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Fed's Big Mistake : Rate Hikes Hurt US Workers

By Rew following x   2017 Jun 13, 2:05pm 2,665 views   44 comments   watch   sfw   quote     share    


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Fed's Big Mistake : Rate Hikes Hurt US Workers
http://www.thefiscaltimes.com/Columns/2017/06/13/Fed-s-Big-Mistake-Rate-Hikes-Hurt-US-Workers

And this ...
https://www.reuters.com/article/us-usa-stocks-idUSKBN1941FD

They have no room though. They have to hike so they can drop rates again. It's like pumping the accelerator to get a response. Bulls call this a 'goldilocks' economy. I think we are gunning the engine to have it explode on us. We aren't in gear.

The real issue is that dollars aren't in main-street/people's hands. Housing and healthcare have removed most discretionary spending. All the liquidity/QE is up in stocks and investments.

https://www.bloomberg.com/view/articles/2017-06-02/why-consumers-aren-t-spending

How can this NOT collapse at some point?

5   Booger   ignore (1)   2017 Jun 13, 3:07pm   ↑ like (3)   ↓ dislike (0)   quote   flag        

Rew says

Are you serious?

Yes. The article falsely claims that artificially low interest rates are helping low income workers. If you want to help low income workers, we need more jobs. The easiest way to do that is with tariffs. If its sold in USA, it needs to be made in USA.

6   Rew   ignore (0)   2017 Jun 13, 3:20pm   ↑ like (0)   ↓ dislike (1)   quote   flag        

Booger says

Yes. The article falsely claims that artificially low interest rates are helping low income workers. If you want to help low income workers, we need more jobs. The easiest way to do that is with tariffs. If its sold in USA, it needs to be made in USA.

Your argument is that tariffs create domestic jobs. That's actually not true. They simply slow growth and pass costs to consumers as a type of consumption tax.
https://www.bloomberg.com/news/articles/2012-03-08/beware-of-politicians-linking-tariffs-to-job-growth
http://www.todayonline.com/commentary/us-protectionism-trade-tariffs-will-hurt-it-most

It seems like you would need tariffs so big that there would initially be shortages in the US for typical products you could buy off shelf at Walmart and Target, to have real big impact effect. Then, after a few years, domestic production could fill that gap ... at a much inflated price. And for what? So something like a toothbrush can be made in America and cost more for everyone?

A huge component of the US money supply is really based on debt ... as distasteful as that is. By raising rates right now, in a very tepid economy, we are killing off more purchasing power in the hands of people. I'm very debt adverse, not a fan at all, but seriously, we will stifle economic activity in huge ways with tariffs OR with raising rates too much right now.

To be specific, your claim is people need jobs. I actually think people need better wages.

7   justme   ignore (0)   2017 Jun 13, 3:23pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

This sucker is gonna blow! (GW Bush)

8   Rew   ignore (0)   2017 Jun 13, 3:28pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

justme says

This sucker is gonna blow! (GW Bush)

Yeah, like that all over again ... only this time can we get the QE into people's pockets?
2% inflation the best we can do as Wall Street/Banks lap it all up. The imbalance is so disgusting.

9   Strategist   ignore (3)   2017 Jun 13, 3:51pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rew says

Fed's Big Mistake : Rate Hikes Hurt US Workers

The Fed's goal is to have a stable, growing economy with 2% inflation. This, they believe is the optimum level that benefits the common man the most. Any deviation from the optimum level will hurt the workers in the long run. It's a tough goal to achieve, and no doubt lots of disagreements, especially by politicians who want high growth now at the expense of future growth just to get reelected.
No single person or organization knows more about the economy than the Fed that sees massive amounts of data pass through their hands every day. I say butt out, and let the Fed do their job even though they will be wrong at times.

10   Strategist   ignore (3)   2017 Jun 13, 3:55pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Booger says

If its sold in USA, it needs to be made in USA.

Nobody does it better. Fattening, greasy, unhealthy burgers, all made in America. Don't forget the fries and coke.
McDonald's to hire 250,000 employees this summer, to use Snapchat to lure millennial job seekers
http://www.cnbc.com/2017/06/12/mcdonalds-to-hire-250000-employees-this-summer-to-use-snapchat-to-lure-millennial-job-seekers.html

11   TwoScoopsOfSpaceForce   ignore (4)   2017 Jun 13, 4:44pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Rew says

To be specific, your claim is people need jobs. I actually think people need better wages.

