Are Rate Increases the Right Response to Inflation?

[What Would Jesus Do?]

If the main drivers of inflation are pandemic disruptions of supply chains, war-related spikes in energy costs, war and climate related increases in food costs, and rampant profiteering in certain sectors, tell me how higher rates make sense as a "solution."

Sure, higher rates are likely to slow growth, reduce employment, and dampen demand. But rate changes don't actually address any of the real problems.

The real problems should be addressed by sensible federal policies. Instead we have gridlock. If you are one of those who has been a cheerleader for gridlock, you might want to rethink.

 

[The Tradition]

Core inflation is caused by an excessive supply of money. Interest rates are the tool of choice for reducing the money supply.

 

[SalAunese]

A great number of people are heavily leveraged at this time as well. The fed needs to walk a tightrope here

 

[luvmyhawks]

Core inflation is caused by an excessive supply of money. Interest rates are the tool of choice for reducing the money supply.

True. However, I do think this new, fun little tool they have discovered known as quantitative easing and tightening has become their new favorite. The fed better start unwinding their balance sheet.

 

[What Would Jesus Do?]

Core inflation is caused by an excessive supply of money. Interest rates are the tool of choice for reducing the money supply.

An ECON 101 truism that ignores the current actual causes of inflation.

 

[86Hawkeye]

Core inflation is caused by an excessive supply of money. Interest rates are the tool of choice for reducing the money supply.

I’m not certain that rate increases are the answer when we have a goods supply problem.

 

[soybean]

Curbing inflation in an economy the size of the United States is a difficult task in normal times, now add to it the fact that the world is on a price increase binge and you begin to understand the enormity of the problem. This will be without a doubt the toughest challenge the Fed has faced in a long time. It would not surprise me to see that this current unfolding event will end up doing more damage than the 2008-2009 near catastrophy did. We'll see soon enough.

 

[binsfeldcyhawk2]

Curbing inflation in an economy the size of the United States is a difficult task in normal times, now add to it the fact that the world is on a price increase binge and you begin to understand the enormity of the problem. This will be without a doubt the toughest challenge the Fed has faced in a long time. It would not surprise me to see that this current unfolding event will end up doing more damage than the 2008-2009 near catastrophy did. We'll see soon enough.

I share your pessimism....but I'm the board pessimist

 

[onlyTheObvious]

Need laws on borrowing.

you don’t have 20% down you don’t get to buy house. get rid of mortgage deduction. Everybody bakes this in to convince you that the price works

you don’t have 25% down you don’t get to buy a car.

save up or downsize your “wants”.

we would see newer homes downsized in amenities and pricing because developers would have to adjust or find another career.

these lenders need to fry this time. Too stupid to learn a god damn thing from just a decade or two ago.

 

[seminole97]

An ECON 101 truism that ignores the current actual causes of inflation.

You conflate the symptoms with the actual cause.

 

[What Would Jesus Do?]

Curbing inflation in an economy the size of the United States is a difficult task in normal times, now add to it the fact that the world is on a price increase binge and you begin to understand the enormity of the problem. This will be without a doubt the toughest challenge the Fed has faced in a long time. It would not surprise me to see that this current unfolding event will end up doing more damage than the 2008-2009 near catastrophy did. We'll see soon enough.

Congress has lots more tools it could use, than the Fed does. It is a genuine failure of governance that we leave this up to the Fed.

 

[Big Hawk D-Port]

An ECON 101 truism that ignores the current actual causes of inflation.

You cannot ignore an economic axiom because you disagree with it politically.

America thought we could shut down the economy and feel no pain from it. The reality is that the credit card bill is coming due, finally. Eventually you have to take your medicine.

 

[soybean]

Need laws on borrowing.

you don’t have 20% down you don’t get to buy house. get rid of mortgage deduction. Everybody bakes this in to convince you that the price works

you don’t have 25% down you don’t get to buy a car.

save up or downsize your “wants”.

we would see newer homes downsized in amenities and pricing because developers would have to adjust or find another career.

these lenders need to fry this time. Too stupid to learn a god damn thing from just a decade or two ago.

Your prescription would all but guarantee not just a recession, but another depression instead.

 

[soybean]

Congress has lots more tools it could use, than the Fed does. It is a genuine failure of governance that we leave this up to the Fed.

Pray tell, what could Congress do?

 

[slapchop]

Congress has lots more tools it could use, than the Fed does. It is a genuine failure of governance that we leave this up to the Fed.

what do you suggest they do? this was caused by monetary policy. anything congress does will be counterproductive in the long run.

 

[The Tradition]

Pray tell, what could Congress do?

Congress could do lots of things to restrict the money supply. They could write a bunch of laws that stifle lending for example.

 

[seminole97]

Pray tell, what could Congress do?

Congress can tell the world it’s not actually going to be trillion dollar deficits henceforth.

Mathematically, the writing is on the wall for a fiat currency treated like this.

“The safe assumption for an investor is that over the next hundred years the (fiat) currency is going to zero.” - Charlie Munger

 

[biggreydogs]

There is a 96.1% chance of a 75 basis point increase and only a 3.9% chance of only increasing 50 basis points.

 

[soybean]

Congress could do lots of things to restrict the money supply. They could write a bunch of laws that stifle lending for example.

C'mon man, you are smarter than that. Changes in the law will come only after whatever is to come passes.

 

[Rifler]

An ECON 101 truism that ignores the current actual causes of inflation.

You talk like you know the "actual causes of inflation",... Your perception isn't necessarily reality.

 

[soybean]

There is a 96.1% chance of a 75 basis point increase and only a 3.9% chance of only increasing 50 basis points.

IMHO they need to tack on 100 basis points in June and get to 5% by the end of the year.

