General Investing and Economics Discussion - No Politics

Pointer

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Looks like no rate changes until full recovery. Even with a spike in inflation after reopening, they will keep rates low unless things get really out of hand. Powell said rates will remain low even after full unemployment recovery so as to not repeat the recovery mistake from 08 (after 08).

It's really the same stuff he's been saying for quite a while now.
 

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GTRanj2 said:
Looks like no rate changes until full recovery. Even with a spike in inflation after reopening, they will keep rates low unless things get really out of hand. Powell said rates will remain low even after full unemployment recovery so as to not repeat the recovery mistake from 08 (after 08).

It's really the same stuff he's been saying for quite a while now.
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Thats the corner we're always backed into. Its why the economy always tanks - we hold interest rates artificially low, overcook the economy, then are forced to raise rates to stave off inflation. Raising rates dramatically slows the economy and everything tanks.

The challenge is all this (what he's saying) is easier said than done (not raising rates). We have tremendous inflation already. Nearly all asset classes are in bubble territory - stock prices, bond prices, commodity prices, housing prices. Basic staple costs are high. Interest rates should have been significantly higher than they are now a long long long time ago. We've accumulated almost $8 trillion of assets on our Fed's balance sheets to hold interest rates down - printing money and using that printed money to buy back our own government bonds, corporate bonds, mortgages, etc.

Inflation is a terribly punitive tax on the middle class. So does the Fed sit back and let the rich get richer while the middle class suffers? So far their answer is that they're trying to have their cake and eat it too. Let inflation run crazy, let the rich live the high life, but print and hand out small modicums of money back to the bottom to try and keep the peon's quiet. None of that is a reasonable economic strategy IMHO.
 
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bwelbo said:
Thats the corner we're always backed into. Its why the economy always tanks - we hold interest rates artificially low, overcook the economy, then are forced to raise rates to stave off inflation. Raising rates dramatically slows the economy and everything tanks.

The challenge is all this (what he's saying) is easier said than done (not raising rates). We have tremendous inflation already. Nearly all asset classes are in bubble territory - stock prices, bond prices, commodity prices, housing prices. Basic staple costs are high. Interest rates should have been significantly higher than they are now a long long long time ago. We've accumulated almost $8 trillion of assets on our Fed's balance sheets to hold interest rates down - printing money and using that printed money to buy back our own government bonds, corporate bonds, mortgages, etc.

Inflation is a terribly punitive tax on the middle class. So does the Fed sit back and let the rich get richer while the middle class suffers? So far their answer is that they're trying to have their cake and eat it too. Let inflation run crazy, let the rich live the high life, but print and hand out small modicums of money back to the bottom to try and keep the peon's quiet. None of that is a reasonable economic strategy IMHO.
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I'm not sure raising rates right now is the best idea anyway. I think it needs to be done in the future for sure, but given the current situation, it would only add to the mess.

Kind of feels like burning furniture to keep your house warm.
 

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GTRanj2 said:
I'm not sure raising rates right now is the best idea anyway. I think it needs to be done in the future for sure, but given the current situation, it would only add to the mess.

Kind of feels like burning furniture to keep your house warm.
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Yep, but that's the thing. There is never a good time to raise rates. 100% it always results in negative impacts on the economy. That's why interest rates should generally be allowed to adjust to the market. That way it self corrects along the way. Yes within reason there are moves the Fed can undertake to help the economy one way or the other. But allowing rates to be at zero for a decade when they probably should be 3%-5% is just building up a lot of momentum towards the usual collapse to happen.
 
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bwelbo said:
Yep, but that's the thing. There is never a good time to raise rates. 100% it always results in negative impacts on the economy. That's why interest rates should generally be allowed to adjust to the market. That way it self corrects along the way. Yes within reason there are moves the Fed can undertake to help the economy one way or the other. But allowing rates to be at zero for a decade when they probably should be 3%-5% is just building up a lot of momentum towards the usual collapse to happen.
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To be fair, Powell was starting to raise rates before the crash, even when Trump was calling for them to be lowered.
 

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GTRanj2 said:
To be fair, Powell was starting to raise rates before the crash, even when Trump was calling for them to be lowered.
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Yep, 100%. Easy to blame the recession that happened on covid. But I believe the 3 quarters right up to covid were all sub 2% GDP growth quarters after having averaged 3% the year before that. Anyway, here is the last 40 years and notice how without exception every recession followed a period of increasing interest rates by the Fed.

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LibertyTurns

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RonJohn said:
There is about zero chance of it getting to $1,000. However, ten years ago I would have said the same about bitcoin.
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Like you I chucked some spare cash into the abyss not expecting anything necessarily to come out other than a good chuckle. The fact I’m up $300 has made my day!
 
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If you want to do crazy imaginary money math, go back to 2017 and "pretend" invest say $10,000 in Dogecoin or Etherium. Etherium would have turned you into a millionaire x 2+.
 
LibertyTurns

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RonJohn said:
@LibertyTurns , you are probably pretty happy today.
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Dang, bought it as a joke. The novelty wore off and it had lost about 25% of the value and then kinda flatlined so I really stopped tracking it much. Figured it was cemented in around $.05 and I could say yeah I own about $750 of doggie, 15k shares. Honestly, if you had not brought it up I’m really not sure when I would have checked on it next.

Damn this mutt is learning tricks now and stopped pissing on the floor. I’ll probably just keep the doggie for the entertainment value at this point.
 
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