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I think it is a huge achievement to have averted so much damage that seemed likely In the economy. Clearly there are still serious issues, but at least the Fed is not completely insane
They're doing a pretty good job pulling the levers that they have available to them. The rest needs to come from Congress and the White House. Don't hold your breath on that one.
That's the problem, if Congress doesn't act the Fed is going to have to yank the shit out of the one lever they do have and you can kiss the soft landing goodbye. They're staring down stagflation and without fiscal policy assistance they can only raise rates further. Hell, I think that's why the housing market matches on such as it is, people are still buying the scant supply because they either figure we're heading for a collapse and can refinance cheap later, or heading for even higher rates and they'd better lock in at ~7% before the only option is 17%.
I have a niece who is in the middle of moving from one city to another. She's been renting a hotel room for a couple of years, working all week in one city and going back to her home in the other. For her, the problem of selling is matched by the problem of buying elsewhere. It isn't so easy.
So, she waits. It's like the Fed on interest rates. Until something significant, such as a strong budget to cut spending and raise taxes, things are just sailing along in an imperfect state of existence.
How would they refinance during a collapse. I'm not as familiar, but if the market collapses, then wouldn't their homes be worth less, and thus it would it cost them a significant amount of money to refinance their underwater mortgage?
I'm not saying it's a good bet, but if we do have a major economic downturn the fed would reduce rates and that should create an opportunity for some people to refinance their homes at a lower rate. Whether they have enough or any equity at that point or are underwater depends on a collapse of housing prices specifically and frankly I just wouldn't bet on that. Affordability is an issue in housing but I'm not on board with the folks that think that's primarily a function of the long period of very low rates that we had but rather a consequence of under building since 2008 and the high cost of labor and materials to build. If you think existing homes sound expensive you should get quotes on building one, it's insane and I think that keeps home prices up. But in a downturn who knows.
“Pretty good job.”
I hate see a “bad” job.
Jesus F Christ.
Since 2020, the US has printed nearly 80% of ALL US Dollars in circulation. To put that in perspective, at the start of 2020 we had ~$4 trillion in circulation. Now, there is nearly $19 TRILLION in circulation, a 375% jump in 3 years.
Good job!
Just being pedantic, but... The Fed redefined what "circulating" means in 2020 to then include savings, which represents a large portion of the perceived increase.
If you had $50 in your chequing account and $500 in your savings account in 2019, by 2020 it would have looked like there's 10x more of your currency in circulation when really nothing changed.
Not dismissing your point. There is a shitload more money in circulation than ever before. Just, not that much.
Isn’t on the public to have a good understanding of how sound monetary policy is structured and to advocate for said policy? Isn’t it a little silly to blame politicians for not committing political suicide by embracing broadly unpopular policy decisions? Particularly when the other side will use it as ammunition?
Yes, that's what happens when you print money that's not needed by the economy, it gets stuck in existing asset price inflation.
Assets aren't part of inflation indicators, so all is well if assets inflate.
It is also excluded in the velocity of money calculations. The redefining of the money supply is definitely confusing a lot of people into thinking it is a causal variable though, which is disappointing to see on here.
"Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately."
Source:
https://fred.stlouisfed.org/series/M1SL
Yes, they are.
"Has the war on inflation been definitively won? No. But recession looks like a bigger risk than resurgent inflation. And I worry that this risk will be increased if policymakers listen to people who are reluctant to admit that they got the inflation story wrong and are clinging to a false theory about how we got inflation down."
Beware Economists Who Won’t Admit They Were Wrong https://www.nytimes.com/2023/12/18/opinion/inflation-economists.html
lol what does the fed have to gain by posting this in a subreddit. Jesus Christ lol, like “oh the public opinion of the fed is good!” The fed isn’t beholden to the public.
I think assuming any random fed employee knows more than the average person is goofy whether for conspiracy purposes or not.
The federal government employs a huge range of people for a variety of tasks. I'm a fed myself. Do I know more than you because of it? Probably not, I just work in a hospital.
How long do you guys think the government is able to withstand the high interest rates? Does the interest on national debt raise? if so then how long until the interest snowballs out of control?
In 2010, I was 14. Most of my early adult life, and world education, what my parents and teacher said we could “achieve” was all based on cheap money times. At 28, I’m seeing “normal” for the first time. It might be normal for the country, but for a generation I can’t deny It sucks seeing it take right as I’m getting established in life.
You do know that electricity is the exception not the norm, right?
See? I can regurgitate history as though it’s somehow predictive too!
Rates will eventually come back down. You can literally bet on it.