 

[biggreydogs]

IMHO they need to tack on 100 basis points in June and get to 5% by the end of the year.

While I don’t disagree I think it would cause to much panic.

 

[soybean]

While I don’t disagree I think it would cause to much panic.

Perhaps, but it would be mostly confined to the equities at first and it would be a slow motion event to the public. Right now John Q Public is too busy bitching about gas and chicken prices to notice much else.

 

[biggreydogs]

Perhaps, but it would be mostly confined to the equities at first and it would be a slow motion event to the public. Right now John Q Public is too busy bitching about gas and chicken prices to notice much else.

Tampons

 

[onlyTheObvious]

Your prescription would all but guarantee not just a recession, but another depression instead.

Disagree.

financial responsibility is a good thing.

free money is the problem. No consequences to the lenders is why we are here.

“you can afford it”
“The interest is deductible”
“What do you want your payments to be?”
“You can always sell for more than you paid and get out of it”

soon we may hear
“ don’t worry, some of that will be forgiven”.

when laws force people to have their car and home loans be a smaller percentage of their income the economy will be better off.

 

[Big Hawk D-Port]

While I don’t disagree I think it would cause to much panic.

Making monetary policy decisions based on popular opinion is part of the problem.

 

[ihhawk]

If the main drivers of inflation are pandemic disruptions of supply chains, war-related spikes in energy costs, war and climate related increases in food costs, and rampant profiteering in certain sectors, tell me how higher rates make sense as a "solution."

Sure, higher rates are likely to slow growth, reduce employment, and dampen demand. But rate changes don't actually address any of the real problems.

The real problems should be addressed by sensible federal policies. Instead we have gridlock. If you are one of those who has been a cheerleader for gridlock, you might want to rethink.

It’s nice to see that you now understand your democrat leaders are lying to you.

 

[soybean]

Disagree.

financial responsibility is a good thing.

free money is the problem. No consequences to the lenders is why we are here.

“you can afford it”
“The interest is deductible”
“What do you want your payments to be?”
“You can always sell for more than you paid and get out of it”

soon we may hear
“ don’t worry, some of that will be forgiven”.

when laws force people to have their car and home loans be a smaller percentage of their income the economy will be better off.

You have a great long term solution, but the problem we face now stands before us.

 

[Pheidippides]

If the main drivers of inflation are pandemic disruptions of supply chains, war-related spikes in energy costs, war and climate related increases in food costs, and rampant profiteering in certain sectors, tell me how higher rates make sense as a "solution."

Sure, higher rates are likely to slow growth, reduce employment, and dampen demand. But rate changes don't actually address any of the real problems.

The real problems should be addressed by sensible federal policies. Instead we have gridlock. If you are one of those who has been a cheerleader for gridlock, you might want to rethink.

The inflation we are seeing is not the result of any of the things you listed so the premise of your argument is flawed. It is due to the trillions of dollars that we’re pumped into the economy during Covid.

 

[BrunoMars420]

Need laws on borrowing.

you don’t have 20% down you don’t get to buy house. get rid of mortgage deduction. Everybody bakes this in to convince you that the price works

you don’t have 25% down you don’t get to buy a car.

save up or downsize your “wants”.

we would see newer homes downsized in amenities and pricing because developers would have to adjust or find another career.

these lenders need to fry this time. Too stupid to learn a god damn thing from just a decade or two ago.

Shut up Dave Ramsey

 

[BrunoMars420]

While I don’t disagree I think it would cause to much panic.

Have you not seen the market this year? We are living through a panic haha

 

[BrunoMars420]

If the main drivers of inflation are pandemic disruptions of supply chains, war-related spikes in energy costs, war and climate related increases in food costs, and rampant profiteering in certain sectors, tell me how higher rates make sense as a "solution."

Sure, higher rates are likely to slow growth, reduce employment, and dampen demand. But rate changes don't actually address any of the real problems.

The real problems should be addressed by sensible federal policies. Instead we have gridlock. If you are one of those who has been a cheerleader for gridlock, you might want to rethink.

Yes they will. Look what Paul Volker did with the rates and see what happened with inflation, Raising rates work. If we weren’t too addicted to the low interest rates and started raising during Obama’s second term then we wouldn’t be in this big of a mess.

 

[wcbtee]

I’m not certain that rate increases are the answer when we have a goods supply problem.

Nor is the answer for the government to continue spending like a drunken sailor.

 

[AreWeCross]

An ECON 101 truism that ignores the current actual causes of inflation.

Only if you mean the actual causes behind the decisions to increase the money supply in an unprecedented response by 2020 and 2021 congress and presidents. Money supply is the reason why we are have inflation. We need to reduce the money supply. The playbook to do this is 101 Economics

 

[AreWeCross]

I’m not certain that rate increases are the answer when we have a goods supply problem.

Supply chains are loosening which is creating bigger problems with inventories. Also, consumer is shifting their spending to services, not goods. More inventories issue.

 

[Finance85]

Congress has lots more tools it could use, than the Fed does. It is a genuine failure of governance that we leave this up to the Fed.

Congress is one of the major causes with excessive deficit spending. You think they are smart enough to fix it?

 

[onlyTheObvious]

You have a great long term solution, but the problem we face now stands before us.

Find a way to keep rates low but the qualifications to borrow it more difficult.

 

[AreWeCross]

Have you not seen the market this year? We are living through a panic haha

This is not a panic. The market is re-pricing with the expectations of slowing growth, profit recession and analyst estimates yet to be lowered.

 

[Urohawk]

Time to raise taxes.

 

[Eburghawk]

i just hope that when the dust settles we bail out the poor, unfortunate gamblers who caused this crash & not take the air out the asset bubbles that they created.