There are enough over-simplifications in this article to turn a guided missile into an unguided one, or, to begin with a destination in mind and end up somewhere else entirely. This entire discussion takes place inside a vacuum, as if interest rates have not also been trending downward throughout the rest of the industrialized world for years, and, for some of the same reasons as they have been here. To suggest that our impact from a 1/4 point increase in a short-term rate is so important, without accounting for the parameters elsewhere that factor indirectly, is to create a false sense of importance of monetary policy in the grander scheme of positive and negative impacts of globalization, currency wars, rising debt obligations, declining living standards and, demographic and generational shifts in personal income growth/consumption. So, the Fed finds it convenient to take credit for declining inflation, as in the '80's when the larger contributor was falling commodity prices, taking credit for expanding prosperity in the '90's, as if the '90's would not have turned out that way without the hand of the Fed, once again, ignoring declining commodity prices, and, now, still pretending to have a goal of moderating unemployment, only when it's convenient, with little or no evidence that this has occurred due to the Fed's hand to date? The Fed is, as usual, delusional, over-playing the impact of it's hand, and, mostly inept in all of the areas where it claims expertise.
2
The irony is that if the "left" truly wants to keep short term rates close to zero, this does nothing to reduce income inequality & increase wages. Investors think continuing the Fed's policy as is means that we have unseen issues in the economy & so do not have the confidence to increase investment, create jobs etc. Anyone on fixed incomes/who is risk averse as they enter retirement is penalized even more if rates are not normalized; therefore consumption/jobs are below what this economy requires. The other irony is that it is the natural supporters of the "right" who have gained most from artificially low rates/incentive for leverage.
As the article states "we are talking about a mathematically minor move". By the way, what is so magical about a 2% inflation rate (however you measure it)? At that level, in 4 1/2 years by dollar is worth just 90 cents!
As the article states "we are talking about a mathematically minor move". By the way, what is so magical about a 2% inflation rate (however you measure it)? At that level, in 4 1/2 years by dollar is worth just 90 cents!
2
Wouldn't an increase in interest rates bring investment capital into the economy? Right now, with rates so low, investors are searching the developing world, looking for returns. Higher rates will increase the cost of borrowing, but it will also increase profitability for lenders.
"...While domestic inflation has been surprisingly sluggish for years now..."
Tell that to people who are trying to live on a pension or Social Security. The prices for food, rent, and medical services have been skyrocketing. Maybe the Golden Pheasants at the Fed are averaging in the great deals they've been getting on Bentleys and Tuscan vacations with the doubling of prices for gruel and adult diapers those non-Ivy-League peasants seem to buy in such huge quantities and coming out with zero inflation. Like all statistics these days the inflation numbers have to be seen with a jaundiced eye. So maybe Von Hayek is wrong and these geniuses know exactly what they're doing but looking at events in China and Europe do not fill one with confidence.
Tell that to people who are trying to live on a pension or Social Security. The prices for food, rent, and medical services have been skyrocketing. Maybe the Golden Pheasants at the Fed are averaging in the great deals they've been getting on Bentleys and Tuscan vacations with the doubling of prices for gruel and adult diapers those non-Ivy-League peasants seem to buy in such huge quantities and coming out with zero inflation. Like all statistics these days the inflation numbers have to be seen with a jaundiced eye. So maybe Von Hayek is wrong and these geniuses know exactly what they're doing but looking at events in China and Europe do not fill one with confidence.
3
the inflation fear-mongers have been consistently wrong over a number of years.
why would any rational person listen to them?
on the other hand, maybe the fed can signal that a "trade" is in order: republicans agree to support additional infrastructure spending, and selective tax increases (a la donald trump) to pay for it, and if that happens the fed will increase rates up to three percent over the next year.
why would any rational person listen to them?
on the other hand, maybe the fed can signal that a "trade" is in order: republicans agree to support additional infrastructure spending, and selective tax increases (a la donald trump) to pay for it, and if that happens the fed will increase rates up to three percent over the next year.
2
The idea that conservatives want one thing and liberals want another is not just wrong but asinine. Micro beats macro every time. Everybody wants the policies that they perceive will benefit themselves. What people perceive is only correct about half the time. China will have more of an impact on the US economy than whether the fed raises in September or 2016 or even further out. Still I would like for the fed to move cautiously. Economies move like battle ships and do not turn on a dime. Once committed to a course, future options are no longer as easy to commit to. The fed should be like weather people who show the different models and the assumptions that cause the models to change.
" The fed should be like weather people who show the different models and the assumptions that cause the models to change."
No, the FED are--at least according to them--the EXPERTS on the national economy. If they have to present the "echonomic [sic] news with as much accuracy as the weather news, then we don't need them at all.
They should have already studied the "models" and solutions and then present the one that works best for the entire nation---even the 47%.
Personally, I don't think they have a clue about they do and it is just as much their guess as anyone's guess. If they really "knew" what was going to happen and what was happening, they would be much wealthier not working for the FED at all.
They are simply playing to the Wall streeters and if the interest rates go up, so will the American debt since we printed money until the cows came home--and then some.
No, the FED are--at least according to them--the EXPERTS on the national economy. If they have to present the "echonomic [sic] news with as much accuracy as the weather news, then we don't need them at all.
They should have already studied the "models" and solutions and then present the one that works best for the entire nation---even the 47%.
Personally, I don't think they have a clue about they do and it is just as much their guess as anyone's guess. If they really "knew" what was going to happen and what was happening, they would be much wealthier not working for the FED at all.
They are simply playing to the Wall streeters and if the interest rates go up, so will the American debt since we printed money until the cows came home--and then some.
I am not convinced that deflation is a problem. The "tech industry" has been in a deflationary environment for 60 years or more. People still buy computers and other devices knowing they will cheaper and more powerful next year. The industry can still borrow money at Interest rates that still allow it to make profits. I think the new paradigm will be deflation is not a problem.
1
The Fed's zero-interest policy is not only catastrophic for seniors, who hoped to have a retirement income on their savings, but it also has not worked - and will not work - to help then economy. With all respect to Paul Krugman, whose analyses I generally agree with, contrary to Mr. Krugman's view near-zero interest rates are not providing an economic stimulus. Why? The best indicator is that major corporations are sitting on mountains of cash, not investing it in their activities - because the demand for their products isn't there. When major corporations can't find a use for their capital - there's an acknowledged worldwide glut of capital - providing near-zero-cost capital, as the Fed is doing, is no help.
In addition, near-zero interest rates encourage unproductive investment. In my area, in the last few years tens of acres of land have been covered with auto dealer lots, covered with thousands of unsold cars. Why? Our population has not doubled. But with zero interest rates, land costs almost nothing. Inventory costs for unsold cars are near-zero, due to cheap interest. We are rewarded with blight as unsold cars cover the landscape, without buyers.
In addition, near-zero interest rates encourage unproductive investment. In my area, in the last few years tens of acres of land have been covered with auto dealer lots, covered with thousands of unsold cars. Why? Our population has not doubled. But with zero interest rates, land costs almost nothing. Inventory costs for unsold cars are near-zero, due to cheap interest. We are rewarded with blight as unsold cars cover the landscape, without buyers.
5
Yes but people without savings, or those whose savings are not put out at interest, will not benefit from a rise in interest rate. On the other hand, those with "mountains of cash" will see their mountains rise ever higher as their increasing interest income is capitalized.
Mortgagors and others paying off debt will see a higher proportion of their payments going toward interest, thus delaying reduction of the principal balance of their debt.
To be sure, many other factors weigh on sound monetary policy. I am merely raising the income inequality argument.
Mortgagors and others paying off debt will see a higher proportion of their payments going toward interest, thus delaying reduction of the principal balance of their debt.
To be sure, many other factors weigh on sound monetary policy. I am merely raising the income inequality argument.
2
One can only wonder based on the fact that there is an aging population which has savings that are either at great risk, or getting virtually nothing in interest income, whether the fed has it all wrong, and that raising rates might actually stimulate the economy by putting money in the hands of folks that are currently getting low or now interest. If they spend it, and pay taxes on it, it might actually buoy the economy, especially since consumer spending is the major driver of the economy!!!!
I wonder why I never see this considered in any articles, if only to disprove the idea?!
I wonder why I never see this considered in any articles, if only to disprove the idea?!
4
@papabear
". . . why I never see this considered ... if only to disprove the idea"?
Because it cannot be disproved, in fact it makes too much sense, and I've made the same argument many times. I believe the answer is that the Fed favors borrowers over savers, big borrowers in fact, because the near-zero rates are mostly helping the banks and the market speculators. Why do you think the market is in a panic at the mere mention of a rate increase of 0.25%? But interest rates on credit cards - which the average JoeBorrower depends on for most major household expenses - are still up in the stratosphere. How is that helping the economy?
". . . why I never see this considered ... if only to disprove the idea"?
Because it cannot be disproved, in fact it makes too much sense, and I've made the same argument many times. I believe the answer is that the Fed favors borrowers over savers, big borrowers in fact, because the near-zero rates are mostly helping the banks and the market speculators. Why do you think the market is in a panic at the mere mention of a rate increase of 0.25%? But interest rates on credit cards - which the average JoeBorrower depends on for most major household expenses - are still up in the stratosphere. How is that helping the economy?
But the only way to address Credit Card Interest Rates would be (Federal) government intervention, which is not even going to be discussed.
1
Sadly, the usual reaction to informing management that some logical contradiction precludes accomplishing the purported objective of its plans is "If you can't do it, we'll find somebody else who can."
This article highlights so much of what is wrong with this country but which does not have to be: Idealistic Intransigence
Consider 2 statements from the article:
1. " The basic paradigm, known as the Phillips Curve, is that inflation falls as unemployment rises, and rises as unemployment falls. But inflation did not fall as much as expected during the Great Recession, and it has remained surprisingly weak during the recovery."