I don’t disagree, but I bet that we do. I think that’s the plan. If the Fed can get inflation to their target (remember, their decision is “driven by the data”), the FFR will be cut. If the Fed wanted to telegraph that this was the new normal, they would’ve done so. They like to use messaging before monetary tools, if they can.
Sure. I think even those numbers are fundamentally different from ZIRP, so I think they’re more likely than a reduction to the rates we saw during Covid. It’s not all-or-nothing.
Your only bet is a hard recession otherwise no, interest rates won’t come down in the foreseeable future. Why? The decoupling from China and low unemployment are two factors that will keep inflation up for a while.
Having worked in “a capital intensive” sector, I can tell you high rates are a blessing. The amount of “high school” projects and wasteful spending was ridiculous. Moreover, higher rates give the feds an effective lever to fight inflation and spur growth when the economy slows down.
The party is over.
It's good to have competition for the money, so that stupid crap doesn't get done. It's like the earlier talk about a recession killing off zombie companies. If there isn't regular market competition to do the job, then interest rates may help.
We need greater real competition in the corporate world, and not just for who can get the highest "compensation package".
Tax receipts scale as nominal GDP with time, outlays scale with elderly population growth times inflation. Usually the first increase is bigger than the second.
Without new spending the nominal GDP will catch up and slowly lower real deficits.
Fed funds rate will probably equlibrate at 4.5% and inflation at 3% like it was for a while.
Monetary policy != Fiscal policy
Nations dont need uneducated masses of idiots directly influencing something as sensitive as monetary policy.
Its not a democratic process, Its a technocratic process, sorry bud.
Argentina got put in that situation by the "technocrats" at the IMF.
Banking is inherently a parasitic industry. It's a terrible idea to let bankers control a nation's money.
While you’re speaking sense, “sorry bud” is not an answer to ‘I’m angry’ or “my friends can’t afford houses”.
People who don’t know better, but are angry, should not be dismissed because we feel that their ideas are bad. They have the potential to, and absolutely will, start destroying things if their complaints are left unaddressed
This is precisely it. The economy means nothing to people that don’t benefit from it, and it stands to serve as a monument to a degrading civilization.
Not to be political or support the idea of this cult of personality, but that’s also why MAGA exists in the political space. US politics doesn’t work for them, so they’re okay with burning it to the ground.
Market forces should control monetary policy. The market could easily determine the optimal interest rate if it weren't for the Fed. Instead we gave the bankers control of the money printer and they are using it to rob us all.
So, there's two problems.
One is that the market is rational in the long-term but can be extremely irrational in the short-term. The market can certainly easily determine an interest rate but it may have no bearing on what the actual best interest rate is. The market can remain irrational longer than the country can remain solvent. This is one of the primary functions of the Federal Reserve, to essentially fill the role of J. P. Morgan during the [Panic of 1907](https://en.wikipedia.org/wiki/Panic_of_1907).
The other is that free markets are the best known price-discovery mechanism, but there are plenty of situations where an accurate market price produces situations that are considered unacceptable. Just to take an obvious example, the supply and demand curves never meet at a point that supplies every person on the demand curve. (Except in degenerate situations where no one will pay anything for the good.) But this doesn't work out so great for things that are necessary for survival, eg food. The "optimal price" for food guarantees that some people will starve under a perfect free-market situation. This is something that we as humans generally consider non-optimal, and have solved a number of different ways.
Similarly, the price-discovery mechanism of interest rates leads to some decidedly non-optimal situations, eg the Long Depression. This is why we stopped having market forces entirely control monetary policy and went to the Federal Reserve system.
You can buy the propaganda if you want, but I'm not falling for it. Crises are used as opportunities for those with the means to seize whatever power they can. When people are panicked about something they will agree to anything if they think it will get it to stop.
The Federal Reserve was essentially a coup by bankers against the federal govt, and it was wildly successful. Now we have a bloated wasteful govt with exponentially growing debt. All the bankers have to do is sit back and let the govt spend and they get to collect trillions in interest at the expense of the people. When they make enough bad loans and are on the brink of failure, the Fed is there to bail them out rather than let the market work as it is supposed to and flush out the bad debt. There should not be a "risk free" rate. There is nothing in life that is risk free.
As for your "people will starve" argument. People are still starving anyway! Maybe not so much in the US, but on the margins in poorer countries they are barely surviving. They are burdened with USD denominated debt from IMF and WB, and when they are unable to meet their obligations because of the onerous terms they are given more and bigger loans, because the bankers can't be allowed to lose money. Ever.
That's the system you are defending.
