patrick.net

The Fed Funds rate is 2.5% now. The Fed may increase it by 1% this month, and not the expected 0.75%.

Either way, once it reaches 3% then that is the highest the Fed Funds rate has been since 2008.

I hope they hold the rate steady at 3.5% from October to at least June 2023 and continue with Quantitative Tightening (QT).

I hope the 30 year mortgage rate steadies around 5.25%. That is about 2% more than where it was when it recently bottomed.

For every 1% increase in the 30 year mortgage rate, there is about a 10% drop in price. That would mean housing nearly returning to its early 2020 price levels.

That is what the Fed needs to do as far as resetting asset prices like housing.

Stocks (i.e., S&P 500) have dropped about 21%, and about 10% above where they were in early 2020.

A vast majority of the gains were not due to productivity increases. That was obvious as many industries did not adapt and adjust without raising costs.

The stock market gains were because of financial engineering from monetary policy as well as due to fiscal stimulus; many investors or traders used stimulus money to buy stocks and ETFs.

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I disagree.
They will wreck the economy.
Some commodity prices are decreasing.
The cause of inflation was excessive government spending, which they are not stopping.
House prices are rising everywhere that’s not in an undesirable place.
Stocks rose because of increasing profits, lower corporate taxes, and of course low interest rates.
High interest rates and high taxes benefit no one.

clambo says

House prices are rising everywhere that’s not in an undesirable place.

Nyet, tovarich.

I didn't write that the Fed raises taxes, did I?

San Jose is still tremendously expensive and 13% decrease there is not a surprise.

House prices will briefly fall as they always do with rising interest rates; but, this will not stop the trend of higher house prices as millions of boomers escape the North and cities, crime, taxes, etc.

Still, everywhere houses are more expensive than a couple of years ago and this trend will not stop, just pause until millions of unwashed stop invading the USA and welfare queens are not paid to have bastard children.

High taxes and high interest rates benefit no one, particularly not any economy.

clambo says

High interest rates and high taxes benefit no one.

Untrue. High interest rates benefit savers. Low interest rates benefit a ponzi economy. High taxes can be a benefit to low income people of which there are plenty.

If you examine the oil rig charts such as for the world or USA, they recently have steadied out and around 15% below the oil rig count set in early 2020.

This tells me the oil industry wants to keep oil prices from crashing due to oversupply and a recession, and gasoline to average above $3.00 a gallon.

https://ycharts.com/indicators/us_oil_rotary_rigs

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ad says

I hope they hold the rate steady at 3.5% from October to at least June 2023

Still way too low. They need to raise it to at least 5-6% immediately.

Actually it must be about 10% to start curbing double digits inflation. What is seen is just a ritual with no real results but wealth transfer from poor and middle class families to rich and gov.

Blue says

Actually it must be about 10% to start curbing double digits inflation. What is seen is just a ritual with no real results but wealth transfer from poor and middle class families to rich and gov.

And when will this happen?

GNL says

And when will this happen?

Perhaps never. That is why one has to cling on some assets including stocks, bonds, RE shacks, any physical assets including boat, RV any junk. Hope its not like Venezuela style but irresponsible out of control free $Ts printing for corporate welfare make cash worthless every month. Gov programs are pumping even more inflation.

Booger says

Still way too low. They need to raise it to at least 5-6% immediately.

Its an optimization effort as they want about 2% annual inflation, in addition to +2.5% annual growth of GDP, and the debt to GDP ratio to continue to decline. You don't want GDP growth solely based on inflation.

But just like with any complex system like our economy, there is delay or hysteresis. A change in interest rates does not produce the immediate desired results. There may be an over correction where we are in a deflationary environment.

That is why they should slowly and steadily increase the interest rates, as well as slowly conduct Quantitative Tightening (QT).

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ad says

. A change in interest rates does not produce the immediate desired results.

It seems to have in the housing market, but otherwise yes.

Booger says

It seems to have in the housing market, but otherwise yes.

There are a lot larger percentage of day traders and stock investors now compared to 2001. That means there is more volatility and bear markets may be now shorter lived because a lot more speculative trader hands in the stock market cookie jar.

So we got the 32% drop in April 2020, and 23% drop a few months ago. But those bear markets were short lived because so many traders and investors (401k's, IRA's, etc.) piling back into stocks and ETFs.

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jykiodfgr says

EU has no energy, they can not survive without Russian and Chinese goodwill.

USA on the other hand is full of natural resources. we can always fall back to the Soviet model. They will have to get rid of 250 million Americans though.

We can ship LGN to them. They went the easy route and it's now biting them. That's why Europe only has small periods of actual prosperity. All the countries continually shoot themselves in their fucking foot. Could have built a fleet of 30-50 tankers. No weapons needed. Just storage and diesel to run them, and a transatlantic skeleton crew to operate them. Cheap basically. Grab natural gas from US and Canada or other countries. Nah... rely on one country to pipe it in where everyone is drunk on vodka most the time. Good idea!

WookieMan says

We can ship LGN to them. They went the easy route and it's now biting them.

No, we can't.

The EU doesn't have the infrastructure for it, and besides that, it's stupid.

If the EU just stayed the fuck out of meddling with Ukraine, and called out the United States for overthrowing it, and kicked NATO to the curb 30 years ago, they wouldn't be in this predicament. The EU is run by traitors. They don't care about their citizens, and the Europeans are starting to slowly realize this FACT.

richwicks says

The EU doesn't have the infrastructure for it, and besides that, it's stupid.

Poland, Finland, Estonia, Latvia, Lithuania, The Netherlands have or have access to LNG terminals. There might be a few more around like the floating LNG terminal on it's way to Italy.

https://en.m.wikipedia.org/wiki/List_of_LNG_terminals