2. “I don’t think the folks at the Fed are of a mind to redesign monetary policy just because of what happened during the crisis,” said Jon Faust, a professor of economics at Johns Hopkins University..."
That is not much different than saying following Hurricane Katrina folks were not of a mind to fix the long rotting levees because of what happened during the crisis.
It is that attitude, more often from the more conservative, more change resistant, that led up to and caused the very crisis we experienced in 2008.
What really scares me is I see no reference here to the impact of our ever tightening noose of wealth concentration created since "Reaganomics" began. It must be affecting both our contentiously defined unemployment rates and the effects on supply and demand in a market dependent on mass consumer consumption. Increase the jobs but reduce the pay and the Phillips Curve cannot do anything but be turned on its head.
Based on my old Keynesian economics I say it's time for the Fed to do nothing. The boat is leaking but not by inflation
Consider 2 statements from the article:
1. " The basic paradigm, known as the Phillips Curve, is that inflation falls as unemployment rises, and rises as unemployment falls. But inflation did not fall as much as expected during the Great Recession, and it has remained surprisingly weak during the recovery."
2. “I don’t think the folks at the Fed are of a mind to redesign monetary policy just because of what happened during the crisis,” said Jon Faust, a professor of economics at Johns Hopkins University..."
That is not much different than saying following Hurricane Katrina folks were not of a mind to fix the long rotting levees because of what happened during the crisis.
It is that attitude, more often from the more conservative, more change resistant, that led up to and caused the very crisis we experienced in 2008.
What really scares me is I see no reference here to the impact of our ever tightening noose of wealth concentration created since "Reaganomics" began. It must be affecting both our contentiously defined unemployment rates and the effects on supply and demand in a market dependent on mass consumer consumption. Increase the jobs but reduce the pay and the Phillips Curve cannot do anything but be turned on its head.
Based on my old Keynesian economics I say it's time for the Fed to do nothing. The boat is leaking but not by inflation
3
In 2008, banks discovered that the collateralized debt instruments they had bought with depositor's money were over-rated, under-managed, and subject to ongoing insurance costs. Many banks became insolvent when these securities were marked to market.
Interest rates should be raised or lowered depending on the economy and employment figures.
Political parties should have no input into these decisions , but the overwhelming greed of the uber wealthy and their sycophants in the republican party are going to scream bitterly about the proposed raise.
1/4 of 1 % in order to offset inflation. A miniscule step to keep the ship on course and cries of communism and foul play emanate from that tiny sliver of the population known as the 1 %.
Five corporate prostitutes disguised in the black robes of Justice have accorded corporations personhood and access to the Bill of Rights.
Furthermore , the very same seraglio of boot lickers to billionaires have gone so far as to declare that wealth is the equivalent of free $peech.
This nation may well be purchased by the Brothers Koch. A family that openly rooted for the Axis in World War II and later established the John Birch Society.
One could not ask for a better example of fascistic politics and legislation than the menu offered up by the Brothers Koch and employed by such puppets as Governors Walker of Wisconsin , Kasich of Ohio , and Jindal of Indiana.
Should one of this motley crew succeed in 2016 , our Democracy will become a fiefdom such as has not been witnessed since the Middle Ages and anarchy may well rule the day.
1/4 of 1 %. WWDD or, What would the Donald do ?
Political parties should have no input into these decisions , but the overwhelming greed of the uber wealthy and their sycophants in the republican party are going to scream bitterly about the proposed raise.
1/4 of 1 % in order to offset inflation. A miniscule step to keep the ship on course and cries of communism and foul play emanate from that tiny sliver of the population known as the 1 %.
Five corporate prostitutes disguised in the black robes of Justice have accorded corporations personhood and access to the Bill of Rights.
Furthermore , the very same seraglio of boot lickers to billionaires have gone so far as to declare that wealth is the equivalent of free $peech.
This nation may well be purchased by the Brothers Koch. A family that openly rooted for the Axis in World War II and later established the John Birch Society.
One could not ask for a better example of fascistic politics and legislation than the menu offered up by the Brothers Koch and employed by such puppets as Governors Walker of Wisconsin , Kasich of Ohio , and Jindal of Indiana.
Should one of this motley crew succeed in 2016 , our Democracy will become a fiefdom such as has not been witnessed since the Middle Ages and anarchy may well rule the day.
1/4 of 1 %. WWDD or, What would the Donald do ?
4
Changing interest rates changes the market value of every outstanding debt instrument, the more so the longer the maturity of the security.
I think what stood out to me and what I found interesting in this article is how they said "this country is literally falling apart" and also provided information to back it up.
3
The Fed has done a great job of making the rich richer. Continuing the same policy that achieved that will continue the same result. If they want a different result, they need a different policy.
2
Amazing.
The political hack Janet Yellen has ensured we have NO protection from the next recession by her refusal to raise the Prime Rate. When the market fails - and it will soon - there is NO protection against runaway inflation or a protracted recession.
Thanks Obama. You show your disdain for the poor through your mismanagement of the Fed.
The political hack Janet Yellen has ensured we have NO protection from the next recession by her refusal to raise the Prime Rate. When the market fails - and it will soon - there is NO protection against runaway inflation or a protracted recession.
Thanks Obama. You show your disdain for the poor through your mismanagement of the Fed.
2
The Federal Reserve Bank is an independently chartered agency. It does not report to the president.
4
"When the market fails - and it will soon - there is NO protection against runaway inflation or a protracted recession."
No, runaway inflation isn't a potential problem. Demand is too weak to cause inflation, and it's insufficient to lift off the economy. In a normal, pre-liquidity-trap economy, increasing the money supply could trigger inflation, but quantitative easing massively increased the money supply yet, due to weak demand, did not bring about any problematic inflation. And, the market might fall a bit, but if the Fed senses a danger that it might collapse, it will come to the rescue with more QE and massive stock buying by the "plunge protection team."
No, runaway inflation isn't a potential problem. Demand is too weak to cause inflation, and it's insufficient to lift off the economy. In a normal, pre-liquidity-trap economy, increasing the money supply could trigger inflation, but quantitative easing massively increased the money supply yet, due to weak demand, did not bring about any problematic inflation. And, the market might fall a bit, but if the Fed senses a danger that it might collapse, it will come to the rescue with more QE and massive stock buying by the "plunge protection team."
1
Professor Blinder's final comment begins to get at the real issue -- the Fed does not have the most powerful tools to deal with unemployment and improvements in wages and productivity -- but does not quite address the real issue. Rather, the best ways to deal with these problems are through fiscal policy. The real issue is that Congress has done less than nothing to help, and that is the only reason the Fed's interest rates have stayed flat for seven years. Yellen and her predecessor have not wanted to be too strident on this point to avoid drawing even more fire from the radical conservatives in Congress. Economists like Blinder, and the press, need to be explicit and persistent in their critique of Congress and of fiscal and industrial policy to get the issues in focus as we go into an election that may either consolidate the power of the plutocracy or give democracy one more chance.
2
It seems to me that the "dual mandate" that Congress imposed on the Federal Reserve Bank to maintain price stability and full employment simultaneously with monetary policy alone is another impossibility concocted by saboteurs to prove that government is inherently incompetent.
2
Has anyone calculated how much tax revenue the Federal Government has lost due to the virtual elimination of interest income?
3
We need government spending on infrastructure. This would create jobs and people, other than the 1%, will spend that money. As far as encouraging savings with higher interest, that is not the issue now. Tell the lady with asthma that higher interest is going to help her buy her medicine.
For Pete's sake raise interest rates already so those of us who don't want to gamble in the market can get growth on the money that WE SAVED and that we continued to spend during the Bushbama years, keeping the economy going while Bushbama bent over backwards to protect the big banks.
1
The claim that inflation is around the corner has been trumpeted ever since the Fed lowered interest rates to near zero. It is not happening and so far those predicting inflation have a terrible track record. So why should any one take them seriously? With interest rates low the rate of inflation may eventually go up but there is nothing to be gained and possibly much to lose by raising interest rates prematurely. There are numerous examples of countries lurching back into recession territory after raising interest rates. The more bizarre claims is that we may be risking a recession because interest rates are too low. That is a truly novel theory backed by no facts whatsoever.
With inflation,currently at least 5-6%,there is no reason a .25% interest rate increase will mean much.Inflation is set to soar soon.
3
"5-6%" inflation? Where did you get your economics degree? What data are you utilizing in coming up with your conclusions? Do you drive a car?
We have been in a somewhat deflationary cycle for the past seven years, and are just now emerging from that. Slowly. In part, because governments across the globe have been slashing spending since the 2008 Financial Crisis.
Not sure what planet you have been living on, but now the prices of most commodities, not the least of which is oil, are less than half what they were a year ago. Which means that fewer people are buying them, and those that still buy do not want as much as in the past. In economic parlance it's called "supply and demand". Supplies are rising because demand is falling. Which drives the price down. Which is deflationary in effect.
Not that it would mean anything to someone from Mars . . .
We have been in a somewhat deflationary cycle for the past seven years, and are just now emerging from that. Slowly. In part, because governments across the globe have been slashing spending since the 2008 Financial Crisis.
Not sure what planet you have been living on, but now the prices of most commodities, not the least of which is oil, are less than half what they were a year ago. Which means that fewer people are buying them, and those that still buy do not want as much as in the past. In economic parlance it's called "supply and demand". Supplies are rising because demand is falling. Which drives the price down. Which is deflationary in effect.
Not that it would mean anything to someone from Mars . . .
1
It's ironic that the conservative proponents of a rate hike distributed chocolate coins in golden wrappers.