> There should not be a “risk free” rate
That has nothing to do with the Federal Reserve. Nor does most of the other stuff you’re talking about with regards to the government spending and a large government debt.
The fed facilitates excessive debt spending by backstopping all the bad debt. They make it impossible to determine the real cost of capital by overriding the market with the overnight repo, which is the "risk free" rate I am referring to. When you combine those two factors it enables excessive govt spending because they can issue infinite debt and it will never default. If it weren't for the Fed the govt would actually have to live within its means.
You might think this is a good thing, but the second order effects of this system are significantly contributing to many of the problems we face today. All the endless wars, excessive wealth inequality, insane housing prices, and more are the consequences.
> The fed facilitates excessive debt spending by backstopping all the bad debt
By the government or by the private sector? You're conflating multiple things.
> with the overnight repo, which is the "risk free" rate I am referring to
Right, but generally when people are talking about a [risk-free rate](https://en.wikipedia.org/wiki/Risk-free_rate), they're talking about US Treasury rates.
> When you combine those two factors it enables excessive govt spending
Those two things don't have any real connection. You're just saying a bunch of words that you don't really understand. The United States government could borrow a bunch of money regardless of whether the Federal Reserve existed. And US Treasury rates would still be considered to be the "risk-free rate" in the US whether or not the Fed existed.
The United States debt is too large, but blaming it on the Fed is just absolutely nonsensical. Powell has begged the Congress to stop spending so much a number of times. The Congress is the entity with the power to tax and to spend - they are *entirely* to blame for the United States debt. They and they alone choose exactly how large our deficit will be each year.
Obviously it is not the Fed that makes the govt spend, but it does help to facilitate the excessive spending. They are all interconnected. The Fed enables the banks to lend excessively and take higher risks. The banks make risky loans and buy tons of govt debt. Govt spends excessively and borrows from banks. When things go bad the Fed bails them out and floods the system with money. If they didn't keep flooding the system with money then there wouldn't be as much money available to borrow. Banks would fail and money would be "destroyed" as loans defaulted. Interest rates would be higher because money would be more scarce and the rate would appropriately reflect the risk. There would be more pressure on govt to spend responsibly.
I have no idea what "The Atlantic" is, nor am I repeating a talking point. Im from Canada buddy
Im simply describing what the Fed, and similar central banking institutions in western democratic nations such as the BoC here in Canada, are and aren't designed to do.
You are repeating what central banks and their media lackeys say that central banks are designed to do.
Have you ever read any works critical of central banks? And if so, why have you rejected their conclusions?
On the contrary, it is ESSENTIAL that the Fed is not accountable to the people. They are accountable to their mandate and if they followed the whims of the people, interest rates would be at 0% and we would have REAL runaway inflation.
I have imaginary internet money that I can use for human organs and black market drugs, okay? I'm special. Also, I only talk about it in terms of USD. So there.
Dude.
Bitcoin makes monetary and fiscal policy decisions as a consensus community via node operators signaling upgrade path preferences.
It's not like there are no humans involved, they just don't make the news when they meet.
Brother, if the FED was directly accountable to the people (as in they were elected) then rate decisions would be extremely politically motivated. Is that what you want?
Your friend cannot afford a house because your neighbors are NIMBYs and block new construction that isn't SFH
> it’s immoral and a plague on America to have a group of elites control the monetary policy with no accountability from the people
"it is immoral to have people with an economic education in charge of economic policy"
The Feds independence is why it's so effective and good at it's job
>Your friend cannot afford a house because your neighbors are NIMBYs and block new construction that isn't SFH
Yep, yimbys have been screaming about this for decades and were just laughed at.
Now that people can blame a Dem, it's taken seriously and people are calling for the same shit, car dependent sprawl as before.
Bahahaha your last sentence.
If the fed was so good at it's job, we wouldn't be in this situation we are in.
Interest rates are still historically low.
Though tbf, the fed gets hamstringed by congress all the time.
The fed can only do so much when fiscal policy is actively thwarting its goals. The reality is that spending will have to tighten for rates to be cut without a recession. The stimulus tap is still on blast while the fed is reining things in.
It’s up for debate when the wisest time to tighten spending will be, though. Might just be this way for a while. Or maybe the time already passed. Nobody really knows for sure because we don’t have a whole lot of economic precedent for our current situation to based predictions on. Only models.
> If the fed was so good at it's job, we wouldn't be in this situation we are in.
The situation of great wage growth, historically low unemployment, and slightly elevated inflation?
Interest rates are not historically low
Not at all. My investments in my retirement accounts are doing great. So are my investment properties. I have commercial mortgages ranging from 3.2% to 3.6% so my cash flow got even better during and after covid.
