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does inflation really make rate rises?
or is it the chicken or the egg?
technology makes us more productive,back then I read it would take almost one month to build a truck in China,now look at them.
back then they wll tear apart an old Deere tractor and make their own,now Deere has a factory there.
But then why are we paying 30-55 K for a car when back then a $3k car is a lot of money,me think because there is more heathcare cost in a car than steel.
does inflation really make rate rises?
or is it the chicken or the egg?
technology makes us more productive,back then I read it would take almost one month to build a truck in China,now look at them.
back then they wll tear apart an old Deere tractor and make their own,now Deere has a factory there.
But then why are we paying 30-55 K for a car when back then a $3k car is a lot of money,me think because there is more heathcare cost in a car than steel.
Yes.
Hyper-simplified............
Relative to the ten year bond as inflation sets in commodity prices increase and some portion of bond buying appetite rotates into plays offering commodity price exposure*. The softening demand for bonds causes prices to drop and yields to increase - ergo bits like fixed rate mortgage APR/APY increase.
More or less simultaneously The Fed. will note commodity price upticks but typically not bump-up the discount rate until labor costs increases begin to outstrip productivity gains.
*There's lots of money to be made in inflationary expansions.
does inflation really make rate rises?
or is it the chicken or the egg?
technology makes us more productive,back then I read it would take almost one month to build a truck in China,now look at them.
back then they wll tear apart an old Deere tractor and make their own,now Deere has a factory there.
But then why are we paying 30-55 K for a car when back then a $3k car is a lot of money,me think because there is more heathcare cost in a car than steel.
Yes, as much as people complain about the Fed, it has actually done a pretty good job at promoting economic stability ever since Volker, and to its credit in the period 2009-15, the Fed acted when congress refused to respond to economic challenges. In particular I think Bernanke to a lesser extent Yellin were quite good.
Where I disagree with them is that they were so timid in raising rates in supposedly "good times" from 2016-19. Apparently "good" is not "good" enough, to such an extent I can't imagine what ever will be. So they have essentially created a new economic paradigm that inextricably ties the United States economy to the markets but we do not have a system where those gains are equitably distributed. The Fed can juice the markets and fiddle with the money supply but it is not a political organization with the power to take care of constituencies' problems. In this case, the vast majority of everyone who is not so invested in the market they can live on it.
We can no longer have a healthy economy without a healthy market, e.g. like the 1950s-60s which was a time of low growth for the markets but good for average workers. Instead, what we do and probably always will have is a struggling or "soft" economy, very unequal, while having a high market. So the market can't lose or else we all lose. But the people and the overall economy can lose the market doesn't care. Witness the covid-19 effects. Entire sectors of the economy are still for all intents and purposes not in operation, or operating at a fraction of full capability. The corresponding jobs just disappeared indefinitely. For example, for some of my individual stock holdings the companies continue to report sales and volume numbers that indicate a recessionary climate. Yet the stock price goes up and up and up; the market does not even register that problem.
My favorite individual stock for illustrating this is SBUX, a company I like and keep up closely with. They reported a sales DECLINE in Q1 2021 that tracks BEHIND the CEO's conservative estimates of recovery from the Q3 2020 earnings call. But the stock only dropped 5% for about 5 days before rising 20% in the last 2 months. This is with far more of their stores still shuttered than they expected. In summer 2020, they expected to have 90% of their U.S. stores open by this point, they're way behind that, looking at permanently closing 400 stores. Yet the stock is overperforming the optimistic projections analysts expected a month ago! It's like the Tesla of the restaurant stocks. The price is driven completely by expectations of SBUX dominating its market to an insane degree 5 years from now.
Last edited by redguard57; 04-20-2021 at 11:11 PM..
Yes, as much as people complain about the Fed, it has actually done a pretty good job at promoting economic stability ever since Volker, and to its credit in the period 2009-15, the Fed acted when congress refused to respond to economic challenges. In particular I think Bernanke to a lesser extent Yellin were quite good.
Where I disagree with them is that they were so timid in raising rates in supposedly "good times" from 2016-19. Apparently "good" is not "good" enough, to such an extent I can't imagine what ever will be. So they have essentially created a new economic paradigm that inextricably ties the United States economy to the markets but we do not have a system where those gains are equitably distributed. The Fed can juice the markets and fiddle with the money supply but it is not a political organization with the power to take care of constituencies' problems. In this case, the vast majority of everyone who is not so invested in the market they can live on it.
We can no longer have a healthy economy without a healthy market, e.g. like the 1950s-60s which was a time of low growth for the markets but good for average workers. Instead, what we do and probably always will have is a struggling or "soft" economy, very unequal, while having a high market. So the market can't lose or else we all lose. But the people and the overall economy can lose the market doesn't care. Witness the covid-19 effects. Entire sectors of the economy are still for all intents and purposes not in operation, or operating at a fraction of full capability. The corresponding jobs just disappeared indefinitely. For example, for some of my individual stock holdings the companies continue to report sales and volume numbers that indicate a recessionary climate. Yet the stock price goes up and up and up; the market does not even register that problem.