It was a good symbol of their overall economic mantra - cut taxes, cut taxes and cut taxes some more. Tastes good for a moment, but otherwise phony.
It was a good symbol of their overall economic mantra - cut taxes, cut taxes and cut taxes some more. Tastes good for a moment, but otherwise phony.
3
I think the parameters for measuring inflation should change. Water prices are rising. Certain real estate markets rise unrelentingly. Cost of infrastructure has risen unrelentingly. Stalled commodity prices never last.
0% interest is like ether starting fluid sprayed into an engine to help it start on a cold morning. Design flaw if the economy can't run without it.
Knowing a Japanese consumer who lived through that country's deflation I have learned the danger. They hold off on purchases of all shapes and sizes because they know they will be cheaper if they wait. America is not Japan but is torture testing the differences wise?
0% interest is like ether starting fluid sprayed into an engine to help it start on a cold morning. Design flaw if the economy can't run without it.
Knowing a Japanese consumer who lived through that country's deflation I have learned the danger. They hold off on purchases of all shapes and sizes because they know they will be cheaper if they wait. America is not Japan but is torture testing the differences wise?
How about raising the rate the relatively small amount of .10 - 25% and taking a few months to assess the impact beyond the inevitable stock market tantrum? A somewhat scientific approach versus the ideology-based and wealth-based arguments.
It is obvious that the current near-zero rates are not sustainable in the long run.
The real remedy can only occur in November 2016 if the people finally purge themselves of the curse of the current Republican Party and get representatives who will wisely use the tools of responsible fiscal policy.
It is obvious that the current near-zero rates are not sustainable in the long run.
The real remedy can only occur in November 2016 if the people finally purge themselves of the curse of the current Republican Party and get representatives who will wisely use the tools of responsible fiscal policy.
5
The argument that the Federal Reserve's Open Market Committee should raise short term interests is nonsense. The Fed has dual mandates: employment and inflation. While there has been much progress on the jobs front, and the unemployment rate is down to 5.3 percent, the Fed can only guess at the non-accelerating inflation rate of unemployment. Given that wages are only keeping up with the rate of inflation, it appears that the unemployment rate can go lower before workers start seeing meaningful raises, let alone causing inflationary pressures. This also fails to account for the decline in the labor force participation rate, which likely makes the unemployment rate misleadingly low. As for inflation, it has been running below the Fed's already low target of 2 percent. Moreover, the annual rate of inflation has been declining year-over-year for the past two years. Consequently, there exists no reason for the Fed to raise rates that this time. Indeed the risks of raising rates are wholly asymmetric, as raising rates too soon can very well lead to a deflationary spiral, from which it is nearly impossible to break free, as the Japanese know.
Those people advocating higher rates provide no analytically coherent refutation of the data, which militates toward keeping rates at current levels. Ultimately, their arguments suggest an unfounded belief that higher rates are, in and of themselves, economically beneficially, rather than a reflection of employment and inflation.
Those people advocating higher rates provide no analytically coherent refutation of the data, which militates toward keeping rates at current levels. Ultimately, their arguments suggest an unfounded belief that higher rates are, in and of themselves, economically beneficially, rather than a reflection of employment and inflation.
14
Interest rates are not a reflection of employment and inflation, they represent the cost of borrowing money. Healthy levels of interest rates promote efficient, long lasting capital investments as long as business can keep the ROI above the cost of borrowing money, those companies that are able to borrow at a given cost (interest rate), re-pay the loan and still have a higher return on the investment than they would have had not investing, are the ones creating real and relatively low risk value in the economic scenario. Interest rates at the current level (which is negative adjusted for inflation) promote extremely inefficient and risky investments, almost any investment would return 0.5%; this also feeds the bubbles, pumps money into markets that would have not grown that fast and that large if borrowing wasn't so cheap.
5
To raise or keep interest rates where they are, both sides of the debate seem to be logical depending on perspective. But I have a very selfish reason (selfishness is never good! ) for a LIKELIHOOD of raising interest rates. You see, my house is up for sale but the traffic has been very slow. The possibility of raised interest rates will make buyers decide faster so that they can lock in lower interest rates. That is my naive, understanding, right or wrong.
As a simple citizen that is my need presently, selfish though it is.
As a simple citizen that is my need presently, selfish though it is.
Thank you Binyamin Applebaum for another superb example of thoughtless and dishnest both sidism hackery.
" Liberals argue that the Fed should aim more broadly to lower unemployment and encourage rising living standards. Conservatives want to strengthen the focus on inflation by requiring officials to follow rules in making policy."
Uhh, Binyamin I would suggest you google "dual mandate" but you already know it. Those sentences were written in your role as hack.
The LAW is a full employment mandate.
The "rules" you refer to with the evil false symmetry both sidism that is your second profesdional skill, after insider gosdip, are some automatic triggers conservative nuts--proven wrong on every major issue for a decade--want to impose.
Today's hack champion. Congratulations, which you don't need because the hacking for rentiers pays so well.
" Liberals argue that the Fed should aim more broadly to lower unemployment and encourage rising living standards. Conservatives want to strengthen the focus on inflation by requiring officials to follow rules in making policy."
Uhh, Binyamin I would suggest you google "dual mandate" but you already know it. Those sentences were written in your role as hack.
The LAW is a full employment mandate.
The "rules" you refer to with the evil false symmetry both sidism that is your second profesdional skill, after insider gosdip, are some automatic triggers conservative nuts--proven wrong on every major issue for a decade--want to impose.
Today's hack champion. Congratulations, which you don't need because the hacking for rentiers pays so well.
2
The Republicans have minimized investment in infrastructure as much as they can for years. The country is literally falling apart as a result of the Republican mantra of lowering taxes year after year, especially on the top 1%. With Congress blocking spending of investment in infrastructure and cutting government jobs, the Fed has stepped in to cut rates to keep the economy going. If we just rebuilt and maintained our public works as we should, the economy would expand and the Fed could restore rates to proper levels. Inequality in pay to working people would also put a huge influx into the economy. The only way to make progress in these areas is to remove the Republicans (and Republican-light Democrats) in Congress so they cannot stand in the way.
7
"Then came the George W. Bush Administration with its resumption of the Republicans’ race-to-the-bottom policies and an unnecessary war in Iraq...."
Oh, was that all Republicans who voted for the Iraq war? I guess my memory must be fading. I could have sworn there were "Yes" votes from many Democrats, including:
Chuck Schumer: Yes to Iraq War
John Kerry: Yes to Iraq War (though that didn't stop him from running on an anti-iraq War platform just two years later).
Hillary Clinton: Yes to Iraq War (though later she said she'd thought Bush was going to ask the Senate for approval a second time, just to be sure -- a fine point most of us seemed to have overlooked in Bush's explicit request for approval).
In other words, the Iraq War was one of those few "bi-partisan" votes -- when the chips were down, Democrats and Republicans alike approved it.
Oh, was that all Republicans who voted for the Iraq war? I guess my memory must be fading. I could have sworn there were "Yes" votes from many Democrats, including:
Chuck Schumer: Yes to Iraq War
John Kerry: Yes to Iraq War (though that didn't stop him from running on an anti-iraq War platform just two years later).
Hillary Clinton: Yes to Iraq War (though later she said she'd thought Bush was going to ask the Senate for approval a second time, just to be sure -- a fine point most of us seemed to have overlooked in Bush's explicit request for approval).
In other words, the Iraq War was one of those few "bi-partisan" votes -- when the chips were down, Democrats and Republicans alike approved it.
1
Inflation does not exist today so why argue over it?
The Fed and Wall Street are close brothers. When the majority of smart people who work hard and save money are pushed into the stock market because savings are almost zero, it creates a volatile market. As young people, we were taught to save and as an older person, it doesn't seem to have been a good lesson.
Almost zero interest rates benefit only big business and banks but do not serve the average working person. Of course, the problem is that big business will just pass on the prices and charge more money for products.
My big question, after reading this article is what is the big deal of raising rates when it seems rather a simple way of fixing and helping working people? One half point is not going to hurt anyone.
The Fed and Wall Street are close brothers. When the majority of smart people who work hard and save money are pushed into the stock market because savings are almost zero, it creates a volatile market. As young people, we were taught to save and as an older person, it doesn't seem to have been a good lesson.
Almost zero interest rates benefit only big business and banks but do not serve the average working person. Of course, the problem is that big business will just pass on the prices and charge more money for products.
My big question, after reading this article is what is the big deal of raising rates when it seems rather a simple way of fixing and helping working people? One half point is not going to hurt anyone.
4
I would just like to see consumer savings be able to earn something decent, rather than the dollar / thousand we currently can get. I understand the plight of the poor, but a rate near zero is crazy for everybody but big business.
4
Keeping rates low only helps big business but it does nothing to help the taxpayer and the saver. As usual, big business wins.
5
The Fed did a good job preventing the economy from crashing.
It is time to realise that monetary policy by itself cannot control nor solve all the country's economic problems.
It is time to realise that monetary policy by itself cannot control nor solve all the country's economic problems.
4
Without wage pressure, there is no inflation on the horizon. It will be a long time before we see wage pressure. Between exporting jobs, importing cheap manual labor, importing cheap white collar labor in the form of H1Bs, and automation, there will never again be wage pressure, even with increases in the minimum wage and increased unionization. Go ahead and raise interest rates, but let's not pretend it's to keep the economy from overheating. There's so little demand you can't find it with a microscope, but sure, hey, everyone's sick of earning 0% on their savings account.
4
This is some clever PR fomented by the Fed. I particularly appreciate the asthma sufferer, having to downgrade to hot dogs in order to purchase medicine.
In other words, we'd love to do the right thing and raise rates, but it would hurt the little people too much. So we'll just have to let the aggressive rich continue to access gobs of money more or less for free; sorry about that.