That won't come for pillow fluffer, dishwashing and ass wiper jobs anytime soon. You need high value added manufacturing to raise wages, which makes low wage service businesses compete with industry for employees by having to offer better wages.

12   Rew   ignore (0)   2017 Jun 13, 5:04pm   ↑ like (2)   ↓ dislike (0)   quote   flag        

TwoScoopsMcGee says

That won't come for pillow fluffer, dishwashing and ass wiper jobs anytime soon. You need high value added manufacturing to raise wages, which makes low wage service businesses compete with industry for employees by having to offer better wages.

If a baristas can compete with a line worker, wages don't rise in that situation. There is not a labor shortage. Repetitive physical tasks are not the job types we need. You want to create jobs that only humans can do right now, as anything that can be automated, will ... to the degree humans let it/will it to happen.

Where we need to be is the best at making things autonomous. We need to be fully putting humanity on a footing where we CAN simply ensure a guaranteed wage, not because we are handing things out, but because humanity has arrived at a level of automated self sufficiency.

So what you want: STEM jobs.

Edit: and we start/focus on guaranteeing good food for all Americans. Our next agricultural revolution should be one based on that.

13   Rew   ignore (0)   2017 Jun 13, 5:09pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says

No single person or organization knows more about the economy than the Fed that sees massive amounts of data pass through their hands every day. I say butt out, and let the Fed do their job even though they will be wrong at times.

I never would have figured you for a believer in experts and intellectualism. Nice!
If Trump weighs in here, you going to tell him to sit down and let the Fed do what it does best?

14   Tenpoundbass   ignore (11)   2017 Jun 13, 5:31pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Poor investors they don't git all of the free widdle money anymore boo fucking hoo.
I remember distinctly a time when small business owners(republicans mostly) would pay the going interest rate for business loans.
They ended when money got free. So yeah, there's that. Some of you fuckers are going to have to work for a living. Isn't it great?

15   Strategist   ignore (3)   2017 Jun 13, 5:44pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rew says

Strategist says

No single person or organization knows more about the economy than the Fed that sees massive amounts of data pass through their hands every day. I say butt out, and let the Fed do their job even though they will be wrong at times.

I never would have figured you for a believer in experts and intellectualism. Nice!

If Trump weighs in here, you going to tell him to sit down and let the Fed do what it does best?

All Presidents weigh in here. They want results NOW. Knowing Trump, he will be at Janet Yellen's door with an axe.

16   Quigley   ignore (0)   2017 Jun 13, 6:55pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

At this point, given your history of supporting globalists and denouncing the working class, I'll support the opposite of whatever you're supporting. Sorry, but you've run a pattern of anti-labor pro-globalist agenda opinion. It's become obvious that you support the globalist side in every argument. Therefore I know I will disagree with you before I even read your post.

If you'd like to be more interesting, think for yourself!

17   Strategist   ignore (3)   2017 Jun 13, 7:27pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rew says

If a baristas can compete with a line worker, wages don't rise in that situation. There is not a labor shortage. Repetitive physical tasks are not the job types we need. You want to create jobs that only humans can do right now, as anything that can be automated, will ... to the degree humans let it/will it to happen.

Where we need to be is the best at making things autonomous. We need to be fully putting humanity on a footing where we CAN simply ensure a guaranteed wage, not because we are handing things out, but because humanity has arrived at a level of automated self sufficiency.

So what you want: STEM jobs.

That is where the world, not just the US is heading towards. And it's been happening for 200 years. The education levels 200 years ago were not much different than 500 years ago. Today, in the US and the world, we have the highest ever education levels, and the trend of education points to the sky. Those with low skills and education will not be able to prosper in a world where skills and knowledge rules.

18   Rew   ignore (0)   2017 Jun 14, 2:10pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

Quigley says

supporting globalists and denouncing the working class, I'll support the opposite of whatever you're supporting. Sorry, but you've run a pattern of anti-labor pro-globalist agenda opinion. It's become obvious that you support the globalist side in every argument.

If it comforts you to think I am somehow in league with globalist dark interests, that somehow rule the world, I am super flattered.

---

Here is eTrade today on the fed rate hike:
https://us.etrade.com/knowledge/markets-news/commentary-and-insights/fed-lifts-benchmark-interest-rate

My favorite graph ...

Which leads to the concluding paragraphs which basically read as: "Uhhh, yeah, uh-oh ... but if you are diversified, for the long run you are ok."

