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.
Yep.
Yes, they will. And the world will keep turning too.
Yes.
Yep. And one of the big Wall Street Banks (I don’t remember who - JP Morgan maybe) thinks they may do so 6 (not 3 or 4) times this year.
If they do, the interest on new debt will make the deficit even worse. If they don’t, we will have to buy our own debt which will make the eventual day of reckoning even worse.
Not an economist but they are kind of trapped. Doing nothing won’t work, raising interest rates where they need to be would cause a huge recession. I think they will raise the interest rates a little bit - just enough to kick the can down the road.
1) I don't believe the Fed will raise the FFR (Federal Funds Rate), even though they should normally.
2) Be careful not to equate the price inflation you're seeing with monetary inflation. They're two different things. Yes, the CPI (Consumer Price Index) and PPI (Producer Price Index) are showing price inflation, which should trigger an FFR increase, BUT...the monetary system is in danger of slipping into deflation (which can still have price inflation). This will cause the Fed to back off raising the FFR.
My 0.02...
No, this cannot be done.
Not only it would collapse stock market, it would also make servicing debt unsustainable — without printing yet more money and making inflation worse.
It does not appear Fed has any tools to deal with the problem, every move loses.
Maybe a couple times. America’s political stability requires cheap money, and the FED is a political institution, so don’t expect much
Because they are so political, the FED is really a PR machine. They hint, spin and jawbone to create expectations. Pure action is limited.
The minute they do the stock market will collapse.
People say “they can’t” and I, frankly, think that is a stupid thing to say.
Stepping away from interest rates for a minute, take a look at our enormous debt:
They could drastically raise taxes so that we can pay off the debt. But they can’t do that.
They could default on the debt and simply refuse to pay $30T. But they can’t do that.
They could keep on spending like a drunken sailor and build a debt measured in quadrillions. But they can’t do that.
One of these impossible options is inevitable.
Interest rates:
Raise the rates like Reagan/Volcker did and watch our debt explode. They can’t do that.
Keep the rates super low and watch inflation skyrocket so that we carry billion dollar bills in our pocket. They can’t do that.
One of these impossible options is inevitable.
My guess is that we will eventually default on our debt (”Let’s screw the bankers that have been screwing us”) and then raise interest rates to control inflation.
That is a terrible solution. In my opinion, it’s the best one we have.
But Biden will limp along with no solution at all, and the Fall elections (if at all honest) will devastate the Democrats.
The general price level cannot rise if money supply does not increase. More money for some goods means less for others if available money is constant.
Yers. The entire drumbeat about inflation is so they can raise rates. The FED is designed to get money from a 4% inflation rate, which has been held artificially low through political intrusion on lower rates. Bill Clintoon started it. He knew the economy would grow if he could hold rates low, even if there would be a Piper to pay later. As long as he got re-elected, he couldn’t care less about the future. Bush didn’t have the guts to raise rates, and Obama and Trump played Clintoon’s game.
yes-1-2 times at minimum.
It does not appear Fed has any tools to deal with the problem, every move loses.
I don't think they will raise - but if they do it won't cause the stock market to collapse, at least right away.
It would cause those taking out debt - then turning around and putting it right into the market - to rethink their allocations.
If the Fed raised too high then that asset bubble of "debt to equities" would burst and the market would correct downwards dramatically.
“The minute they do the stock market will collapse.”
No way. If anything, many companies in the stock market will greatly benefit from inflation and higher interest rates.
Pain is on the way, but continuing to have free money has destroyed the world, and only help to prop up already inflated assets.
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