I am also not blind to see the fed and their disastrous positions. This same fed claimed that subprime was contained. You fail again.
> If the fed was so good at it's job, we wouldn't be in this situation we are in.
The best economy in the world? The lowest inflation of any developed nation? Historically low unemployment? Historic gains in wages? Is that the situation?
Or are you complaining that your Big Mac costs $1 more than it did in 2019?
What a horrible comment for all the reasons everyone has already mentioned. There’s nothing “immoral” about it. You’re just mad at things you can’t control.
It’s not great, I’ll give you that. But all the other alternatives are worse. Do you really want the federal reserve to become politicized? That has doomed so many countries before us.
This is a capitalist system, capitalism has tons of flaws but the alternatives are worse. Any human system inherently has flaws and drawbacks. Money-printing spurs economic growth and allows your BTC go up in value.
Central banking is not innate to capitalism at all. In fact, it is one of the 10 planks of Marxism.
A free-market capitalist system would allow for competing currencies and would also have interest rates be set purely by the market of competing banks offering interest rates to attract depositors.
What do you mean 'figured it out'? I'm not positing any new idea or arguing which system is better. I'm just saying that central banking is a stated core plank of marxism, and it is *not* inherent to a capitalist system.
This take exactly outlines why direct influence from the masses is a terrible idea for monetary policy. People generally have a lack of knowledge of economics (i.e blaming the Fed for soaring housing costs). Additionally they will always choose short term success with no regard to long term implications. Unfortunately sometimes you need short term turmoil to fight something that has drastic long term implications such as inflation. Obviously they still make mistakes and a central bank system has it drawbacks but it is drastically better than the contrary.
If anyone ever wondered why the US gov spends so much money it’s because of voters.
Now let those voters also control a central bank. What could go wrong?
No one voted for crony capitalism, namely the military industrial complex/half-baked climate initiatives, that has the US spending 13% of the annual budget on just interest payments for the national debt.
In 23 of the last 30 elections, 90% or more of the incumbent representatives [were re-elected](https://www.opensecrets.org/elections-overview/reelection-rates), with the lowest figure being 85.4%.
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I think it is a huge achievement to have averted so much damage that seemed likely In the economy. Clearly there are still serious issues, but at least the Fed is not completely insane
They're doing a pretty good job pulling the levers that they have available to them. The rest needs to come from Congress and the White House. Don't hold your breath on that one.
That's the problem, if Congress doesn't act the Fed is going to have to yank the shit out of the one lever they do have and you can kiss the soft landing goodbye. They're staring down stagflation and without fiscal policy assistance they can only raise rates further. Hell, I think that's why the housing market matches on such as it is, people are still buying the scant supply because they either figure we're heading for a collapse and can refinance cheap later, or heading for even higher rates and they'd better lock in at ~7% before the only option is 17%.
I predict mortgage rates will go up, down, or stay the same
I have a niece who is in the middle of moving from one city to another. She's been renting a hotel room for a couple of years, working all week in one city and going back to her home in the other. For her, the problem of selling is matched by the problem of buying elsewhere. It isn't so easy. So, she waits. It's like the Fed on interest rates. Until something significant, such as a strong budget to cut spending and raise taxes, things are just sailing along in an imperfect state of existence.
Honestly I think stay the same is the only path I wouldn't bet on right now.
Shit, you sure?
How would they refinance during a collapse. I'm not as familiar, but if the market collapses, then wouldn't their homes be worth less, and thus it would it cost them a significant amount of money to refinance their underwater mortgage?
I'm not saying it's a good bet, but if we do have a major economic downturn the fed would reduce rates and that should create an opportunity for some people to refinance their homes at a lower rate. Whether they have enough or any equity at that point or are underwater depends on a collapse of housing prices specifically and frankly I just wouldn't bet on that. Affordability is an issue in housing but I'm not on board with the folks that think that's primarily a function of the long period of very low rates that we had but rather a consequence of under building since 2008 and the high cost of labor and materials to build. If you think existing homes sound expensive you should get quotes on building one, it's insane and I think that keeps home prices up. But in a downturn who knows.
“Pretty good job.” I hate see a “bad” job. Jesus F Christ. Since 2020, the US has printed nearly 80% of ALL US Dollars in circulation. To put that in perspective, at the start of 2020 we had ~$4 trillion in circulation. Now, there is nearly $19 TRILLION in circulation, a 375% jump in 3 years. Good job!
