Sanrith Descartes
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Investing General Discussion
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Guest, it's time once again for the massively important and exciting FoH Asshat Tournament!
Go here and give us your nominations!Who's been the biggest Asshat in the last year? Give us your worst ones!
Sanrith Descartes
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Sanrith Descartes
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Jysin
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Powell needs to be honored with the title of patron saint of patience.
Fuck me, the stupidity of the questions in these hearings. 90% of it is just the senators grandstanding for sound bites of their own agendas and have fuck all to do with the Fed issues at hand. Then you have the ones that come in with pre-prepared questions and just read off script, despite the fact Powell has already answered the same question X other times in the same sitting.
I'd have thrown a chair at some of these idiots.
Fuck me, the stupidity of the questions in these hearings. 90% of it is just the senators grandstanding for sound bites of their own agendas and have fuck all to do with the Fed issues at hand. Then you have the ones that come in with pre-prepared questions and just read off script, despite the fact Powell has already answered the same question X other times in the same sitting.
I'd have thrown a chair at some of these idiots.
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Sanrith Descartes
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Mist
REEEEeyore
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I think it's more complicated because there isn't a direct line between the rates and the inflation. Rates having been too low for too long is definitely one reason that inflation was high, but so was the QE, the handouts, the lifestyle changes, a massive war throwing grain and oil prices out of whack, and flat out profiteering. Simply raising rates and pivoting to QT doesn't address any of the other sources of the inflation.
We could easily end up with a situation where millions lose their jobs, YOY CPI increases remain above 4 or even 5% due to the other proximal causes, and the government pivots back to QE and handouts to address it, which then causes inflation to start to rise again. Crashing the economy does not stop inflation if a populist government of either party starts tossing out money to counteract. This macro trap is explicitly called out in the Ray Dalio video that you linked recently.
Gravel
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This is supposedly one of our "expert" politicians on economics and banking.
The people in charge of this country are buffoons.
Yes, let's just blow up the USD and the economy, you dullard. I'm sure that'll do wonders for the American people.
We can't kick the can down the road forever. Eventually we have to pay for this shit, and the Fed actually seems to be doing it (albeit at a much slower pace than they should have).
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Sanrith Descartes
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A century or more of Macro-economic theory disagrees with you.
The relationship between interest rates and inflation is complex and multifaceted. In general, interest rates tend to rise as inflation increases, and fall as inflation decreases, but the exact nature of this relationship depends on a variety of economic and political factors.
When inflation is high, it erodes the value of money over time. In order to combat this erosion of value, central banks may raise interest rates in order to make borrowing more expensive, which can reduce consumer spending and investment. This reduction in spending and investment can help to slow down the rate of inflation, as there is less demand for goods and services.
On the other hand, when inflation is low, central banks may lower interest rates in order to stimulate economic activity. Lower interest rates make borrowing cheaper, which can encourage consumers and businesses to spend and invest more, thereby stimulating economic growth.
In addition to these general trends, there are many other factors that can affect the relationship between interest rates and inflation. For example, if investors believe that inflation will continue to rise in the future, they may demand higher interest rates in order to compensate for the expected loss of purchasing power of their money. Similarly, if central banks are perceived to be behind the curve in controlling inflation, they may need to raise interest rates more aggressively in order to restore confidence in the economy.
Overall, the relationship between interest rates and inflation is complex and dynamic, and depends on a variety of economic and political factors. While higher interest rates can help to combat inflation in the short term, they can also have negative effects on economic growth and investment. As such, central banks need to carefully balance the competing demands of inflation control and economic growth in order to maintain a stable and sustainable economy.
When inflation is high, it erodes the value of money over time. In order to combat this erosion of value, central banks may raise interest rates in order to make borrowing more expensive, which can reduce consumer spending and investment. This reduction in spending and investment can help to slow down the rate of inflation, as there is less demand for goods and services.
On the other hand, when inflation is low, central banks may lower interest rates in order to stimulate economic activity. Lower interest rates make borrowing cheaper, which can encourage consumers and businesses to spend and invest more, thereby stimulating economic growth.
In addition to these general trends, there are many other factors that can affect the relationship between interest rates and inflation. For example, if investors believe that inflation will continue to rise in the future, they may demand higher interest rates in order to compensate for the expected loss of purchasing power of their money. Similarly, if central banks are perceived to be behind the curve in controlling inflation, they may need to raise interest rates more aggressively in order to restore confidence in the economy.
Overall, the relationship between interest rates and inflation is complex and dynamic, and depends on a variety of economic and political factors. While higher interest rates can help to combat inflation in the short term, they can also have negative effects on economic growth and investment. As such, central banks need to carefully balance the competing demands of inflation control and economic growth in order to maintain a stable and sustainable economy.
