Economy tumbling as the Fed raises rates

[Bugsy McGurk]

Markets in the tank, recession looming, all because the Fed hikes rates and says it will hike them some more…

Most CEOs are bracing for a recession

The mood in the C-Suite is darkening.

www.cnn.com

Why? Because conventional wisdom holds that raising interest rates lowers inflation. Seems pretty daffy to me. Inflation has stayed steady but, at what cost do we supposedly fight inflation? Causing economic misery is better than inflation?

Strange times.

 

[PNWest]

Markets in the tank, recession looming, all because the Fed hikes rates and says it will hike them some more…

Most CEOs are bracing for a recession

The mood in the C-Suite is darkening.

www.cnn.com

Why? Because conventional wisdom holds that raising interest rates lowers inflation. Seems pretty daffy to me. Inflation has stayed steady but, at what cost do we supposedly fight inflation? Causing economic misery is better than inflation?

Strange times.

Short term pain in exchange for long term gain. Historically this worked well.

Unemployment is only 3.6 percent. Raising rates will make it more expensive for businesses to borrow money to expand. This will lead to less hiring and a rise in unemployment as well as less demand for goods and services. This will allow businesses to pay less for employees which will allow them to build at lower costs. This will lower prices which reduces inflation. And then the cycle will begin again.

Note: Because of the ultra-low interest rates that have been in place for the last decade conservative investors (typically older retirees) have taken it in the shorts while stock investors have cleaned up. Shoe is on the other foot now. There will almost certainly come a time when interests rates over-shoot where they need to be. Back in the early 1980s 30 year T-Bills were paying near 13 percent. Inflation was raging at nearly 20 percent at that time but the high interest rates soon came down and savy T-Bill investors scored 13% on their investments for over 25 years. That beat the market by a long shot at what is considered to be ZERO risk (In economic risk calculations T-Bills are considered to be risk free).

As I have gotten older I have been waiting for an opportunity like that to present itself again. I'll go heavily into T-Bills if rates get up that high again.

In the mean time Joe Biden is the one that will pay the price for the stock market performance and inflation. The buck stops with him. If Biden doesn't get it back on track he'll be a one-termer like hid predecessor.

 

[Bugsy McGurk]

Short term pain in exchange for long term gain. Historically this worked well.

Unemployment is only 3.6 percent. Raising rates will make it more expensive for businesses to borrow money to expand. This will lead to less hiring and a rise in unemployment as well as less demand for goods and services. This will allow businesses to pay less for employees which will allow them to build at lower costs. This will lower prices which reduces inflation. And then the cycle will begin again.

Note: Because of the ultra-low interest rates that have been in place for the last decade conservative investors (typically older retirees) have taken it in the shorts while stock investors have cleaned up. Shoe is on the other foot now. There will almost certainly come a time when interests rates over-shoot where they need to be. Back in the early 1980s 30 year T-Bills were paying near 13 percent. Inflation was raging at nearly 20 percent at that time but the High interest rates soon came down and savy T-Bill investors scored 13% on their investments for over 25 years. That beat the market by a long shot at what is considered to be ZERO risk (In economic risk calculations T-Bills are considered to be risk free).

As I have gotten older I have been waiting for an opportunity like that to present itself again. I'll go heavily into T-Bills if rates get up that High again.

In the mean time Joe Biden is the one that will pay the price for the stock market performance and inflation. The buck stops with him. If Biden doesn't get it back on track he'll be a one-termer like hid predecessor.

That’s another strange aspect to it.

Biden has no say in rates - that’s up to the Fed - but he takes the political hit when the Fed does what it does.

Weird.

 

[PNWest]

That’s another strange aspect to it.

Biden has no say in rates - that’s up to the Fed - but he takes the political hit when the Fed does what it does.

Weird.

life ain't fair - ask jimmy carter

 

[PNWest]

That’s another strange aspect to it.

Biden has no say in rates - that’s up to the Fed - but he takes the political hit when the Fed does what it does.

Weird.

Check out the other post on this subject - Amazing how the short bussers clamor for my input. They'd love to have me grace their posts with my brilliance.

I'm spread pretty thin living in so many of their heads at any given time - HAHAHAHAHA

 

[Spamature]

Markets in the tank, recession looming, all because the Fed hikes rates and says it will hike them some more…

Most CEOs are bracing for a recession

The mood in the C-Suite is darkening.

www.cnn.com

Why? Because conventional wisdom holds that raising interest rates lowers inflation. Seems pretty daffy to me. Inflation has stayed steady but, at what cost do we supposedly fight inflation? Causing economic misery is better than inflation?