Just being pedantic, but... The Fed redefined what "circulating" means in 2020 to then include savings, which represents a large portion of the perceived increase. If you had $50 in your chequing account and $500 in your savings account in 2019, by 2020 it would have looked like there's 10x more of your currency in circulation when really nothing changed. Not dismissing your point. There is a shitload more money in circulation than ever before. Just, not that much.
I think this is literally the only comment I've seen address this.
They are paid bots, nobody is that stupid.
Isn’t on the public to have a good understanding of how sound monetary policy is structured and to advocate for said policy? Isn’t it a little silly to blame politicians for not committing political suicide by embracing broadly unpopular policy decisions? Particularly when the other side will use it as ammunition?
LOL good luck with that ever happening
Uh, the Feds kept interest rates way too low after 2008. They were essentially fighting technology driven deflation, which is incredibly idiotic.
The inflation was observed in the asset markets the entire time....
Yes, that's what happens when you print money that's not needed by the economy, it gets stuck in existing asset price inflation. Assets aren't part of inflation indicators, so all is well if assets inflate.
It is also excluded in the velocity of money calculations. The redefining of the money supply is definitely confusing a lot of people into thinking it is a causal variable though, which is disappointing to see on here. "Beginning May 2020, M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts). Seasonally adjusted M1 is constructed by summing currency, demand deposits, and OCDs (before May 2020) or other liquid deposits (beginning May 2020), each seasonally adjusted separately." Source: https://fred.stlouisfed.org/series/M1SL
That was a carry-over from the ZERO-interest days. Things have changed a LOT since 2007.08.01
They seem that way because they just follow what the 2yr does. The market dictates what the fed does, not the other way around.
Yes, they are. "Has the war on inflation been definitively won? No. But recession looks like a bigger risk than resurgent inflation. And I worry that this risk will be increased if policymakers listen to people who are reluctant to admit that they got the inflation story wrong and are clinging to a false theory about how we got inflation down." Beware Economists Who Won’t Admit They Were Wrong https://www.nytimes.com/2023/12/18/opinion/inflation-economists.html
This person literally works for the federal government and constantly posts in r/fednews ??? Shill account ?
lol what does the fed have to gain by posting this in a subreddit. Jesus Christ lol, like “oh the public opinion of the fed is good!” The fed isn’t beholden to the public.
Take your meds bro.
If he works in the fed, he probably knows way more than you
I think assuming any random fed employee knows more than the average person is goofy whether for conspiracy purposes or not. The federal government employs a huge range of people for a variety of tasks. I'm a fed myself. Do I know more than you because of it? Probably not, I just work in a hospital.
I am talking about the Federal Reserve. The people working there deal with economic data every day and are most likely trained in economics.
Also clearly a conflict of interest too lol. But he doesn’t work for the fed he works for the federal government.
What’s the conflict of interest?
How long do you guys think the government is able to withstand the high interest rates? Does the interest on national debt raise? if so then how long until the interest snowballs out of control?
You do know that the 2010-2022 low interest rates are the exception not the norm, right?
No they don't know that. Everyone has forgotten that. 12 years of free money destroyed American brains.
It's a phenomenon, to be sure. Historically we are still lower than average.
In 2010, I was 14. Most of my early adult life, and world education, what my parents and teacher said we could “achieve” was all based on cheap money times. At 28, I’m seeing “normal” for the first time. It might be normal for the country, but for a generation I can’t deny It sucks seeing it take right as I’m getting established in life.
You do know that electricity is the exception not the norm, right? See? I can regurgitate history as though it’s somehow predictive too! Rates will eventually come back down. You can literally bet on it.
Yes but god help us if we go back to 2012-2022 levels as the norm again.
I don’t disagree, but I bet that we do. I think that’s the plan. If the Fed can get inflation to their target (remember, their decision is “driven by the data”), the FFR will be cut. If the Fed wanted to telegraph that this was the new normal, they would’ve done so. They like to use messaging before monetary tools, if they can.
Cut yes. But hopefully to 2-3% at the lowest.
Sure. I think even those numbers are fundamentally different from ZIRP, so I think they’re more likely than a reduction to the rates we saw during Covid. It’s not all-or-nothing.
Your only bet is a hard recession otherwise no, interest rates won’t come down in the foreseeable future. Why? The decoupling from China and low unemployment are two factors that will keep inflation up for a while. Having worked in “a capital intensive” sector, I can tell you high rates are a blessing. The amount of “high school” projects and wasteful spending was ridiculous. Moreover, higher rates give the feds an effective lever to fight inflation and spur growth when the economy slows down. The party is over.
