When Will the FED Worry More About Recession than Inflation?

Nov 28, 2010
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What happens when the Fed realizes that severe rate hikes don't fix supply chains, don't stop war profiteering or pandemic profiteering, and can't compensate for Congressional refusal to raise the revenues needed to pay the bills they have been running up?

If the only way for rate increases to curb inflation is to drive the US economy (and possibly the world economy) into a brick wall, is that the right way to go?

I'm not blaming the Fed. They have limited tools to cool inflation.

Is there any chance the lame duck Congress will act responsibly on the way out, and vote to take the steps they alone can take to ease inflation? Obviously they haven't yet, and won't before Election Day. But they could after. Will they? I won't hold my breath, but I hope so.
 

binsfeldcyhawk2

HR Legend
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Oct 13, 2006
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It's more important for the peripheral wage worker to lose his/her job than it is for the middle class to pay an extra buck fifty for a carton of eggs......I have always found this to be a strange economic philosophy.
Just let it run rampant? Inflation drags everyone down....the working class and poor the most.
 

Fijimn

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May 7, 2008
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Just let it run rampant? Inflation drags everyone down....the working class and poor the most.
I didn't suggest to let it run rampant. I lived in a country that had hyperinflation--to a level not seen since post WW1 Germany. But it is an interesting study as to at percentage of inflation is the threshold for feeling ok with people losing their jobs and benefits. It appears to be $4.00 gas and $3.50 for eggs.
 

bunsen82

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May 6, 2004
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Ok, here is my personal opinion on the matter. I think we are very close to a Fed Pivot (for my terminology slowing down rate hikes and possibly topping out). I think inflation is coming down but will take a while to show up in the data. I don't think the Fed wants to be seen as political and will basically give guidance that they will be data dependent in the future on rate hikes at the November meeting. Now this may seem minor, but what this will imply is that if the data is continuing to slow, slower rate hikes are coming. All the earnings are showing decreasing revenue, so I think the fed has to acknowledge they are making progress on slowing the economy. I don't think a recession is off the table, and I honestly think the Fed welcomes one. I think Fed rates will be in the 4 range for the foreseeable future. We are still going to have the market trying to digest this information. Honestly I think the S&P will jump up to the 4100 range in the short term - only to fall back down to the 3400 range early next year with the recession in full swing and earning estimates and PE ratios continuing to decline in higher interest rate environment for longer.
 

binsfeldcyhawk2

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Oct 13, 2006
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I didn't suggest to let it run rampant. I lived in a country that had hyperinflation--to a level not seen since post WW1 Germany. But it is an interesting study as to at percentage of inflation is the threshold for feeling ok with people losing their jobs and benefits. It appears to be $4.00 gas and $3.50 for eggs.
There's no easy way out of this....

What do you suggest to tamp down inflation other than increasing interest rates.
 

Fijimn

HR Legend
May 7, 2008
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There's no easy way out of this....

What do you suggest to tamp down inflation other than increasing interest rates.
Well...increasing taxes on upper income earners would reduce their consumption spending and reduce inflationary pressures. The obvious retort is "trickle down economics" , but the evidence suggests that cutting the upper tax rate does not spur economic growth.....we (the rich) will only buy so many boats and widgets.
 

binsfeldcyhawk2

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Oct 13, 2006
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Well...increasing taxes on upper income earners would reduce their consumption spending and reduce inflationary pressures. The obvious retort is "trickle down economics" , but the evidence suggests that cutting the upper tax rate does not spur economic growth.....we (the rich) will only buy so many boats and widgets.
Sooooo...taxing upper income earners will bring down core inflation numbers? I agree with increasing their taxes but think it'd have minimal inflationary impact.
 

hwk23

HR All-American
Nov 22, 2010
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We should cut federal spending drastically. It needs to be around 18% of gdp like it was under Clinton. This would force more efficiency and free up labor for the private sector to help produce goods and services. 2020 and 2021 were the highest federal spending years going back to WWII, 30% and 29% of GDP respectively.
 
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Nov 28, 2010
80,065
33,312
113
Maryland
We should cut federal spending drastically. It needs to be around 18% of gdp like it was under Clinton. This would force more efficiency and free up labor for the private sector to help produce goods and services. 2020 and 2021 were the highest federal spending years going back to WWII, 30% and 29% of GDP respectively.
Agree with increased efficiency - and we really need to start fighting corruption - but disagree with arbitrary percentages for spending.

We should spend what we need to spend to achieve what we decide to achieve.

We just need to make sure the revenues match the spending. That's the main failure we have these days, not the percentage of GDP we spend.
 

hwk23

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Nov 22, 2010
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Agree with increased efficiency - and we really need to start fighting corruption - but disagree with arbitrary percentages for spending.

We should spend what we need to spend to achieve what we decide to achieve.

We just need to make sure the revenues match the spending. That's the main failure we have these days, not the percentage of GDP we spend.
I agree with you on efficiency and fighting corrpution, maybe conflicts of interest. I don't believe raising taxes and cutting spending have the same economic effect. It's not arbitraury in the sense it is a benchmark to compare benefit levels to spending levels. I would favor a balanced budget law with exceptions for emergencies.
 

Jan Itor

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Jan 31, 2009
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It's more important for the peripheral wage worker to lose his/her job than it is for the middle class to pay an extra buck fifty for a carton of eggs......I have always found this to be a strange economic philosophy.
The middle class is the only ones paying an extra buck fifty for eggs? Oh, and it’s more than a buck fifty.
 

NCHawk5

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Aug 7, 2019
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Hopefully not for quite some time. We need a recession. This economy has been overheating for a long ass time, and the government has caused almost all of it.
 

Jan Itor

HR Legend
Jan 31, 2009
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I didn't suggest to let it run rampant. I lived in a country that had hyperinflation--to a level not seen since post WW1 Germany. But it is an interesting study as to at percentage of inflation is the threshold for feeling ok with people losing their jobs and benefits. It appears to be $4.00 gas and $3.50 for eggs.
I agree with your premise, except it isn’t just the poor that lose their jobs during a recession. Middle class as well.