My favorite individual stock for illustrating this is SBUX, a company I like and keep up closely with. They reported a sales DECLINE in Q1 2021 that tracks BEHIND the CEO's conservative estimates of recovery from the Q3 2020 earnings call. But the stock only dropped 5% for about 5 days before rising 20% in the last 2 months. This is with far more of their stores still shuttered than they expected. In summer 2020, they expected to have 90% of their U.S. stores open by this point, they're way behind that, looking at permanently closing 400 stores. Yet the stock is overperforming the optimistic projections analysts expected a month ago! It's like the Tesla of the restaurant stocks. The price is driven completely by expectations of SBUX dominating its market to an insane degree 5 years from now.
Why do you believe The Fed. should have increased the discount rate more than it did from '16-'19 when yearly inflation per that run averaged 2.1%? For reference The Nov. 2015 DR was .75% and by Dec. 2018 it was 3.0% and stayed there until mid year by the ned of '19 it was 2.25%. I'm not sure the Fed could have handled that span of time any better.
Why do you believe The Fed. should have increased the discount rate more than it did from '16-'19 when yearly inflation per that run averaged 2.1%? For reference The Nov. 2015 DR was .75% and by Dec. 2018 it was 3.0% and stayed there until mid year by the ned of '19 it was 2.25%. I'm not sure the Fed could have handled that span of time any better.
It was after the December 2018 market palpitation that I think they freaked out. If you look at the chart, it does appear that they were trying to conservatively stair-step back to normal until that point.
I mean, I think everything will be alright until a shoe drops that they don't have the tools to respond to, or cannot push the pedal any closer to the floor. It's already on the floor.
I am so glad the arm chair monday morning quarterbacking economist wanna bees here know so much more about what should have been done than some of the most brilliant minds on the subject including the fed.
Ya’ll should be in the Forbes 400 already with all of this figured out ..
Are you saying the Fed and other central banks are better than we are,except they draw a paycheck biweekly and have the degrees to back up what they said.
I finally figured out,lowering interest rate is all they know to solve crisis,like the Pavlov experiment,like taking 2 aspiriins .
you tell me what else is in their medicine cabinet?
If they dont,Wall Street or the WHITE House will beg them to do so,like do it now before we see the whites of an ugly recession?
lower interest to urge more spending,SPEND,SPEND,SPEND as if we have never thought of doing so,what a briilliant idea,need we be reminded we have not spent enough,30 year mortgage,equity loan,MC,V,AMEX,DISCOVERY and MACY,BBY,AMZN credit cards ,student loan,yacht,auto,appliances all bought with credit,so lets spend more to bail each other out,what a brilliant idea,while those who live on meager fixed income have to go looking for quarters and dimes between the sofa cushions and old clothes pockets.
WOW,I found a quarter in my old coin purse,and a dime under my toaster!
Are you saying the Fed and other central banks are better than we are,except they draw a paycheck biweekly and have the degrees to back up what they said.
I finally figured out,lowering interest rate is all they know to solve crisis,like the Pavlov experiment,like taking 2 aspiriins .
you tell me what else is in their medicine cabinet?
If they dont,Wall Street or the WHITE House will beg them to do so,like do it now before we see the whites of an ugly recession?
lower interest to urge more spending,SPEND,SPEND,SPEND as if we have never thought of doing so,what a briilliant idea,need we be reminded we have not spent enough,30 year mortgage,equity loan,MC,V,AMEX,DISCOVERY and MACY,BBY,AMZN credit cards ,student loan,yacht,auto,appliances all bought with credit,so lets spend more to bail each other out,what a brilliant idea,while those who live on meager fixed income have to go looking for quarters and dimes between the sofa cushions and old clothes pockets.
WOW,I found a quarter in my old coin purse,and a dime under my toaster!
Yes I am saying the fed and their consultants are way ahead of you in knowledge...it is like comparing a successful pro in anything to a wanna be amateur
It was after the December 2018 market palpitation that I think they freaked out. If you look at the chart, it does appear that they were trying to conservatively stair-step back to normal until that point.
I mean, I think everything will be alright until a shoe drops that they don't have the tools to respond to, or cannot push the pedal any closer to the floor. It's already on the floor.
The Fed. is implying a DR of .25% right now....not zero the pedal is not on the floor.
In event of a downturn The Fed. has many arrows in the quiver.
A. Take the DR to 0% or even less temporarily. After recent Swiss moves into minus territory we know it can be done.
B. Decrease minimum bank lending ratios (rrr).
C. Soften bank cash reserve/balance sheet requirements....FWIIW B. and C. are related but not the same.
D. Work with The US Treasury and President to weaken the dollar if needed. Or the opposite.
E. Direct or indirect acquisition of bad paper.
F. Quicker moves into private areas of concern..........read - don't allow another Lehman Brothers type mega-collapse or at least guide a failing financial co./bank through an orderly demise. FWIIW The Fed. has action plans in place to do this.
G. QEs, bond yield manipulation etc. are proven to work at least fairly well.
i am so glad the arm chair monday morning quarterbacking economist wanna bees here know so much more about what should have been done than some of the most brilliant minds on the subject including the fed.
Ya’ll should be in the forbes 400 already with all of this figured out ..
+1.
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