In other words, we'd love to do the right thing and raise rates, but it would hurt the little people too much. So we'll just have to let the aggressive rich continue to access gobs of money more or less for free; sorry about that.
4
We, the United States has how much money going up to the one per cent? On that, how much is going to the top one tenth of one per cent? That is not a distortion? And people seriously wonder why there is a malaise? A slow growth environment?
What was the distribution of income, the last time people, the majority of people not only felt well, there was broad-based prosperity in the United States?
What was the distribution of income, the last time people, the majority of people not only felt well, there was broad-based prosperity in the United States?
3
The US economy has been driven by debt for decades now, both private and public debt. Interests rates near zero make it more lucrative to borrow money and spend it rather than save it (and build up capital); therefore the "recovery" of the past years, where the GDP growth has been mainly consumer and government spending with little value (asset) creation in new businesses, which requires capital investments. Cheap money encourages debt, not capital/asset accumulation. It's a fast and easy policy to stimulate a stagnant economy, but also a very short term one, for how long can GDP growth be based on debt only?
3
Cheap money funds stupid investments that default.
1
One of the first things taught in an economics class is the difference between macroeconomics and miicroeconomics. TheFed deals with macroeconomics that effect our nation and the world. Jobs and pay affected by macroeconomic changes very limited? The Fed rate is so low that savings accounts provide limited income. Individual stocks use fail to work because lack of information and limited knowledge. Raising rates would help those who no longer trust stocks and will require companies to use debt better.
4
Presumably the Fed will look at the hard numbers and not be influenced by the political propaganda. The political punditry talking heads on TV keep telling the masses the right thing to do is X or the right thing to do is Y, but the talking heads are all promoting either their own self-centered agendas or the agendas of the people who pay their "think tank" bills. The main problem with the talking heads is, when they're subsequently proven wrong, they'll still be back tomorrow telling everyone what to do. Talking heads don't seem to get fired for being wrong. It's a cushy highly non-productive job. How does one go about getting it?
2
Politicians need to stay away from the fed decisionmaking process. The entire point of the Federal Reserve system -- like the Supreme Court -- is to protect it from the vicissitudes of mercurial public opinion and shallow political point-scoring so as to enable it to pursue the long-term economic interests of the country i.e., macroeconomic growth, full employment, and low inflation -- all metrics that require long-horizon thinking and some measure of isolation from the day-to-day rabble-rousing that demarcates so much of the modern political climate. In short, pundits, politicians, and the public alike need to stay away from the institution and let it do its job.
5
Three observations from flyover land, about how "inflation is under control."
1. An appliance is the same price it was 5 years ago, but it's only going to last for 2/3 as long. Isn't that a price increase?
2. Advances in manufacturing have developed a sewing machine that can join two pieces of fabric (in my example, a mattress covering) with only an eighth-inch instead of a half-inch seam allowance. It's sold for the same price, but it's going to separate under the least stress. Isn't that a price increase?
3. You people don't grocery shop, do you?
1. An appliance is the same price it was 5 years ago, but it's only going to last for 2/3 as long. Isn't that a price increase?
2. Advances in manufacturing have developed a sewing machine that can join two pieces of fabric (in my example, a mattress covering) with only an eighth-inch instead of a half-inch seam allowance. It's sold for the same price, but it's going to separate under the least stress. Isn't that a price increase?
3. You people don't grocery shop, do you?
5
The way lobbyists are lining up to influence the Fed makes me just realize that there's simply nothing left for Americans to come together on. The Fed is allegedly independent--why on earth would somebody bring chocolate coins to an airport to curry favor if not to create some not so subtle influence in that direction?
I certainly want the Fed to use its best judgment on what will most benefit the US economy, both short and long term. Raising rates because "it's time" or some wealthy investors want a better rate of return on cash, or whatever, is not a good reason. Up to now, the Fed's policy has been sound and our fledgling recovery continues to bumble along. If it takes some momentary pain to effect a long-term gain, fine.
But if it's done just to appease a particular side in this debate, it's the wrong reason. So far I've trusted Janet Yellen to do the right thing. Let's see what happens next before we speculate that economic Armageddon is around the corner.
I certainly want the Fed to use its best judgment on what will most benefit the US economy, both short and long term. Raising rates because "it's time" or some wealthy investors want a better rate of return on cash, or whatever, is not a good reason. Up to now, the Fed's policy has been sound and our fledgling recovery continues to bumble along. If it takes some momentary pain to effect a long-term gain, fine.
But if it's done just to appease a particular side in this debate, it's the wrong reason. So far I've trusted Janet Yellen to do the right thing. Let's see what happens next before we speculate that economic Armageddon is around the corner.
3
By transferring trillions of tax dollars and lost interest on savings from the middle classes and seniors to Wall Street during the past 7 years, the self-serving Fed has suppressed spending, labor participation, and wages for all but the wealthy, while simultaneously increasing income inequality. Fed policy has now become a structural impediment to the overall economy, and may be difficult to reverse since the wealthy have reaped enormous benefits from public assistance for Wall Street. The Fed has a strong conflict of interest, and the country would be much better served by representative control of the economy.
20
Except historically raising interest rates has resulted in increased unemployment. So are you in favor of a better interest rate on your savings in return for higher unemployment?
1
@W.A. Spitzer - Yeah, when we raised interest rates to 16% in 1982, there was a lot of unemployment. Do you think that will happen if we raise interest rates to .25% in 2015?
If the economy can't take such ridiculously low interest rates without collapsing, we might as well give up.
If the economy can't take such ridiculously low interest rates without collapsing, we might as well give up.
2
This is an application for a computer algorithm that applies negative feedback to maintain stable yield curves.
Fed Up is not talking about poverty. They are talking about jobs. The Fed can't create jobs. Monetary policy can create conditions that affect jobs, but only fiscal policy can create jobs, and only legislation can fix the conditions in which workers can enforce their rights to a fair share of the profits they create. Congress needs to act.
But it won't. Republicans like the army of unemployed desperate people who keep wages at subsistence levels for the benefit of their capitalist cronies. Democrats aren't much better. Workers should just die in the streets, and will if the two legacy parties have their way.
But it won't. Republicans like the army of unemployed desperate people who keep wages at subsistence levels for the benefit of their capitalist cronies. Democrats aren't much better. Workers should just die in the streets, and will if the two legacy parties have their way.
13
The Fed's zero interest rates destroyed retirement income plans of millions of the 80% who depended on life-long savings accounts, forcing them into the stock market. This huge money influx was a genius move by the Fed on behalf of Wall Street.
And huge banks can "borrow" cheap money at 0.4% and loan it back out in 4% mortgages--a 1,000% mark-up, not to mention credit card rates up to 20%
--another genius move on behalf of Wall St.
I remember decades of prosperity when savings accounts paid 4 or 5%. Now there's no incentive to save, other than gambling on the market. In case there's any doubt about who owns and controls the country, through Congresses controlled by either party.
And huge banks can "borrow" cheap money at 0.4% and loan it back out in 4% mortgages--a 1,000% mark-up, not to mention credit card rates up to 20%
--another genius move on behalf of Wall St.
I remember decades of prosperity when savings accounts paid 4 or 5%. Now there's no incentive to save, other than gambling on the market. In case there's any doubt about who owns and controls the country, through Congresses controlled by either party.
20
Actually, the mortgages are nearly all sold to Fannie Mae. While the banks can borrow money at very low rates right now, there is little chance that they will be able to do so for the next 30 years. These mortgages are in fact very risky to the lender, so the government is taking the risk, not the banks.
As for credit cards, they are unsecured loans. There is no guarantee that balance will ever be paid, so there is a substantial risk premium built into the rates. I have credit cards with a 9.8% rate, because the banks consider me a good risk. Unfortunately for them, I pay the balance as soon as the billing period closes.
As for credit cards, they are unsecured loans. There is no guarantee that balance will ever be paid, so there is a substantial risk premium built into the rates. I have credit cards with a 9.8% rate, because the banks consider me a good risk. Unfortunately for them, I pay the balance as soon as the billing period closes.
This is what people don't get. Their daddy's banking system is dead and buried to create paper with hidden risks to sell to naive investors.
3
These mortgages are inherently risky even without credit risk because the value of long term loans falls steeply when (Guess who) raises interest rates.
2
This column is just a big fat lie. There is not squaring off making the fed have jitters about who to side with, that's just how the right wants it to look when it doesn't. There is no threat of inflation while the GOP congress and the business sector are sitting on their hands all but making inflation even remotely possible while unemployment is so wide spread it's rolled off the back end of being counted with underemployment and compensation tracking at rates of 20 years ago in absolute terms, no need to even calculate inflation. No this is just a matter of the bullies in our economy trying to intimidate and scare everybody else including the Fed. The single best thing the Fed can do for the country is to stand up the bullies and tell them to go actually do something to make them have to raise the interest rate.
4
Ok, I'm a just (born during WW2) pre-boomer.
What young folks and the government miss is that inflation is good for borrowers such as the US government; it is not so good for creditors such as us old folks who survive on fixed incomes related to pre-devalued dollars.
Even if SSA were to keep pace with inflation until it collapses, a fixed annuity will not.
Just a reminder (we're old but we vote).
What young folks and the government miss is that inflation is good for borrowers such as the US government; it is not so good for creditors such as us old folks who survive on fixed incomes related to pre-devalued dollars.
Even if SSA were to keep pace with inflation until it collapses, a fixed annuity will not.
Just a reminder (we're old but we vote).
5
Well I'm younger than you and I vote too, and I totally disagree with you. Old folks who didn't invest appropriately in the stock market failed to pay any attention to the correct advice given to people on how to save a nest egg for old age.