19   justme   ignore (0)   2017 Jun 14, 2:18pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Fed Reveals Balance Sheet "Normalization" Schedule: Will Reduce Reinvestments By $10BN/Month

http://www.zerohedge.com/news/2017-06-14/fed-reveals-balance-sheet-normalization-schedule-will-reduce-reinvestments-10bnmonth#comment-9714374

COMMENT: The starting time of the tapering apparently has not been settled, but some pundits say September is when it will start.

20   Rew   ignore (0)   2017 Jun 14, 2:20pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Tenpoundbass says

Poor investors they don't git all of the free widdle money anymore boo fucking hoo.

What you fail to understand is they have the money already. They are just going to move some of it over to higher interest bank vehicles now. Woopity-dooooo.

Main street now gets the following: stagnant wage, tighter credit ... and still insignificant interest in your average CD/savings account. MAGA!

21   justme   ignore (0)   2017 Jun 14, 2:46pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Most people do not understand the massive theft that Quantitative Easing was. Rich owners of bad MBS (mortgage debt bonds) were made whole and used the money they got to buy 7% of the US housing stock, which was then inflated back to bubble price levels, for fun and profit.The HAVES won big, and the HAVE NOTS lost. That is the FRB in a nutshell,

https://mishtalk.com/2017/06/14/fed-lays-out-plan-to-s-l-o-w-l-y-reduce-balance-sheet-how-long-will-it-take

At $10 billion a month, $120 billion a year, it would take the Fed 29 years to reduce its balance sheet to $1.0 trillion from $4.5 trillion.

At $50 billion a month, $600 billion a year, it would take 5.8 years. If the Fed slowly ratchets up its cap, we are talking about a 10-year time frame.

Those are the absolute minimum and maximums assuming the Fed starts reduction and does not stop until it’s done. Both are highly unlikely in actual practice.

22   Rew   ignore (0)   2017 Jun 14, 4:47pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

You are saying the inequality imbalance isn't fixed by anything they can really do, so ... we are screwed. :)

23   Bellingham Bill   ignore (5)   2017 Jun 14, 8:57pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

oops, forgot the treasuries . . .

24   Bellingham Bill   ignore (5)   2017 Jun 15, 6:04am   ↑ like (2)   ↓ dislike (0)   quote   flag        

Strategist says

And what's wrong with that? You expect those with no money, or old widows pour money into risky ventures? Really?

you're so fixing for a fight that you're missing the point.
Strategist says

Yeah sure, that would help a lot considering everything in the mall and Amazon is made in China.

while

https://www.bea.gov/newsreleases/international/intinv/2017/intinv416.htm

is AFAICT the biggest medium-term issue the USA faces, fixing the distribution of income problem

http://www2.ucsc.edu/whorulesamerica/

is a parallel problem. In fact, they are quite linked.

blue is real corporate profits (2009 dollars), red is the annual trade deficit (2009 dollars)

The Fed dumped $3T+ of new money into the economy 2009-2014 to keep the game going.

Imbalances in the distribution of income -- rich getting richer and the poor getting increasingly fucked thereby -- should be an obvious problem.

But "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"

25   Strategist   ignore (3)   2017 Jun 15, 7:28am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Bellingham Bill says

blue is real corporate profits (2009 dollars), red is the annual trade deficit (2009 dollars)

The Fed dumped $3T+ of new money into the economy 2009-2014 to keep the game going.

Imbalances in the distribution of income -- rich getting richer and the poor getting increasingly fucked thereby -- should be an obvious problem.

When stocks and real estate go up, yes, the rich will benefit, but so will the poor. Unemployment goes down and tax revenues increase, benefiting everyone. What good did the 2008 crash do to anyone?
You seem more concerned with what others make, rather than what you make.

26   zzyzzx   ignore (1)   2017 Jun 15, 7:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says

Nobody does it better. Fattening, greasy, unhealthy burgers, all made in America.

How do you know that the beef is not imported?

27   Rew   ignore (0)   2017 Jun 15, 8:23am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Bellingham Bill says

you're so fixing for a fight that you're missing the point

The nativists are restless.

28   Rew   ignore (0)   2017 Jun 15, 9:53am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says

When stocks and real estate go up, yes, the rich will benefit, but so will the poor.

How?
This is trickle up economics at this point Strat'.

Strategist says

You seem more concerned with what others make, rather than what you make.

If you don't believe the imbalance has already hurt you, I'm not sure Bill would make sense to you. Yes.