The economist John Maynard Keynes developed a theory of economics that emphasized the role of government intervention in stabilizing the economy. According to Keynesian theory, the relationship between interest rates and inflation is more nuanced than a simple cause-and-effect relationship.
In Keynesian economics, interest rates are seen as a tool that can be used to stimulate or slow down economic growth. When the economy is in a recession, the government can lower interest rates in order to encourage businesses and consumers to borrow and spend more, which can stimulate economic activity and reduce unemployment.
However, Keynesian economists also recognize that lowering interest rates can lead to inflation if it leads to excessive borrowing and spending. In order to prevent inflation from getting out of control, the government may need to raise interest rates again in order to slow down economic growth and cool off inflation.
According to Keynesian theory, the relationship between interest rates and inflation is therefore a cyclical one. The government can use interest rates to stimulate economic growth in the short term, but if inflation starts to rise, it may need to raise interest rates again in order to prevent the economy from overheating.
Keynesian economists also emphasize the importance of government spending in stabilizing the economy. In times of recession, the government can use deficit spending to inject money into the economy and create jobs. This can help to stimulate economic growth and reduce unemployment, which in turn can help to keep inflation under control.
Overall, the Keynesian view of the relationship between interest rates and inflation emphasizes the importance of government intervention in stabilizing the economy. By using interest rates and government spending to manage economic growth and inflation, the government can help to create a stable and sustainable economy that benefits all members of society.
In Keynesian economics, interest rates are seen as a tool that can be used to stimulate or slow down economic growth. When the economy is in a recession, the government can lower interest rates in order to encourage businesses and consumers to borrow and spend more, which can stimulate economic activity and reduce unemployment.
However, Keynesian economists also recognize that lowering interest rates can lead to inflation if it leads to excessive borrowing and spending. In order to prevent inflation from getting out of control, the government may need to raise interest rates again in order to slow down economic growth and cool off inflation.
According to Keynesian theory, the relationship between interest rates and inflation is therefore a cyclical one. The government can use interest rates to stimulate economic growth in the short term, but if inflation starts to rise, it may need to raise interest rates again in order to prevent the economy from overheating.
Keynesian economists also emphasize the importance of government spending in stabilizing the economy. In times of recession, the government can use deficit spending to inject money into the economy and create jobs. This can help to stimulate economic growth and reduce unemployment, which in turn can help to keep inflation under control.
Overall, the Keynesian view of the relationship between interest rates and inflation emphasizes the importance of government intervention in stabilizing the economy. By using interest rates and government spending to manage economic growth and inflation, the government can help to create a stable and sustainable economy that benefits all members of society.
Big Phoenix
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Imagine a government that instead unshackled the economy of endless regulation for it to easily churn out goods and services instead of relying choking the money supply to combat inflation.
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Sanrith Descartes
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Mostly agree, but that doesnt change the fact that some of the theories held up for a long time. Stagflation was impossible per Keynes and he was right for like 50 years. Until he was wrong. Phillips curve the same thing. It held up for a long time.
Sanrith Descartes
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I remember a president trying to unshackle business from the gubmint. It seems like only a few years ago.
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Asshat wormie
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Some theories working until they don't means you can't use previously successful theories to explain the now or to predict the future.
Mist
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Did you even read what you just pasted from ChatGPT?
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Mist
REEEEeyore
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Spent more money and gave out more handouts than anyone in history, and it wasn't even close.
Also repeatedly and directly threatened the Fed to keep interest rates artificially low.
Sanrith Descartes
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The way you pull spending cash out of the economy to counter inflation is to raise interest rates. It lowers the borrowing and increases the savings. Both of these decrease spending and bring prices down.
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Jysin
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Really dont want to derail into politics, but it is relevant. Both parties are fucking retarded, but I was frothing at the stupidity on display at the Powell testimony today when multiple Repubs took jabs at Powell and policy and completely and entirely blaming the Dems. I am sat here thinking, "what kind of gaslighting horseshit is this nonsense!?" Who was it again that elected JPow to Fed Chairman as well as were in power when the multi-trillion dollar money printer got turned on? How the fuck is this now a "liberal" blame to take?
Fucking term limit every last one of the senate. Boot out every decrepit senile one of them across all parties.
/end rant
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Mist
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Oh yeah we gotta get rid of the old fucks. People who are too old to have to deal with the consequences of their actions cannot be allowed to govern.
Mist
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Yes, that's true. But this is shit we should have been doing from 2015 onward, not doing now, 8 years and a gazillion spending bills and handouts later.
Sanrith Descartes
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