The Fed simply cannot drive interest rates to extremes, either high or low, without making traditional banking an untenable business. If you want locally owned banks taking deposits from and making collateralized loans to local populations, with a local capacity to work out bad loans and make recovery by sale of collateral, you must have monetary policy that maintains stable yield curves.
The time to increase interest rates was probably last month. Given the circumstances in China and the current fragility of the world's stock markets, now may not be the best time.
But rates should be allowed to rise soon, perhaps in a month or two.
The problem is, there are real downsides to keeping rates low forever. First, this encourages bubbles in the stock market, one of which may be unwinding now.
Second, zero rates are having a devastating effect on people who save money, particularly seniors who are at or near retirement. These people planned to retire on the interest from a lifetime of savings. Now, because of the unprecedented 8 year period (and counting) of zero interest, they can't, and are instead paying down their principal. This can't go on, and sooner or later large numbers of vulnerable citizens will become destitute.
Third, lower interest rates is one of the Fed's best short term solutions to energize the economy. But it is a short term solution. If rates are already zero, the Fed has few effective tools in its arsenal. If the present stock market swoon turns in to a recession, there may not be much the Fed can do to help.
But rates should be allowed to rise soon, perhaps in a month or two.
The problem is, there are real downsides to keeping rates low forever. First, this encourages bubbles in the stock market, one of which may be unwinding now.
Second, zero rates are having a devastating effect on people who save money, particularly seniors who are at or near retirement. These people planned to retire on the interest from a lifetime of savings. Now, because of the unprecedented 8 year period (and counting) of zero interest, they can't, and are instead paying down their principal. This can't go on, and sooner or later large numbers of vulnerable citizens will become destitute.
Third, lower interest rates is one of the Fed's best short term solutions to energize the economy. But it is a short term solution. If rates are already zero, the Fed has few effective tools in its arsenal. If the present stock market swoon turns in to a recession, there may not be much the Fed can do to help.
20
Seniors, if you're on a pension it probably relies mostly on returns from the stock market. Something to think about.
Not so. The bond market has about twice the capitalization of the stock market.
Whatever theories about the role of the Fed. and the "normal" level of interest rates one may hold, nobody can doubt that raising interest rates now will do serious harm to the economy. The recovery will stall, people on fixed incomes will suffer, employment will stagnate. So why do it?
The only thing that is truly predictable about the economy is the behavior of "markets" masters of the universe. They will always try to figure out how to get OUR money into their pockets at the least expense and highest profit. No inflation? These people must not shop for groceries and if they do they will find their selection of stores, and different products, has been greatly diminished because BIG business has been allowed to buy up their competition, and their supply chain, and control prices. If the Fed raises rates the banker-robbers will pass it on -highly inflated - to WE average citizens. Global markets are tanking again today and some hedge funds are making BILLIONS of dollars playing market craps. The only thing that will help average Americans, and average people around the world, is SERIOUS REGULATION, TAXATION AND NATIONALIZATION/BREAK UP OF BIG FINANCIAL AND CORPORATE ENTITIES. Right now this is where the hard-earned money of average people around the world is going:
https://fbkfinanzwirtschaft.wordpress.com/2015/08/30/a-black-swan-fund-m...
https://fbkfinanzwirtschaft.wordpress.com/2015/08/30/a-black-swan-fund-m...
4
The Fed has done fine since 2008.
They will do the right thing in September.
They will do the right thing in September.
2
Please refer to your own editorial from Saturday: http://www.nytimes.com/2015/08/29/opinion/show-some-spine-federal-reserv...
It is a mischaracterization which has been championed by Krugman that the only argument for raising rates is to fight inflation. We have had zero interest rates for 8 years. This has undoubtedly created a stock market bubble and probably a real estate bubble in some markets.
Fiscal spending would help employment but our paralyzed government cannot act. Monetary policy was always a very weak substitute and has reached its limit.
It's time for the government to stop pushing retirees and young people trying to save some money into risky stock market investments.
It is a mischaracterization which has been championed by Krugman that the only argument for raising rates is to fight inflation. We have had zero interest rates for 8 years. This has undoubtedly created a stock market bubble and probably a real estate bubble in some markets.
Fiscal spending would help employment but our paralyzed government cannot act. Monetary policy was always a very weak substitute and has reached its limit.
It's time for the government to stop pushing retirees and young people trying to save some money into risky stock market investments.
5
When did the Fed become the alpha and omega of managing the economy?
Oh, yeah: when both Democrats and Republicans decided that using the budget to shape economic outcomes was Komyounizm.
Oh, yeah: when both Democrats and Republicans decided that using the budget to shape economic outcomes was Komyounizm.
2
Why do we keep saying "raise the interest rate" when the correct language should be that we should "restore the interest rate to its normal level"? Near-zero is an artificial cost of money that benefits only the 1% and mortgage-seekers. God forbid it should benefit folks with student loan debts or even credit card debt!
When I was in business school, the "risk free rate of return" was 6%. Right now the only way to access 6% is to risk a 20+% loss in the stock market. That is not a risk-free rate of return. For boomers approaching retirement, they are between a rock and a hard place.
The markets are like a chain smoker with emphysema who is now hooked on oxygen. Quit smoking and lose the dependency on free O2. It won't be fun at first, but eventually you'll get your life back.
I say rip off the bandaid, let the markets swoon temporarily, and restore normalcy.
When I was in business school, the "risk free rate of return" was 6%. Right now the only way to access 6% is to risk a 20+% loss in the stock market. That is not a risk-free rate of return. For boomers approaching retirement, they are between a rock and a hard place.
The markets are like a chain smoker with emphysema who is now hooked on oxygen. Quit smoking and lose the dependency on free O2. It won't be fun at first, but eventually you'll get your life back.
I say rip off the bandaid, let the markets swoon temporarily, and restore normalcy.
17
Actually, you probably could get 6% with little credit risk, if you were willing to tie your money up forever. But then you'd face interest-rate risk....
The problem is our government has manipulated our economic measures to a degree that everything being reported is distorted.
Name one thing, other than interest rates, that has not gone up in price in the last decade and even the last year. We measure inflation by what people spend. If your income doesn't increase and you can't borrow more, you didn't spend more and had no inflation. Never mind that you bought chicken instead of steak, traveled less, ate out less, etc. Your expenditures for food and entertainment did not increase. We discount price increases based on product improvements. When optional equipment on your new car is now standard and new safety requirements were mandated causing you to spend more, there was no inflation.
When one department of our government issues new debt and another department of our government buys half of it, we call it a sale and new financing.
When social security payments equal contributions, we call it an aging problem. Never mind that over half of all social security payments go to individuals under 65.
When our highway trust fund is out of money we point out the failure to invest in highways and bridges. Never mind that a substantial portion of our highway trust fund has been spent on mass transit and other things that have nothing to do with highways.
Distortion, after distortion, after distortion. They we wonder why we have problems we can't fix!
Name one thing, other than interest rates, that has not gone up in price in the last decade and even the last year. We measure inflation by what people spend. If your income doesn't increase and you can't borrow more, you didn't spend more and had no inflation. Never mind that you bought chicken instead of steak, traveled less, ate out less, etc. Your expenditures for food and entertainment did not increase. We discount price increases based on product improvements. When optional equipment on your new car is now standard and new safety requirements were mandated causing you to spend more, there was no inflation.
When one department of our government issues new debt and another department of our government buys half of it, we call it a sale and new financing.
When social security payments equal contributions, we call it an aging problem. Never mind that over half of all social security payments go to individuals under 65.
When our highway trust fund is out of money we point out the failure to invest in highways and bridges. Never mind that a substantial portion of our highway trust fund has been spent on mass transit and other things that have nothing to do with highways.
Distortion, after distortion, after distortion. They we wonder why we have problems we can't fix!
6
For a country that is supposedly the "home of the brave," America has been brought to its knees apparently over the fear of a measly 0.25% interest rate.
Get a grip people.
Get worked up about things that will have a much greater impact on their lives than 0.25%. I suggest the utterly broken political situation we have in this country due to unlimited money in politics and gerrymandered districts.
~
Get a grip people.
Get worked up about things that will have a much greater impact on their lives than 0.25%. I suggest the utterly broken political situation we have in this country due to unlimited money in politics and gerrymandered districts.
~
5
I always like it when people mention gerrymandered districts. It gives me an opportunity to point out that the biggest PROPONENT of gerrymandering is the Department of Justice. For years it has required that the most extreme, hideous geographic monstrosities be created to achieve so-called majority-minority' districts.
How about a deal? Both Left and Right agree to a non-partisan commission to draw up boundaries on a geographic basis of compactness and contiguity? That's what The Electoral Commission does in the UK.
How about a deal? Both Left and Right agree to a non-partisan commission to draw up boundaries on a geographic basis of compactness and contiguity? That's what The Electoral Commission does in the UK.
In June of 2009 Obama and the Dem Congress announced that the recession was over. We hear constantly, especially before an election, that unemployment has been reduced and that the economy is growing.
Yet, the Fed doesn't raise it's interest rate for overnight borrowing. It is about 0% right now. Anyone that saves cannot earn any money on that money - that includes millions of retirees that have been struggling on a fixed income. The unintended result is that now many retirees are in higher risk investments, where principle is at risk.
It is hard for me to understand protests from liberals fighting this interest rate increase. I'm sure they don't really understand economics, but for the life of me I don't get why they want to continue along the deluded hypothesis (that has been proven false) that if banks can borrow money for free, the masses will be able to borrow and spend money they don't have.
It was the low interest rates in the early 2000s and late 1900s that helped cause the housing bust - all kinds of people decided to make money flipping houses without putting any money down. It worked for a while, but drove the globe into a disaster. Yes, it was the subprime loans, but why do you think subprime loans were even possible?