29   Strategist   ignore (3)   2017 Jun 15, 11:26am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Rew says

Strategist says

When stocks and real estate go up, yes, the rich will benefit, but so will the poor.

How?

This is trickle up economics at this point Strat'.

Not at all. It's still trickle down.

Rew says

Strategist says

You seem more concerned with what others make, rather than what you make.

If you don't believe the imbalance has already hurt you, I'm not sure Bill would make sense to you. Yes.

The imbalance does not hurt me, you, or anyone else. How does someone making $100 million in the stock market hurt you?

30   Rew   ignore (0)   2017 Jun 15, 11:36am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says

Yes, I know. I don't think you know.

Well by all means, please show us how smart you are then.

Strategist says

The imbalance does not hurt me, you, or anyone else. How does someone making $100 million in the stock market hurt you?

Because very few "average Americans" have any means to participate in the stock market, and it is contributing to giving very few the ability to buy and partake in the fruits of all the production. It concentrates wealth and pools it to very few.

It is actually "robbing" from would be customers for any business making a physical good.

31   Strategist   ignore (3)   2017 Jun 15, 11:58am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Strategist says

Why does the fed lower interest rates when the economy is poor and raise them when the economy is good? Do you know?

Yes, I know. I don't think you know.

Rew says

Well by all means, please show us how smart you are then.

The Fed lowers interest rates to spur investment and growth when the economy is poor. The Fed raises interest rates during a recovering economy to ensure inflation does not get out of hand.

Rew says

Strategist says

The imbalance does not hurt me, you, or anyone else. How does someone making $100 million in the stock market hurt you?

Because very few "average Americans" have any means to participate in the stock market, and it is contributing to giving very few the ability to buy and partake in the fruits of all the production. It concentrates wealth and pools it to very few.

It is actually "robbing" from would be customers for any business making a physical good.

WTF. What kind of a bizarre answer is that?
Going by your logic, someone losing $100 million would then benefit the poor. Sheesh.

32   justme   ignore (0)   2017 Jun 15, 2:31pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Bellingham Bill posted some graphs that show, for each time period, corporate profits versus FRB (Fed) MBS and TB (treasury Bond) purchases over the same time period. That is not a useful comparison to make. For the comparison to be at least somewhat meaningful, the 2nd graph should be the cumulative value (equals: the BALANCE) of the MBS+TB on the FRB balance sheet, as shown in the following graph

//fred.stlouisfed.org/graph/graph-landing.php?g=e6GU&width=670&height=475

Acceptance of MBS bonds (or any other type debt/bonds) onto the FRB balance sheet is what creates bank reserves, namely additional reserves that are backed by said MBS. Bank reserves are base money. Base money does not "get spent", it gets circulated. It is the total balance of base money that matters. Read that again: It is the outstanding balance of reserves that matters, not the absence of incremental changes.

The implicit argument being made by BB is the following: "Look, FRB stopped printing money but corporate profits are still higher than before and even rising. Hence the printing of money is not what made profits rise."

This argument is, to put it bluntly, balderdash. The presence of about $3.7T in additionally created reserves (from MBS and Treasury Bonds) from 2008-2015, and the associated drop in long term interest rates, is what inflated many assets (housing, stocks, bonds), and also inflated corporate profits. It is as simple as that. As an aside, note also that although base money was increased by about 5x or $3.7T, corporate profits increased only by $400-500B at best. That is a paltry recovery and increase in profits given the massive increase in base money, is it not? That profit curve most certainly does not look nearly as impressive anymore, does it?

33   TwoScoopsOfSpaceForce   ignore (4)   2017 Jun 15, 3:51pm   ↑ like (0)   ↓ dislike (0)   quote   flag        

Higher rates make cars and houses more affordable. There is a monthly payment that people can reasonably make. Also, old people need safe income.

The interest rates have been too damn low for too long.

34   joeyjojojunior   ignore (1)   2017 Jun 15, 3:55pm   ↑ like (1)   ↓ dislike (0)   quote   flag        

TwoScoopsMcGee says

Higher rates make cars and houses more affordable. There is a monthly payment that people can reasonably make. Also, old people need safe income.

The interest rates have been too damn low for too long.

Rates that affect people's payments like cars and mortgages are set by the free market--not the Federal Reserve.

If you want rates to rise, vote for politicians that understand the effect of wealth disparity and have a plan to address it. Wealth disparity is the reason why our interest rates have been falling pretty continuously since Reagan.





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