Strange times.

That's the way it works.

You slow the economy.
You slow inflation.

Carter raised the rates, but he only held the office long enough to take the blame.

A Reagan inherited that plan, and he got to take the credit for the "economic miracle" that came from the misery Carter was blamed for.

 

[Bugsy McGurk]

Trump mercilessly badgered and threatened the Fed against raising interest rates when he was president. He’s silent about it now, of course.

Jerome Powell Has The Most Humiliating Job In America

No Federal Reserve chair has ever been ridiculed publicly as much as Powell has. And that's despite the central bank's unprecedented efforts to save the American economy.

www.npr.org

Should Biden do the same?

 

[SW48]

Markets in the tank, recession looming, all because the Fed hikes rates and says it will hike them some more…

Most CEOs are bracing for a recession

The mood in the C-Suite is darkening.

www.cnn.com

Why? Because conventional wisdom holds that raising interest rates lowers inflation. Seems pretty daffy to me. Inflation has stayed steady but, at what cost do we supposedly fight inflation? Causing economic misery is better than inflation?

Strange times.

Seems like this is inflation due to supply chain issues, shortages, and labor shortages and not traditional inflation.

 

[SW48]

Trump mercilessly badgered and threatened the Fed against raising interest rates when he was president. He’s silent about it now, of course.

Jerome Powell Has The Most Humiliating Job In America

No Federal Reserve chair has ever been ridiculed publicly as much as Powell has. And that's despite the central bank's unprecedented efforts to save the American economy.

www.npr.org

Should Biden do the same?

yes

 

[worldlymrb]

I'll go heavily into T-Bills if rates get up that High again.

It took 20% interest rates to tame the double digit inflation rate of the 70s and that’s when USDebt was counted in billions instead of trillions.

USGOV has been enjoying 0% interest for the last 10 years. A 20% interest rate would add almost $10T in interest each year which would have to be printed by the Federal Reserve causing even more inflation.

Unfortunately we are now in a death spiral which is why the Davos groupies at the WEF have been preaching the “Great Reset” where everybody will own nothing, eat bugs and be happy… or else.

 

[PNWest]

It took 20% interest rates to tame the double digit inflation rate of the 70s and that’s when USDebt was counted in billions instead of trillions.

USGOV has been enjoying 0% interest for the last 10 years. A 20% interest rate would add almost $10T in interest each year which would have to be printed by the Federal Reserve causing even more inflation.

Unfortunately we are now in a death spiral which is why the Davos groupies at the WEF have been preaching the “Great Reset” where everybody will own nothing, eat bugs and be happy… or else.

Oh Gheezeus K Kryst - the world is going to end. Morons have been preaching that sh!t since the days of well Jesus Cristy. Hey worldly - we're all still here. And I suspect that the world ain't going to come to and end just because interests rates get high. Truth be told they SHOULD have started raising them back in Obama's second term after his policies saved the country from a second republican caused great depression. They SHOULD have raised them during Orange Foolius's term prior to COVID. Now they have no choice. Stock up on your survivalist crap and build yourself a bomb shelter for you and your paranoid pals if you think the end is near.

 

[Bugsy McGurk]

Seems like this is inflation due to supply chain issues, shortages, and labor shortages and not traditional inflation.

It does have a different flavor to it. In any event, I question the “remedy” of hiking interest rates in today’s economic climate.

 

[Bugsy McGurk]

Oh Gheezeus K Kryst - the world is going to end. Morons have been preaching that sh!t since the days of well Jesus Cristy. Hey worldly - we're all still here. And I suspect that the world ain't going to come to and end just because interests rates get High. Truth be told they SHOULD have started raising them back in Obama's second term after his policies saved the country from a second republican caused great depression. They SHOULD have raised them during Orange Foolius's term prior to COVID. Now they have no choice. Stock up on your survivalist crap and build yourself a bomb shelter for you and your paranoid pals if you think the end is near.

Of course, rather than encourage rate hikes during his term, Trump relentlessly browbeat the Fed into keeping them low. Keeping them low was optimal for short term economic growth, and that’s all Trump cared about. Himself. Not the nation.

 

[PNWest]

Of course, rather than encourage rate hikes during his term, Trump relentlessly browbeat the Fed into keeping them low. Keeping them low was optimal for short term economic growth, and that’s all Trump cared about. Himself. Not the nation.

