The article didn't address Quantitative Tightening (how quickly the Fed is lowering its balance sheet from its gargantuan level). IMHO that's probably at least as important as rate hikes.
Posted on 03/07/2023 7:40:52 AM PST by Tell It Right
Federal Reserve Chairman Jerome Powell on Tuesday cautioned that interest rates are likely to head higher than central bank policymakers had expected.
“If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes,” the central bank leader said in prepared remarks for appearances this week on Capitol Hill.
(Excerpt) Read more at cnbc.com ...
The article didn't address Quantitative Tightening (how quickly the Fed is lowering its balance sheet from its gargantuan level). IMHO that's probably at least as important as rate hikes.
inflation ONLY comes by printing money,
for Ukraine, for the coverup, for the trafficking,
for the elites, and 10% for you know who.
It’s all by design. Worldwide.
The design is much further along than anyone knows.
Inflation is caused by too much money printing. Price changes can be caused by pumping trillions into an economy when the are slow price adjustments. Biden did the latter, Powell/Yellen did the former.
13 week T bills offering 4.75%
Pretty good liquidity, return and safety.
This is what FJB means when he says his economy is going higher. He and Jill his pardner have got everything under control for their incoming freeloading, “migrant refugees”!
SAVE THE BALD EAGLES! EAT A BREAKFAST TACO!
No one knows where inflation comes from.
Money has been printed in enormous quantities since 2009. We had no inflation to speak of 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021. Only now.
Japan has printed money in unimaginable quantities and STILL has no inflation.
No one knows what causes inflation. Nor does anyone know if interest rate hikes combat it. You will absolutely, no question, get an avalanche of economics schools from Chicago to Stanford and even Wharton who sign onto the money quantity theory, but that doesn’t make it right.
Money is a substance created by whimsy from central banks like the Fed. It comes from nothingness. Why should anything that comes from nothingness be expected to adhere to any imagined laws of nature. The substance itself has only value determined only by the imagination of counterparties.
Calories have measurable value. Or Joules for transport of those calories to your mouth. Everything else is in your mind.
if you’ve been looking in to powell’s testimoney, you may have seen LA Sen Kennedy gracefully b!+ch slap powell’s policy objectives.
<> based on history, for powell to achieve 2% inflation, it will result in an increase in unemployment to approx 11%
<> when asked if high energy prices make it more difficult to lower inflation....powell said to the effect: energy prices fluctuate up & down so energy prices are not really a concern.
No need to crash into the wall by raising interest rates again.
It took FOREVER for the fed to switch from QE to QT. But they did. IMHO, QT is what must be done, to undo QE. Raising rates only cools of the housing market, killing ARMs and gives banks an excuse to take people’s homes from them. Or it puts small businesses out of business. It does not even directly affect corporations which raise funds from stocks instead of business loans.
I’m now investor class, so I say this against self-interest, but the only moral thing to do to kill off asset inflation is to QT. And that’s ONLY to undo QE. PPI is down about 7% since June. DEFLATION. (Not truly a deflationary economy but the point is that INFLATION has calmed, at least from the business perspective. CPI went nuts in January for some reason, but that will HELP profitability.)
“No one knows what causes inflation. Nor does anyone know if interest rate hikes combat it.”
That sounds like the Modern Monetary Theory idea that the Biden gang were pushing. Didn’t we just get a real world test of it?
Nixon blamed monetary tightening for his 1960 loss. So after he won in 1968 he appointed Arthur Burns and pressured the Fed to keep increasing the money supply. Add to that closing the gold window and price controls on oil and inflation was off to the races.
Bond vigilantes began driving up interest rates even before Volcker was appointed. They would kill bond prices whenever the money supply numbers revealed increases. When Volcker took office he moved in the same direction as the vigilantes, choking off credit creation. Reagan took office and deregulated oil and installed a pro growth tax policy. By 1982 inflation had collapsed, the Fed relaxed their tight money policy in August and the American economy roared ahead without the inflation that had plagued the 1970s.
Bump for later.
I, too, say that against my self-interest. I already have a low interest fixed rate mortgage that I'll never pay extra on because I get a lot more ROI in simple mutual funds. (Full disclosure, I'm currently out of all equity mutual funds, with a little extra in LT treasury funds because they tend to go up when the Fed lets the air out of the stock bubble.)