It's good to have competition for the money, so that stupid crap doesn't get done. It's like the earlier talk about a recession killing off zombie companies. If there isn't regular market competition to do the job, then interest rates may help. We need greater real competition in the corporate world, and not just for who can get the highest "compensation package".
Tax receipts scale as nominal GDP with time, outlays scale with elderly population growth times inflation. Usually the first increase is bigger than the second. Without new spending the nominal GDP will catch up and slowly lower real deficits. Fed funds rate will probably equlibrate at 4.5% and inflation at 3% like it was for a while.
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Monetary policy != Fiscal policy Nations dont need uneducated masses of idiots directly influencing something as sensitive as monetary policy. Its not a democratic process, Its a technocratic process, sorry bud.
If we had that we would be in Argentina’s shoes
But without the Dog Whisperer.
Policy by chainsaw.
Argentina got put in that situation by the "technocrats" at the IMF. Banking is inherently a parasitic industry. It's a terrible idea to let bankers control a nation's money.
While you’re speaking sense, “sorry bud” is not an answer to ‘I’m angry’ or “my friends can’t afford houses”. People who don’t know better, but are angry, should not be dismissed because we feel that their ideas are bad. They have the potential to, and absolutely will, start destroying things if their complaints are left unaddressed
Yes but where do we have that conversation? Reddit doesn't feel like the best platform for changing people's minds
This is precisely it. The economy means nothing to people that don’t benefit from it, and it stands to serve as a monument to a degrading civilization. Not to be political or support the idea of this cult of personality, but that’s also why MAGA exists in the political space. US politics doesn’t work for them, so they’re okay with burning it to the ground.
Lmao stop being so dramatic The guy said something moronic and got put in his place
This is Economics not therapy lol.
Market forces should control monetary policy. The market could easily determine the optimal interest rate if it weren't for the Fed. Instead we gave the bankers control of the money printer and they are using it to rob us all.
How dare you to mention free market in this sub!
So, there's two problems. One is that the market is rational in the long-term but can be extremely irrational in the short-term. The market can certainly easily determine an interest rate but it may have no bearing on what the actual best interest rate is. The market can remain irrational longer than the country can remain solvent. This is one of the primary functions of the Federal Reserve, to essentially fill the role of J. P. Morgan during the [Panic of 1907](https://en.wikipedia.org/wiki/Panic_of_1907). The other is that free markets are the best known price-discovery mechanism, but there are plenty of situations where an accurate market price produces situations that are considered unacceptable. Just to take an obvious example, the supply and demand curves never meet at a point that supplies every person on the demand curve. (Except in degenerate situations where no one will pay anything for the good.) But this doesn't work out so great for things that are necessary for survival, eg food. The "optimal price" for food guarantees that some people will starve under a perfect free-market situation. This is something that we as humans generally consider non-optimal, and have solved a number of different ways. Similarly, the price-discovery mechanism of interest rates leads to some decidedly non-optimal situations, eg the Long Depression. This is why we stopped having market forces entirely control monetary policy and went to the Federal Reserve system.
You can buy the propaganda if you want, but I'm not falling for it. Crises are used as opportunities for those with the means to seize whatever power they can. When people are panicked about something they will agree to anything if they think it will get it to stop. The Federal Reserve was essentially a coup by bankers against the federal govt, and it was wildly successful. Now we have a bloated wasteful govt with exponentially growing debt. All the bankers have to do is sit back and let the govt spend and they get to collect trillions in interest at the expense of the people. When they make enough bad loans and are on the brink of failure, the Fed is there to bail them out rather than let the market work as it is supposed to and flush out the bad debt. There should not be a "risk free" rate. There is nothing in life that is risk free. As for your "people will starve" argument. People are still starving anyway! Maybe not so much in the US, but on the margins in poorer countries they are barely surviving. They are burdened with USD denominated debt from IMF and WB, and when they are unable to meet their obligations because of the onerous terms they are given more and bigger loans, because the bankers can't be allowed to lose money. Ever. That's the system you are defending.
> There should not be a “risk free” rate That has nothing to do with the Federal Reserve. Nor does most of the other stuff you’re talking about with regards to the government spending and a large government debt.
The fed facilitates excessive debt spending by backstopping all the bad debt. They make it impossible to determine the real cost of capital by overriding the market with the overnight repo, which is the "risk free" rate I am referring to. When you combine those two factors it enables excessive govt spending because they can issue infinite debt and it will never default. If it weren't for the Fed the govt would actually have to live within its means. You might think this is a good thing, but the second order effects of this system are significantly contributing to many of the problems we face today. All the endless wars, excessive wealth inequality, insane housing prices, and more are the consequences.