Didn't Obama do exactly the same in his second term? And where was Biden in his first year when the economy was going gangbusters?

 

[Bugsy McGurk]

Didn't Obama do exactly the same in his second term? And where was Biden in his first year when the economy was going gangbusters?

Nope. No one has ever interfered with the Fed like Trump. What’s more, Obama inherited a cratered economy followed by modest, yet consistent growth. Trump inherited that growing economy. Dunno what your question is as to Biden.

 

[PNWest]

Nope. No one has ever interfered with the Fed like Trump. What’s more, Obama inherited a cratered economy followed by modest, yet consistent growth. Trump inherited that growing economy. Dunno what your question is as to Biden.

The economy was in pretty decent shape by the time of Obama's second term and interest rates SHOULD have been raised somewhere between 2012 and 2016 - they were not. That's Obama's watch.

It was still in decent shape up until around March of 2020 and interest rates should have risen then also. COVID changed things and interest rates should have been and were LOW during 2020.

Again the economy picked up steam by early 2021 and the signs of inflation were on the horizon. The Fed ignored them for too long. That's on Biden's watch.

As the greatest and most impartial poster here I have an obligation to ALWAYS tell it like it is. And I do.

Oh and as far as Jimmy Carter is concerned - he didn't lose because of the economy. He lost because he was too big of a p*ssy to get tough on Iran for seizing our citizens. He should have given them a week to release them unharmed and if they didn't started bombing the bastards. Had he done that we wouldn't have any problems with Fundamentalist Islam today because they would have been afraid of us and found it easier and safer to just ignore the west . 9/11 came about because Jimmy Carter didn't remove the threat when it was small and localized.

 

[worldlymrb]

world ain't going to come to and end just because interests rates get High. Truth be told they SHOULD have started raising them back in Obama's second term

I didn't say the world was going to end because of your greed for high-interest rates. I was just pointing out the fact USGovt can't afford to pay high-interest rates and would have to print more money to do such, which would increase inflation in a vicious cycle that ends with the "Great Reset" in which everybody owns nothing and everybody is happy.

See! Happy Ending!

 

[PNWest]

Raising interest rates after the housing bubble burst which caused the great financial crisis of 2008 would have been the right thing to do instead of lowering interest rates to zero and QE? I don't disagree with your premise but am interested in your theory why that would have been the right thing to do?

I didn't say the world was going to end because of your greed for High-interest rates. I was just pointing out the fact USGovt can't afford to pay High-interest rates and would have to print more money to do such, which would increase inflation.

By 2012 the economy had bounced back pretty well and was definitely on an upwards trajectory. That's when rates should have slid back to a more normal level (historically around 4% give or take)

What you refer to as my greed for high interest rates is non-existent. I'll invest where I expect to get the best results - just like you would if you had money to invest.


You obviously don't know much about economics. Go back and look at what your God Reagan did in the early 80s when faced with high inflation. The Fed jacked up interest rates to 13% on 30yr T-Bills when inflation was running closer to 20% - what was the result. It caused a pretty big recession which brought inflation down to the range that they target (2-3%). And inflation stayed low until the dot com bubble.

 

[worldlymrb]

The Fed jacked up interest rates to 13% on 30yr T-Bills when inflation was running closer to 20% - what was the result. It caused a pretty big recession which brought inflation down to the range that they target (2-3%). And inflation stayed low until the dot com bubble.

That's my point! It took raising rates to double digits and a BIG RECESSION to lower the double-digit inflation that plagued the late 70s.

The current Fed fund rate is 0.500% after just being raised and economic indicators are already screaming recession.

What do you think 5.0% interest rates will do let alone the 13-20% rates it took last time to beat inflation?

 

[PNWest]

That's my point! It took raising rates to double digits and a BIG RECESSION to lower the double-digit inflation that plagued the late 70s.

The current Fed fund rate is 0.500% after just being raised and economic indicators are already screaming recession.

What do you think 5.0% interest rates will do let alone the 13-20% rates it took last time to beat inflation?

I don't know how high interest rates will have to get. I seriously doubt if they will get anywhere near 13% though. My predictions on economic issues like this are just a guess guided by previous history. They are no better than any of the so-called pundits that pollute the financial news networks. If you want to understand the world around you then you should understand this quote:

"Things are not as bad as they seem. Things are not as good as they seem" - PNWest

Things always look better or worse than they turn out to be in the long run.