A fiat monetary system characterized by exponentially rising debt is not a “healthy” economy, so no, it won’t tolerate half percent rises in interest rates without triggering an unmanageable collapse in asset values. These clowns need to stop promoting the “Goldilocks” narrative while they still have some credibility left.
Responding to the worst inflation the U.S. has seen in more than 40 years, the central bank official said she foresees “an expeditious march” through the year toward benchmark interest rates that would neither stimulate nor repress growth — the “neutral” rate, in Fed parlance.
given that all the bad ideas of the 70s are back again, can stagflation be far behind?
I’ve even seen that huge bellbottoms are back in fashion … speaking of things that should remain mired in history
The clowns that created the problem are now going to fix it? Like letting the fox guard the hen house.
Janet Yellen will fix it by keeping abortion safe and legal. She just said so …
She is SUCH an affirmative-action, leftist hire groomed for the top echelon of the useless bureaucrat administrators.
We have seen inflation driven by a rapidly expanding money supply in a struggling economy – more money chasing fewer good. Coming next is wage driven inflation caused by workers catching up after losing 30% of their wages to inflation over the last 2 years. I have a dog that chases its tail. Ain’t purty.
Keep in mind, this isn’t unintended consequences. This is all going as planned.
Skyhigh fuel, rationing, the poorest barely able to get by?
Welcome to the Green New Deal Utopia!! It’s everything they said it would be.
What kept the “advanced” western nations afloat for a generation was an ample supply of slave labour in the Third World, and the laundering of the profits of Chinese industry into western government bonds.
What you are observing is what happens when you run out both of other people’s money and of people you can force to work for free.
Price inflation alone can be hedged against. Wage inflation gets their attention. Our masters would rather die than give a white man a raise.
“Our masters would rather die than give a white man a raise.”
Your terms are acceptable.
Oooh-rah.
Ah, yes. The neutral rate of interest, a Keynesian fairy tale right up there with NAIRU — the Non-Accelerating-Inflation Rate of Unemployment.
Both reasonable sounding ideas in theory, but accurately calculating them in a non-linear feedback system with thousands of variables and billions of interconnections (otherwise known as “the economy,” otherwise otherwise known as “millions of individuals making day-to-day choices about how and how much to produce, consume and ultimately trade with others”) is impossible. But they’re gonna try anyways, ’cause they’re IYIs (Intellectual Yet Idiots).
TL;DR: We’re boned.
Yes, in Lefty Liberal Theoretical Fantasy land, her theory is perfectly sound, of course.
In the real economy, the current minor rate increases have already had significant effects, though in initial stages. The real estate market has stalled already, across the US and here. Price reductions are occurring. This from a simple half point rise in rates. Its having the desired effect, though the impatient and incompetent media expected immediate cures and results.
Imagine what a 2 to 3 point rise in rates will “accomplish”. Hope y’all aren’t carrying 500k Variables or YUGE Heloc’s………………………….this will be vicious to those heavily indebted, living on the razors edge. Still they should have known better, all the same.
FYI, sold my vacay property earlier this year, at a tidy profit, at the tope of the market. Present day, those are the first to get fire saled. CASH IS KING
The Fed is trapped. On one hand, if they raise rates and withdraw liquidity (QT) sufficient to rein in inflation, they severely damage the economy. On the other hand, if they don’t, they wil see prices and wages spiral upward.
All they seem to have left is to jawbone, as this article is doing.
The government could cease its insane spending, but…no, that’s not an option.
Speaking of heading for default, Finland is having its electricity imports from Russia cut for non payment.
Maybe they don’t like the idea of Finland joining NATO.
https://www.reuters.com/business/energy/russias-inter-rao-halt-power-exports-finland-due-lack-payment-2022-05-13/
“” HELSINKI, May 13 (Reuters) – Russian state-owned utility Inter RAO (IRAO.MM) will stop exporting electricity to Finland from Saturday because it has not been paid, the company’s Finnish subsidiary said on Friday.
Inter RAO has not received payments for electricity sold via pan-European power exchange Nord Pool since May 6, the subsidiary said, without giving any reason.
“This situation is exceptional and happened for the first time in over twenty years of our trading history,” RAO Nordic, said in a statement.
Power imports to Finland will be halted from 1 a.m. local time on Saturday (2200 GMT on Friday) “for the time being,” Finnish grid operator Fingrid said in a separate statement, citing RAO Nordic. “”
Say what you will about the Russians but if someone failed to pay me for services rendered, I would cut them off plus go after them for outstanding balance including extra fees, penalties for collection.
If I truly didn’t like them I would sue for breach of contract.
And the Russians’ denial-denial makes it seem likely that they were demanding payment in rubles rather than in euros, crowns etc. that they had been paid with in the past.
The Creature from Jekyll Island is a great read right now.
Do not worry,
It is going to get worse.
The more governments f**k with the markets the more the markets get f**ked.
And us low-lives see our pensions turn into Canadian Tire money.
There used to be a strip joint in Lethbridge that took CanTire money at par. Or so I heard…
Also in the day, Bulldog Pub, Whitefish Montana.
June’s increase to 1.5% in the U.S. will likely be the last. I can’t see them being able to raise beyond that.
Canada either.
Raise the damn rates to 5% minimum. Let the weak fail and default and those of us who are smart will buy these assets on the cheap. The stupid must be punished.
Or we could continue electing them. Yes! That’s it!