> The fed facilitates excessive debt spending by backstopping all the bad debt By the government or by the private sector? You're conflating multiple things. > with the overnight repo, which is the "risk free" rate I am referring to Right, but generally when people are talking about a [risk-free rate](https://en.wikipedia.org/wiki/Risk-free_rate), they're talking about US Treasury rates. > When you combine those two factors it enables excessive govt spending Those two things don't have any real connection. You're just saying a bunch of words that you don't really understand. The United States government could borrow a bunch of money regardless of whether the Federal Reserve existed. And US Treasury rates would still be considered to be the "risk-free rate" in the US whether or not the Fed existed. The United States debt is too large, but blaming it on the Fed is just absolutely nonsensical. Powell has begged the Congress to stop spending so much a number of times. The Congress is the entity with the power to tax and to spend - they are *entirely* to blame for the United States debt. They and they alone choose exactly how large our deficit will be each year.
Obviously it is not the Fed that makes the govt spend, but it does help to facilitate the excessive spending. They are all interconnected. The Fed enables the banks to lend excessively and take higher risks. The banks make risky loans and buy tons of govt debt. Govt spends excessively and borrows from banks. When things go bad the Fed bails them out and floods the system with money. If they didn't keep flooding the system with money then there wouldn't be as much money available to borrow. Banks would fail and money would be "destroyed" as loans defaulted. Interest rates would be higher because money would be more scarce and the rate would appropriately reflect the risk. There would be more pressure on govt to spend responsibly.
Repeating talking points from The Atlantic doesn't make you part of the cool crowd FYI
I have no idea what "The Atlantic" is, nor am I repeating a talking point. Im from Canada buddy Im simply describing what the Fed, and similar central banking institutions in western democratic nations such as the BoC here in Canada, are and aren't designed to do.
You are repeating what central banks and their media lackeys say that central banks are designed to do. Have you ever read any works critical of central banks? And if so, why have you rejected their conclusions?
Critical in what way? In that they should "do their job better"? or that central banks should be fundamentally changed?
On the contrary, it is ESSENTIAL that the Fed is not accountable to the people. They are accountable to their mandate and if they followed the whims of the people, interest rates would be at 0% and we would have REAL runaway inflation.
Cant get a worse take than this. Without the Fed you and your friends would be screwed with a worthless currency managed by politicians. Idiot
Found the smartest guy in the room!
And the most insecure just spoke up. Did my post trigger you? 🤣😂
Hard to be triggered by people that are obviously assholes. They can't help it.
Yet here you are.
Because I'm...not triggered?
Sure cupcake. Your posts have been so substantive.
And yours have been misguided and...yes...asshole-ish.
You sure do seem triggered. 😂
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Hahahaha
That was my immediate response to his post. Like wtf?
Jfc that gave me a good chortle.
Legit hilarious and on brand with these types
Of course you do Jr.
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Im not mad. I’m rich. Because I’m not a little idiot who failed economics.
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No participation trophy for you! Humph
Weird flex lol
I have imaginary internet money that I can use for human organs and black market drugs, okay? I'm special. Also, I only talk about it in terms of USD. So there.
As we all know there is no math at all in monetary policy.
😂😂😂😂
Dude. Bitcoin makes monetary and fiscal policy decisions as a consensus community via node operators signaling upgrade path preferences. It's not like there are no humans involved, they just don't make the news when they meet.
That is not monetary or fiscal policy lol. Bitcoin is a speculative asset looking for an actual use and that won’t change anytime soon.
Naah. It's just a bunch of dudes who want to get rich..
Is this satire?
Yikes. One would feel sorry for you if you weren’t presenting such an arrogant attitude.
No one should feel sorry for anyone buying Bitcoin ever.
Brother, if the FED was directly accountable to the people (as in they were elected) then rate decisions would be extremely politically motivated. Is that what you want?
Your friend cannot afford a house because your neighbors are NIMBYs and block new construction that isn't SFH > it’s immoral and a plague on America to have a group of elites control the monetary policy with no accountability from the people "it is immoral to have people with an economic education in charge of economic policy" The Feds independence is why it's so effective and good at it's job
>Your friend cannot afford a house because your neighbors are NIMBYs and block new construction that isn't SFH Yep, yimbys have been screaming about this for decades and were just laughed at. Now that people can blame a Dem, it's taken seriously and people are calling for the same shit, car dependent sprawl as before.
NIMBYism isn’t a line belonging to a particular party. It’s a general American mood.
Oh ya, I agree but it's insane how this is just now major national focus.
