is to destroy the country.
How do they relate?
Dan Niles hedge fund manager, predicts 4 - 5 times this year, which will cause the stock market to drop20%.
Yep, there is far more market manipulation than actual altruism, even on the TV shows.
Everybody “talks their book”, everybody. When a Big House says buy AMAZON it’s because they already own a big position in it.
I just tell people to read “The Millionaire Next Door” and get to work. And ignore any book about money that has an exclamation point at the end of the title, or the word “crash”.
We don’t have that kind of time in a comment section. The only way to learn how to build wealth is to study it while you work at it for years and sooner one starts the better because time is not your friend.
IMO, the best book for most people to start with is still “The Millionaire Next Door.”
Yes they will start out by inching up a quarter point a couple of times. The chaos will ensue and they will quickly have to lower again.
“Yes they will start out by inching up a quarter point a couple of times. The chaos will ensue and they will quickly have to lower again.”
The long standing saying among investors is: “Three Steps and a Fall,” meaning a fall in stock values.
The same thing happens after every fall or “crash” in the stock market/economy but people never talk about the good part, they only focus on and fear crashes. You build wealth by crashing and growing your way to prosperity.
I’ve been through 5 “crashes” along the way. They are necessary. I much prefer the occasional crash to a collectivist steady state economy which is a long downhill ride to nowhere.
Yes, they will but probably not enough to turn inflation. I could be wrong and always reserve that possibility but I don’t mind.
Things are relative. In the late 70s common interest rates were 6 to 7%. It took a lot to make that look low or something else high. This generation of borrowers are accustomed to rates less than half the old amounts; like 2 to 3% and on top of that have inflated the price of housing and other things to match that cheap as dirt borrowing cost. It may not take much increase in rates to shake them to their knees. The new generations believe 2 to 3% is a given and it isn’t. When the price of a mortgage goes up 50%, and that only takes a 1% or so increase in rates, the payments on inflated housing go up correspondingly. We may see how that swallows soon.
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