It's long past time to raise rates. Without it, the next bout of inflation will have no tool to use to fight it. Then we will be a banana republic.
Yet, the Fed doesn't raise it's interest rate for overnight borrowing. It is about 0% right now. Anyone that saves cannot earn any money on that money - that includes millions of retirees that have been struggling on a fixed income. The unintended result is that now many retirees are in higher risk investments, where principle is at risk.
It is hard for me to understand protests from liberals fighting this interest rate increase. I'm sure they don't really understand economics, but for the life of me I don't get why they want to continue along the deluded hypothesis (that has been proven false) that if banks can borrow money for free, the masses will be able to borrow and spend money they don't have.
It was the low interest rates in the early 2000s and late 1900s that helped cause the housing bust - all kinds of people decided to make money flipping houses without putting any money down. It worked for a while, but drove the globe into a disaster. Yes, it was the subprime loans, but why do you think subprime loans were even possible?
It's long past time to raise rates. Without it, the next bout of inflation will have no tool to use to fight it. Then we will be a banana republic.
10
"In June of 2009 Obama and the Dem Congress announced that the recession was over."
The authority to identify recessions has been privatized in recent years. It is likely that the record of recessions would be different now if a government agency were still in charge of keeping the public informed about recessions.
The authority to identify recessions has been privatized in recent years. It is likely that the record of recessions would be different now if a government agency were still in charge of keeping the public informed about recessions.
1
There will never be wage pressure again, not until there is wage pressure around this hot, flat world - not likely with 9B souls all scrapping for whatever it is automation can't do - so whence cometh inflation?
1
This post should be required reading for all progressives, whose hearts are in the right place, but don't understand that the answer to a bad economy isn't necessarily keeping interest rates low.
Don't even get me started on the fact that since we not only haven't seen inflation, but don't even completely understand why economies experience inflation, the Fed should not raise interest rates.
Too much of a good thing is not necessarily good. If too much money is chasing too few ideas, because interest rates are too low, some really bad ideas will get funded. When those bad ideas don't pan out, the taxpayer will be left holding the bag. Just increasing regulation on extending credit, with the hopes that those bad ideas (e.g. internet in the 1990's, housing debt in the 2000's) will not be funded, is a fantasy.
Don't even get me started on the fact that since we not only haven't seen inflation, but don't even completely understand why economies experience inflation, the Fed should not raise interest rates.
Too much of a good thing is not necessarily good. If too much money is chasing too few ideas, because interest rates are too low, some really bad ideas will get funded. When those bad ideas don't pan out, the taxpayer will be left holding the bag. Just increasing regulation on extending credit, with the hopes that those bad ideas (e.g. internet in the 1990's, housing debt in the 2000's) will not be funded, is a fantasy.
2
One reason that inflation hasn't risen as the unemployment rate has fallen according to textbook script is that wages have remained stagnant, leaving wealth accumulation at the top end of the affluence scale where more new money is invested rather than spent. Thus the normally expected infusion of money resulting from robust employment simply doesn't exist because workers are now paid so badly.
The relatively small portion of new money spent for consumption is chasing a supply of yachts, luxury care and trophy houses for our 1% rather than food, clothing and decent housing for ordinary working citizens. Thus, there's little pressure on prices for goods considered essential to life. Add to this the plunge in commodity prices and the standard textbook gets re-written.
The inevitable and ultimate result of this condition has to be slowing economic growth. This is grade school arithmetic. In the real world where people live, it doesn't matter whether interest rates are raised in September or December.
www.endthemadnessnow.org
The relatively small portion of new money spent for consumption is chasing a supply of yachts, luxury care and trophy houses for our 1% rather than food, clothing and decent housing for ordinary working citizens. Thus, there's little pressure on prices for goods considered essential to life. Add to this the plunge in commodity prices and the standard textbook gets re-written.
The inevitable and ultimate result of this condition has to be slowing economic growth. This is grade school arithmetic. In the real world where people live, it doesn't matter whether interest rates are raised in September or December.
www.endthemadnessnow.org
3
This article is too long, and it's tedious reading because, conforming to Wall Street dictates, the reporter never explains that the Federal Reserve's policymaking is constricted by the zero lower bound, or "liquidity trap." The Fed cannot meaningfully cut rates because the Fed Funds Rate has been stuck near zero for several years (see FRED chart). The only way the Fed could meaningfully lower rates, to stimulate the economy, would put the rate below zero, which would mean that savers would have to pay banks for the privilege of having a bank account. Unable to stimulate the economy by reducing rates, the Fed has engaged in three rounds of quantitative easing, which, as in Japan, have rescued markets from collapse but have failed to bring about any meaningful economic rebound.
4
Please raise rates, please fix issues created by zero interest rates that effect everyone depending upon a non-stock market return for their investments
Seniors, cities, school districts, just about any entity dependent on a rate of return have been damaged by the policy of providing cheap money to the banking sector
Please help!!
Seniors, cities, school districts, just about any entity dependent on a rate of return have been damaged by the policy of providing cheap money to the banking sector
Please help!!
4
Our friendly Fed has decreed that 60% of our assets shall yield nothing.
The Fed has become a slave to the stock market. This is what happens when you continually reduce rates until they are virtually zero, all in order to stimulate the economy. As soon as a rumor of any potential rate increase hits the news wires, the market tanks as it did in the past 2 weeks. To add insult to injury, the federal debt is now in excess of $18 trillion, up from less than $11 trillion when Obama took office. And the Fed continues to purchase U.S. Treasury debt to boot. There is no free lunch and this mess will implode sooner or later.
2
This is both heartening and annoying. How wonderful that our system is open enough that the meetings of our financial "ministers" are held with some public access, rather than in deep secret. A similar event is simply inconceivable in just about any other country on earth. Just try to hire the conference room downstairs from a meeting of the Financial Ministry of China while they are in session. At the same time, what a pain that this is yet another example of the political polarization where folks with too much money and too much free time go off to cheer lead and lobby for outcomes that are likely not best outcomes for anyone. Why are the "conservative" and "liberal" positions necessarily labeled as such? Why do they position themselves as "opposites". They look to me like nothing more than extremists who would happily blow the whole economy up just so they could do a happy dance. Where is the lobby of those who suggest the Fed do nothing? How about a lobby to cheer lead using bit coin or maybe letting the Federal Reserve Bank in Dallas secede from the system? You won't see that because it would "Trump" the crazies who make a meeting a circus, bringing in a whole new set of clowns to make it apparent just how looney this polarized cheer leading really is.
Mayer: Excellent insight! On first blush, it certainly seems a double edged sword that in a democracy everyone has the opportunity to have their say, no matter how idiotic or one sided that opinion may sound. On the other hand, in the totolitarian countries like Russia or China when the pressures build-up in their socities or their economy crashes, their governments usually come down in an ugly way and a revolution sweeps away the debris.
Very little talk here about balance of trade. We have a large trade deficit and the dollar has been increasing in value significantly against most foreign currencies. Isn't this evidence that the dollar is already over valued? Add to that the fact that inflation is low and apt to stay low for some time into the future, and the Republican Congress has refused to fund even basic infrastructure needs, I find it hard to understand why the Fed would even consider raising rates. To what end?
3
The problem is that increasing interest rates will have short term consequences. Unfortunately long term problems may well be greater as a result. It became easy to fix problems through monetary policy and everyone lost sight of the bigger picture.
This piece helps confirm what I've been reading in Paul Krugman's column. One of the things I've learned there is that when if are reading a very serious article that says "economists" are mystified by the economic facts of the last decade, then you should stop reading. Perhaps Mr. Appelbaum should find some better economists to talk to and report on?
14
OTOH, it's certainly possible, nay likely, that the economists who know why what happened happened are incorrect about their hindsight. As Oliver Sachs might have pointed out confabulation is not just for mental patients, but is part of our daily lives.
Let me have control over a nation's money and I care not who writes its laws.
Let me have control over a nation's interest rate and I care not who writes its money.
Let me have control over a nation's interest rate and I care not who writes its money.
4
Its natural that both sides of the aisle would want the Fed to help in the pursuit of their objectives: more growth and less inequality for the left; hard money, financial stability and tight control of inflation on the right. The Fed is, however, substantially less capable of achieving this myriad objectives than commonly thought, and sometimes objectives clash with each other.
The Fed should focus, of course, on its dual mandate: employment and inflation. With the labor market getting better, unemployment coming down, but inflation significantly below its target of 2%, that means the Fed should continue is zero-rate interest rate policy for months to come. Many central banks post 2009 made the mistake of raising rates ahead of time, only to find that they killed recoveries and had to backtrack with serious damage to their economies. The Fed should hang tight and, as has been said, wait to raises rates until they see "the whites of inflation eyes".
The Fed should focus, of course, on its dual mandate: employment and inflation. With the labor market getting better, unemployment coming down, but inflation significantly below its target of 2%, that means the Fed should continue is zero-rate interest rate policy for months to come. Many central banks post 2009 made the mistake of raising rates ahead of time, only to find that they killed recoveries and had to backtrack with serious damage to their economies. The Fed should hang tight and, as has been said, wait to raises rates until they see "the whites of inflation eyes".
12
Do you really believe that inflation is 2%!? You must not do the grocery shopping. Pay the utilities. Buy any of the essentials that have been eliminated from the inflation estimate since Clinton became president in the early 90s. Even gas, while low, has a very high price given that the states and fed are taking the money via added taxes. The current price for a barrel of oil should result in under a dollar a gallon. It's well over $2 where I live.
Check out shadowstatistics to see the actual inflation rate based on the formula used before the government decided to change it for it's own use. It's running about 19%.