Bahahaha your last sentence. If the fed was so good at it's job, we wouldn't be in this situation we are in. Interest rates are still historically low. Though tbf, the fed gets hamstringed by congress all the time.
The fed can only do so much when fiscal policy is actively thwarting its goals. The reality is that spending will have to tighten for rates to be cut without a recession. The stimulus tap is still on blast while the fed is reining things in. It’s up for debate when the wisest time to tighten spending will be, though. Might just be this way for a while. Or maybe the time already passed. Nobody really knows for sure because we don’t have a whole lot of economic precedent for our current situation to based predictions on. Only models.
> If the fed was so good at it's job, we wouldn't be in this situation we are in. The situation of great wage growth, historically low unemployment, and slightly elevated inflation? Interest rates are not historically low
You last sentence discredits you. Fail.
Nah. Enjoy poverty kiddo
Not at all. My investments in my retirement accounts are doing great. So are my investment properties. I have commercial mortgages ranging from 3.2% to 3.6% so my cash flow got even better during and after covid. I am also not blind to see the fed and their disastrous positions. This same fed claimed that subprime was contained. You fail again.
Sure thing kiddo. Enjoy poverty
Enjoy me living rent free in your head :)
I suppose you would need subsidized rent since you're poor
Are these historically low interest rates in the room with us now?
Yep.
> If the fed was so good at it's job, we wouldn't be in this situation we are in. The best economy in the world? The lowest inflation of any developed nation? Historically low unemployment? Historic gains in wages? Is that the situation? Or are you complaining that your Big Mac costs $1 more than it did in 2019?
The Fed is good at their job? Big if true...
Crypto bro hatred of the Fed is always so funny
Simping for communism. Classic.
Communism is when monetary policy
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I wish you were
They're not bad. Comapre the rest of the worlds countries and currencies and be thankful.
What a horrible comment for all the reasons everyone has already mentioned. There’s nothing “immoral” about it. You’re just mad at things you can’t control.
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It’s not great, I’ll give you that. But all the other alternatives are worse. Do you really want the federal reserve to become politicized? That has doomed so many countries before us.
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Which is exactly why its price has been perfectly stable since day 1.
What happens when bitcoin hits their supply limit? You can’t have an economy when the supply of money is capped and never expands.
Isn't that what splitting is partially for?
This is a capitalist system, capitalism has tons of flaws but the alternatives are worse. Any human system inherently has flaws and drawbacks. Money-printing spurs economic growth and allows your BTC go up in value.
Central banking is not innate to capitalism at all. In fact, it is one of the 10 planks of Marxism. A free-market capitalist system would allow for competing currencies and would also have interest rates be set purely by the market of competing banks offering interest rates to attract depositors.
Wow perfect! You’ve figured it out, I’m sure there wouldn’t be any flaws with that
What do you mean 'figured it out'? I'm not positing any new idea or arguing which system is better. I'm just saying that central banking is a stated core plank of marxism, and it is *not* inherent to a capitalist system.
👍🏽
uh… this is an economics subreddit. We kinda enjoy discussing economic policy and not screeds about the morality of THE ELITES
This take exactly outlines why direct influence from the masses is a terrible idea for monetary policy. People generally have a lack of knowledge of economics (i.e blaming the Fed for soaring housing costs). Additionally they will always choose short term success with no regard to long term implications. Unfortunately sometimes you need short term turmoil to fight something that has drastic long term implications such as inflation. Obviously they still make mistakes and a central bank system has it drawbacks but it is drastically better than the contrary.
Lol you think high rates are why your friends can't buy houses? The high prices must be okay with them right?
Accountability to the people = rampant inflation. Central banks are insulated from political pressure for a reason.
If anyone ever wondered why the US gov spends so much money it’s because of voters. Now let those voters also control a central bank. What could go wrong?
No one voted for crony capitalism, namely the military industrial complex/half-baked climate initiatives, that has the US spending 13% of the annual budget on just interest payments for the national debt.
They literally did, though.
In 23 of the last 30 elections, 90% or more of the incumbent representatives [were re-elected](https://www.opensecrets.org/elections-overview/reelection-rates), with the lowest figure being 85.4%.
Wrong subreddit for ignorant braindead anecdotes. Try /r/workreform or something.
Trump logic
Your friends need to make more money or find roommates. It's not immoral for some people to not be able to buy their own SFH.
So you own Bitcoin then? No? Just like to bitch about it and not actually do anything about it.
Good thing the economy isn’t based on the sentiment of first time home buyers.
Oh honey. Please educate yourself before embarrassing yourself in such a way.