Seems like it
That’s not what happened.
If you examine the historical Fed Funds rate you will see that it was rising before Volker took office. Sharply. Inflation didn’t care.
There are only a few issues to address, and they can’t be. All other historical gobbledygook is statistics with sample size < 10.
There is no Modern Monetary Theory. There can’t be any theories at all about a substance created whimsically from nothingness. So that’s issue number 1.
Issue number 2 is address very strictly 2010-2020 and the absence of inflation, in the presence of enormous QE. You can’t. No one can. This is all finance industry BS enshrouding meaninglessness with opaque terminology like yield curve inversion and hell, Quantitative Ease itself.
Sometime have a look at the QE wiki. Then look up “monetizing debt”. You will find the only difference between the two is words. When QE happens for reasons quoted, then it is QE. When monetizing doesn’t use those reasons, then it is monetizing.
It is a substance from nothingness. How could it possibly have meaning? It’s not Maxwellian electromagnetics or Newtonian gravity. It’s babble.
Buy farmland.
“That’s not what happened.”
Everybody’s entitled to an opinion. And that one’s yours.
“There is no Modern Monetary Theory.”
Of course there is, which you’d know if you actually followed monetary debates. Biden’s economic advisors were yapping about MMT all during the election.
“Issue number 2 is address very strictly 2010-2020 and the absence of inflation, in the presence of enormous QE. You can’t. No one can.”
Actually a lot of people can explain it. They just know more than you do about how money and banking and the credit markets are interrelated. Remember the housing bubble that popped in 2008? It’s why we ended up with TARP and QE. And it’s why QE didn’t cause inflation.
The collapse of the bubble made a trillion or so dollars evaporate. Banks had been holding that mortgage paper and their derivatives as assets. Those assets vanished as loans defaulted. QE was counter balanced by a huge deflation occurring in the banking system, so there was a wash.
QE and TARP were tools that Bernanke used to prevent a repeat of 1930-33 when that era’s Fed failed to act. 30% of the US money supply vanished in those three years. A domino effect of credit contraction and disintermediation as thousands of solvent banks failed.
“Sometime have a look at the QE wiki. Then look up “monetizing debt”.
I passed the Series 7, the General Securities exam, back in the 1980s. Now granted that may not equal the fine education that you gained from reading definitions at Wiki, but FINRA seemed to think it was pretty good. IIRC we had to know about Treasury auctions, Fed open market operations, how the bond market operates. Basically the machinery involved in QE. Just without the commericial banking aspect.
Of course if you wanted to learn the theory behind QE you could look up Friedman & Schwartz’s “The Great Contraction”, their history of the banking collapse that cratered the US money supply and caused the Great Depression. Bernanke was a student of Friedman & Schwartz and he implemented their ideas.
And so, you did not address how a substance created from nothingness should be expected to conform to invented “laws” of nature. The value is in the imagination of counterparties.
Not quite sure why a Series 7 is relevant to QE and Monetizing Debt having the same action taking place, but with different words used to describe it. QE is the buying of government bonds (and MBS but that is not relevant) with the purpose of stimulating growth. Monetizing debt is buying government bonds with the purpose of . . . it doesn’t matter. Both are the same actions. Words don’t change anything.
Well, they change the imaginations of counterparties — who might not be happy with the latter label vs the former.
An examination of the Fed Funds rate in 1978 and 79, when Volker took office, will show increases, sharp, to 10%, and inflation didn’t care.
As to the disappearing money theory of 2009 offsetting QE and thus preventing inflation, you’ll find M2’s growth slope shows no evidence of significant change at all throughout the decade. Steady growth, no disappearing money, no inflation.
Congrats on Series 7 in the 1980s. My MBA from the Univ of Pennsylvania was before then in 1979, so knowledge of the imaginary substance may have advanced in those next few yrs and I’m out of date.
It was a call between 25 and 50 basis points.
I gambled, I lost. The market tried to sway 25.
He sounds 50. Oh well.
“substance created from nothing”
The usual gold bug fantasy that even von Mises didn’t share. Which is why his Theory of Money and Credit regards creating unbacked credit money as fundamental to banking.
QE and TARP kept major banks from collapsing like Bear Stearns. Commercial bank collapse would have cratered the money supply. QE was matched by an asset deflation in bank assets which is why it didn’t result in inflation.
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