Check out shadowstatistics to see the actual inflation rate based on the formula used before the government decided to change it for it's own use. It's running about 19%.
2
I just could leave this discussion without adding the keen observations of David Stockman. From is blog Contra Corner:
"In fact, the only real value of Fischer’s pretentious bloviation was that it was a reminder that the financial system of the world is in thrall to a tiny, insuperably arrogant posse of Keynesian academics who have invented from whole cloth a monetary theory of plenary control. They have effectively ended free market capitalism in the financial system and beyond and made democratic fiscal governance essentially irrelevant.
Here’s why——starting with the Fed’s specious mantra that “Humphrey-Hawkins” makes us do it."
"In fact, the only real value of Fischer’s pretentious bloviation was that it was a reminder that the financial system of the world is in thrall to a tiny, insuperably arrogant posse of Keynesian academics who have invented from whole cloth a monetary theory of plenary control. They have effectively ended free market capitalism in the financial system and beyond and made democratic fiscal governance essentially irrelevant.
Here’s why——starting with the Fed’s specious mantra that “Humphrey-Hawkins” makes us do it."
5
Keynesian economics is about fiscal policy: taxing and/or borrowing to spend to bring a mixed economy up to full employment. Monetary policy cannot do this.
2
While the Fed may be loath to show a pull back from its proposed rates, a move upwards followed by a downward revision a year from now if we move toward recession would be worse. We are well under the targeted inflation benchmark, the world economies are reeling. I can see no reason to move up rates. The Fed should hold pat and signal a revisiting next year.
3
In his paper for GMO entitled The Idolatry of Interest Rates, James Montier presents convincing evidence that the manipulation of interest rates by central banks is correlated neither to growth nor inflation, and that it is fiscal policy rather than monetary policy that should be the correct tool for regulating the economy. The generation of US central bankers going back to Greenspan has been partly responsible for the situation we have today, in which wealth is concentrated as never before in the hands of a tiny minority.
It would be refreshing if the leaders of the Fed would look down from their lofty positions to see the disastrous effects low interest rates are having on those of us who are either trying to save for retirement or are already living on fixed incomes.
How can we have any degree of equality in this country when the banks can borrow essentially for nothing then turn around and charge upwards of 20% interest on consumer debt? In what way does that stimulate the economy or savings?
It would be refreshing if the leaders of the Fed would look down from their lofty positions to see the disastrous effects low interest rates are having on those of us who are either trying to save for retirement or are already living on fixed incomes.
How can we have any degree of equality in this country when the banks can borrow essentially for nothing then turn around and charge upwards of 20% interest on consumer debt? In what way does that stimulate the economy or savings?
31
Yes, agreed that in an ideal world we should make greater use of fiscal rather than monetary policy to regulate aggregate demand in the economy. However, experience sadly indicates that the politicians up on Capitol Hill are collectively unable and/or unwilling to operate an active fiscal policy calibrated to doing that job. Thus the Fed finds itself with little alternative to the use of active monetary policy -- however much it may be a second-best choice -- to do the macro-economic work the politicians have shirked.
As a growing fraction of the national income goes to the 1% the number of people with discretionary income (mostly the middle class) is reduced fast enough to compensate the increase in employment. What the 1% spend doesn't figure much in the cost of living index.
1
So congressional Republicans want to impose new restrictions on the fed's conduct of monetary policy.
Yet another example of ideology trumping reality.
Supposedly the electorate is in the mood for a candidate who "tells it like it is", which would argue against applying abstract formulas to economic policies.
Let's hope the Democrats can use this to their advantage.
Yet another example of ideology trumping reality.
Supposedly the electorate is in the mood for a candidate who "tells it like it is", which would argue against applying abstract formulas to economic policies.
Let's hope the Democrats can use this to their advantage.
2
The economy is on the road to recovery. It's not there yet but it's ok. As such, at this time, we need to invoke the 11th Commandment, "if it ain't broke don't fix it".
2
With the greatest respect, the country cannot go on forever with 0% interest rates.
It hurts savers, and I note that it has driven many otherwise prudent investors into risky investments. The next thing you know, those prudent investors have lost their principal.
It hurts savers, and I note that it has driven many otherwise prudent investors into risky investments. The next thing you know, those prudent investors have lost their principal.
2
Inflation has remained weak because the majority of Americans have fewer means or little incentive to spend.
Most of us are if not day-to-day then month to month.
I'd give the conservatives their rate hike IF congress would spring for crucial improvements in infrastructure while borrowing costs are still relatively cheap.
That's a big if, but even that might not trickle its way down to the pocketbooks of the lower 80% to 50%.
Low interests rates have not helped the poor or that vastly underreported segment of the population still looking for work or part time employed who would be vary happy to work full time.
Those leaps in the stock market which are based on Fed actions hardly affect the 80%, or at least don't seem to.
Liberals' pleas for no interest rate hikes are based on a different kind of "trickle down" theory promulgated by Reaganites, which is about as perverse and ironic as we can get.
Meanwhile some corporations sit on mountains of cash while others (and some with mountains of cash) lay off workers as soon as the bottom trends too low for the market makers.
Th reality for many workers is: Don't make waves because you could be next.
Is this the new normal?
Most of us are if not day-to-day then month to month.
I'd give the conservatives their rate hike IF congress would spring for crucial improvements in infrastructure while borrowing costs are still relatively cheap.
That's a big if, but even that might not trickle its way down to the pocketbooks of the lower 80% to 50%.
Low interests rates have not helped the poor or that vastly underreported segment of the population still looking for work or part time employed who would be vary happy to work full time.
Those leaps in the stock market which are based on Fed actions hardly affect the 80%, or at least don't seem to.
Liberals' pleas for no interest rate hikes are based on a different kind of "trickle down" theory promulgated by Reaganites, which is about as perverse and ironic as we can get.
Meanwhile some corporations sit on mountains of cash while others (and some with mountains of cash) lay off workers as soon as the bottom trends too low for the market makers.
Th reality for many workers is: Don't make waves because you could be next.
Is this the new normal?
8
Indeed, the money has been channeled to the rich, who spend lesser percent of their money and away from the middle class and especially the poor who especially spend more. Hence economic stagnation.
4
Of course there is no simple solution, but I think, given the fragility of the economy and how much worse it is than the Feds - with their cushy jobs in Washington - want to admit, raising the interest rates would send a jolt through the stock market. It will also increase the number of people who default on credit card debt or any variable interest debt, as the debt load is already very high; and the banks will exploit a Fed increase by raising their interest rates by several percentage points.
Given the faltering Chinese economy, recession in Brazil, general worldwide stagnation, tepid growth and some slowing, now is not the time to raise interest rates. The stock market's house of cards will soon fall anyway. That fall will provide a catalyst toward bettering the middle class by virtue of leaving the rich elite few - heavily invested on Wall Street - with no avenue for growth other than to generate more discretionary income for the middle class, with the American middle class their best bet. There's no other way to provide more wealth for the one percent than to provide more jobs and raise incomes for the ninety nine percent. Raising interest rates accomplishes nothing but to park money for the select few that have it, without even having to risk an investment. Hence, it's no wonder the Republicans are all for it. Raising interest rates is simply not a good idea.
Given the faltering Chinese economy, recession in Brazil, general worldwide stagnation, tepid growth and some slowing, now is not the time to raise interest rates. The stock market's house of cards will soon fall anyway. That fall will provide a catalyst toward bettering the middle class by virtue of leaving the rich elite few - heavily invested on Wall Street - with no avenue for growth other than to generate more discretionary income for the middle class, with the American middle class their best bet. There's no other way to provide more wealth for the one percent than to provide more jobs and raise incomes for the ninety nine percent. Raising interest rates accomplishes nothing but to park money for the select few that have it, without even having to risk an investment. Hence, it's no wonder the Republicans are all for it. Raising interest rates is simply not a good idea.
6
If the experts can't come up with a real solution--to the extent that their feeble but closely-watched machinations ever can--we are left to the whims of the largest banks and the wealthy to whom the "little guy" means nothing. I don't know much about our economy, but I feel how fundamentally unhealthy it is every day. Please think of all Americans when you make your next, purportedly big decision.
2
After reading the "tea leaves" and "the casting of the runes" on a monthly basis, the dithering continues to everyone's detriment. Raise the rates already, get it over with, and let the markets return so some semblance of the irrational abnormality fostered by computer trading.
1
Finding the sweet spot will be the Fed's biggest problem. The anticipated upward move is almost more symbolic that significant. Part of the concern all should have is the lack of wiggle room to do much should we start sliding back into recession. This is a very real fear and possibility.
Real wage growth is an issue. More jobs is a real issue too. If the Congress wasn't so dysfunctional maybe these, and other serious long term challenges, could be addressed. A quarter point rise in the Fed Rates won't really felt by the average American. The Chinese slowdown is most likely to be noticed, in some cheaper products and some job losses.
Better to write your representatives about infrastructure repair, communication upgrades and modernization of travel and transport facilities. These will provide jobs at home.
Real wage growth is an issue. More jobs is a real issue too. If the Congress wasn't so dysfunctional maybe these, and other serious long term challenges, could be addressed. A quarter point rise in the Fed Rates won't really felt by the average American. The Chinese slowdown is most likely to be noticed, in some cheaper products and some job losses.
Better to write your representatives about infrastructure repair, communication upgrades and modernization of travel and transport facilities. These will provide jobs at home.
10
The reporter writes:
“Conservatives see the Fed as enabling the growth of the federal debt, while liberals see the Fed as contributing to the rise of inequality.”
Both conservatives and liberals are wrong about the effects of the Fed on the growth of the federal debt and the rise of inequality.
Republican-enacted laws governing labor, trade, finance, banks, taxes and defense spending (not an all-inclusive list) of the past three and one-half decades – laws supported by too many Democrats – are the true culprits in the growth of the federal debt and the rise of inequality.
Some of us are old enough to remember the Great Federal Budget Surplus that was bequeathed to the nation by the Clinton Administration and the Democratic-controlled congress; a kind of break from the Republicans’ race-to-the-bottom policies. Then came the George W. Bush Administration with its resumption of the Republicans’ race-to-the-bottom policies and an unnecessary war in Iraq that was funded by debt. Now we have intense inequality and additional federal debt created to fund an unnecessary war in Iraq.
The Fed is not the problem. The Republican-controlled congress is the problem.
P.S. The current candidates for the GOP presidential nomination strongly believe invading Iraq was the right thing to do, and that we should do the same to Iran while simultaneously cutting taxes on the One Percent and eliminating health care for many middle- and working-class American families.
“Conservatives see the Fed as enabling the growth of the federal debt, while liberals see the Fed as contributing to the rise of inequality.”
Both conservatives and liberals are wrong about the effects of the Fed on the growth of the federal debt and the rise of inequality.
Republican-enacted laws governing labor, trade, finance, banks, taxes and defense spending (not an all-inclusive list) of the past three and one-half decades – laws supported by too many Democrats – are the true culprits in the growth of the federal debt and the rise of inequality.
Some of us are old enough to remember the Great Federal Budget Surplus that was bequeathed to the nation by the Clinton Administration and the Democratic-controlled congress; a kind of break from the Republicans’ race-to-the-bottom policies. Then came the George W. Bush Administration with its resumption of the Republicans’ race-to-the-bottom policies and an unnecessary war in Iraq that was funded by debt. Now we have intense inequality and additional federal debt created to fund an unnecessary war in Iraq.
The Fed is not the problem. The Republican-controlled congress is the problem.
P.S. The current candidates for the GOP presidential nomination strongly believe invading Iraq was the right thing to do, and that we should do the same to Iran while simultaneously cutting taxes on the One Percent and eliminating health care for many middle- and working-class American families.
69
Beginning in 2009 the D's had the power to pass anything they wanted without a single R vote. As Dem Sen Schumer has pointed out, they used that time and power to increase the percentage of Americans with health insurance by a few points. If they didn't use it to do the things you suggest, that was a conscious policy choice.
Dakar,
I am curious to know what the Democratic congress should have passed in 2009? If I recall correctly "the economy" was in a free fall.
I am curious to know what the Democratic congress should have passed in 2009? If I recall correctly "the economy" was in a free fall.
If one looks at the Federal Reserve original charter under the law we would find the central bank of today that bears no resemblance to it. It was supposed to be a back office operation whose purpose was to relieve liquidity issues only and temporarily.
Today the US central bank has become the model that all other nations central banks follow. Market manipulation, price manipulation, taxation via inflation without the need for consent of the electorate, monetization of debt, and the absolute destruction of honest price discovery.
The central bank now acts as an unelected quasi-government controlling and ruling body. When you control the money you control the price of everything. In a world where everything is bought and sold those with the money have all the power. Every physical movement and utterance from this politburo's of bankers are followed like rockstars.
The central bank of the US and its chairperson starting with Alan Greenspan have facilitated the financialization of the economy creating a casino like atmosphere on Wall St. where profits are privatized and losses socialized. The Greenspan "put" if you like. The in the last 30 years value of the entire stock market has grown by over 8% annually vs a underlying economy that has grown by only 3% and most of that growth in the first 15 years.
Its time to remove the Federal Reserve's goliath role in the economy. We need honest price discovery not manipulated ones.
Today the US central bank has become the model that all other nations central banks follow. Market manipulation, price manipulation, taxation via inflation without the need for consent of the electorate, monetization of debt, and the absolute destruction of honest price discovery.
The central bank now acts as an unelected quasi-government controlling and ruling body. When you control the money you control the price of everything. In a world where everything is bought and sold those with the money have all the power. Every physical movement and utterance from this politburo's of bankers are followed like rockstars.
The central bank of the US and its chairperson starting with Alan Greenspan have facilitated the financialization of the economy creating a casino like atmosphere on Wall St. where profits are privatized and losses socialized. The Greenspan "put" if you like. The in the last 30 years value of the entire stock market has grown by over 8% annually vs a underlying economy that has grown by only 3% and most of that growth in the first 15 years.
Its time to remove the Federal Reserve's goliath role in the economy. We need honest price discovery not manipulated ones.
21
The Alternatives are a dictatorial President or a disfunctional congress. The Fed is trying to modify the pain of the Great Recession on working & middle class people. While not perfect, they are doing something. The other players refuse to use methods designed in the later years of the Great Recession. Read Paul Krugman for more on this.
1
Yes, the Fed does have an outsized role today, but it's not the Fed's fault. Putting everybody who has responsibility for the health of the economy on line, everybody BUT the Fed took a step BACK leaving the Fed stuck with the whole job. The only way to shrink the Fed's current role is to roust out the shirkers in Congress and make them do their job so the Fed does not have to. Doing the same will also take the pressure off Obama having to do through executive order what Congress should be doing rather than threatening yet another shutdown.
2
The Fed simply cannot fulfill the "dual mandate" Congress has placed on it. Congress itself has to manage fiscal policy for full employment. Monetary policy obviously cannot do it.
Isn't it silly everyone is worried about a quarter of a point interest rate hike. That tells you how great this economy really is with people overspent and always in debt. The Fed should just raise it and not talk about it months in advance.
16
It cannot be the right thing to keep interest rates at zero forever. The US economy is now recovering, so it's time to start normalizing the banking system. I'm afraid the longer we stay at zero, the more chance there is that some other imbalance is building up in the system that will come back to bite us later.
30
A 3 month delay seems appropriate to: let the 'China Crash' get past, Unemployment rates to drop a bit further and the Labor Participation Rate-frozen at the current rate for many months- to increase.
1
The Fed has massively distorted our economy with their gutless stand.
0 interest rates are almost as far away from normal as were 17% interest rates under Carter.
This has created a giant real estate and stock market bubble, which now will be painful to prick.
Money should earn a return in savings. Zero return causes people to see riskier places to place their money. It removes the ability of retired people and careful savers to find safe returns at low risk.
In the last 10 years we have seen a massively incompetent Fed.
Something needs to change. And quick.
0 interest rates are almost as far away from normal as were 17% interest rates under Carter.
This has created a giant real estate and stock market bubble, which now will be painful to prick.
Money should earn a return in savings. Zero return causes people to see riskier places to place their money. It removes the ability of retired people and careful savers to find safe returns at low risk.
In the last 10 years we have seen a massively incompetent Fed.
Something needs to change. And quick.
38
The Republican Congress refused to any fiscal measures like infrastructure rebuilding, which left the much weaker Fed measures like very low interest rates as the only tool to reduce the impact of the Great Recession. The Fed is competent and the Congress is not!
3
Why can't we see the Fed's position for what it is. A strategy based on biased economic arguments to legitimize their decision - all toward forcing and directing the common workers savings to now, the only game in town - the stock market!
1
In the last 10 years we have seen what happens when you tie the hands of the Fed, because you have a massively incompetent Congress.
1
I am a liberal and I want the feds to raise rates so seniors stop funding the stock market's over-valuation of stocks. The fed is funding a speculative bubble. Capital is relying upon cheap money for profits instead of r&d. Pensions funds are being placed in jeopardy by the stock market.
60
Exactly how do seniors fund the stock market's over valuation of stocks?
Stock prices are set at the margin. That is why they can move very rapidly when there is an imbalance of buyers and sellers. Prices rise when buyers predominate, and fall when sellers predominate.
Retired seniors have a fixed pool of money to sustain themselves. It is not possible to sustain their standard of living when safe and prudent instruments such as CDs or government bonds yield near to zero percent. Thus they find themselves pursuing either riskier bonds or investing in the stock market. Prices for stocks will go up as more money chases after their higher, but riskier returns.
1
I had the rather cynical thought last week when our markets tumbled, that the major players were trying to influence the FED not to raise the rates.
Right after the FED announced that it might raise rates anyway, our markets went into recovery.
Those "too big to fail" still exert a major influence.
Right after the FED announced that it might raise rates anyway, our markets went into recovery.
Those "too big to fail" still exert a major influence.
10
A professor once told me that there are those that practice what they have learned and are quite successful. Then there are those that can't practice what they have learned as resort to teaching what they have learned in the past. These bureaucrats at the Fed are no more knowledgeable than anyone else as to the future. What we do know is that part of what plays a part in their hairbrained calculations is the issue of unemployment. They calculate unemployment based upon those collecting benefits, which is utter nonsense. What about those folks that are no longer eligible and those that have been out of work so long they have stopped looking. Our government has been feeding us these nonsensical numbers so long, some actually believe it. The Fed believes that inflation rises when unemployment decreases - okay, let's buy that scheme. Now they wonder that inflation isn't rising even though THEIR NUMBERS say unemployment is going down. What a smoke screen. Add in the folks not collecting benefits or who have stopped looking and you'll unemployment isn't falling. The Fed, like our administration is using too much pixy dust.
10
Watch the Labor Participation Rate, it picks up the flaws you noted. I think the current Fed looks at it carefully along with inflation rates
Politicizing the Fed is absolutely the wrong thing to do. Let's not forget that the Fed's monetary policy has assumed undue importance because Congress has been unable to agree upon any useful fiscal policy due to politicization.
55
Last week when news came that the Fed might hold off raising rates in September, the stock market went up 4% in reaction. That's about 1 trillion dollars of extra wealth in one day, mostly for the 1%. So part of the left may want to keep rates down, but it's not a part that I would want to belong to.
22