@derryb said: 2% inflation should be unacceptable. Think of it as an annual 2% reduction in the value of what you trade your labor for.
I tend to agree with this; that is, if I were setting Fed policy, I would target zero inflation. In executing a zero target, you might see fluctuations between - 1 % and + 1 %. There is no empirical evidence that very mild deflation is dangerous.
However, one of the reasons economists tend to want a 2 % target relates exactly to @derryb's objection. They feel it gives businesses greater flexibility to reduce real wages if necessary, and that this flexibility helps the overall economy.
(it is much easier to give a 1 % raise in an era of 2 % inflation than to demand a 1 % reduction in salary in a zero inflation environment!)
@MsMorrisine said:
right now, I'd be happy with 4% GDP and 2% inflation and employment this low.
2% inflation should be unacceptable. Think of it as an annual 2% reduction in the value of what you trade your labor for. Without a pay raise this means you are giving 2% more of yourself for a paycheck that is buying 2% less.
easing is the only tool the Fed has.
to achieve what?
Lot's of tools at the Fed's disposal. Unfortunately the correct one (higher rates) is not the popular one. They are actually the only one in a position to take punch bowl away.
One must first ask, "what is not so good about the economy?" (debt, easy money)
Then one must ask, "how to correct it?" (higher rates)
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
inflation is a byproduct of a growing economy.
what is not so good is the growth. it could be better. this would benefit all.
We have been conditioned to accept 2% inflation. Inflation is not a byproduct of a growing economy, it is the byproduct of wreckless money printing, which is needed to support wreckless spending. Fed fed prints what the congress orders. . . herein lies the problem; no real controls on those who spend other peoples' money.
If you understand the power of compounded interest on a savings account over the long term, then you more easily realize the harm in the compounded effect of a "small" 2% annual dollar devaluation. The only way a 2% inflation results in a zero effect on consumers is if the resulting 2% increase in the cost of living is matched each year with an equal 2% pay increase.
Until there are effective safeguards in place (restraints), the value of money will continue to be whittled away by politicians who have the Fed printing press at their disposal.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@MsMorrisine said:
right now, I'd be happy with 4% GDP and 2% inflation and employment this low.
2% inflation should be unacceptable. Think of it as an annual 2% reduction in the value of what you trade your labor for. Without a pay raise this means you are giving 2% more of yourself for a paycheck that is buying 2% less.
easing is the only tool the Fed has.
to achieve what?
Lot's of tools at the Fed's disposal. Unfortunately the correct one (higher rates) is not the popular one. They are actually the only one in a position to take punch bowl away.
One must first ask, "what is not so good about the economy?" (debt, easy money)
Then one must ask, "how to correct it?" (higher rates)
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
There is no need for higher rates at this time. If the US and China come to a trade agreement, then I would agree that a rate increase should occur. Until that happens, I see no reason to increase rates, especially when other competing economies and central banks (China, Japan, EU) are all cutting their rates to increase their exports...which in turn makes US manufacturers less competitive.
One must first ask, "what is not so good about the economy?" (debt, easy money)
Then one must ask, "how to correct it?" (higher rates)
When you have $22,000,000,000,000 in debt and want to get rid of it (or at least pay it down) the last thing you should want to do is to pay more in interest. I doubt the US fed fun rate will ever get back to Pre-2008 interest rates ever again (5%+) since our debt was increased by 89% overnight to bail out the bankers.
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
Agree, that's how you ensure consumption grows.
Spending future income now is temporary growth. Once future paychecks are spoken for by today's spending there will be no future growth. Today's spending with credit steals from future spending with cash.
Debt by a manufacturer to grow his output is not the same as debt by a consumer who has to have it before he has the money to pay for it. The first is a business investment, the latter is poor money management.
My sigline says it all.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@coinpalice....That is certainly a bullish forecast.....I would be very surprised if it approached true performance... If it does, I want their crystal ball....I will monitor this going forward, but with no real confidence that it will play out. Cheers, RickO
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
Agree, that's how you ensure consumption grows.
Spending future income now is temporary growth. Once future paychecks are spoken for by today's spending there will be no future growth. Today's spending with credit steals from future spending with cash.
Debt by a manufacturer to grow his output is not the same as debt by a consumer who has to have it before he has the money to pay for it. The first is a business investment, the latter is poor money management.
When you have $22,000,000,000,000 in debt and want to get rid of it (or at least pay it down) the last thing you should want to do is to pay more in interest
We have made zero attempt to pay it down. In fact, the rate of debt growth has increased in recent years.
According to Modern Money Theory (MMT), US sovereign debt is irrelevant as long as there is no limit to what can be printed.
Critics of MMT, myself included, refer to it as the "Magic Money Tree" theory. Regardless of its irresponsible management, it does not grow on trees.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Easy money has become the new welfare. People expect it and feel they are entitled to it. Like welfare it comes at a price that someone else usually has to pay.
Easy money juices the system NOW. That is all that seems to matter.
"fixed it for you" makes it clear that the statement has been modified. You are wrong, again.
It's hard to tell what the economy is really doing. The baseline parameters keep changing.
I don't like that Trump changed his rhetoric on the Fed and interest rates after being elected. It's the nature of the beast, I suppose - but it's grossly inconsistent.
Same s**t, different day. Still, much better than what we'd have had if we hadn't dodged the bullet in 2016.
Q: Are You Printing Money? Bernanke: Not Literally
Comments
@derryb said: 2% inflation should be unacceptable. Think of it as an annual 2% reduction in the value of what you trade your labor for.
I tend to agree with this; that is, if I were setting Fed policy, I would target zero inflation. In executing a zero target, you might see fluctuations between - 1 % and + 1 %. There is no empirical evidence that very mild deflation is dangerous.
However, one of the reasons economists tend to want a 2 % target relates exactly to @derryb's objection. They feel it gives businesses greater flexibility to reduce real wages if necessary, and that this flexibility helps the overall economy.
(it is much easier to give a 1 % raise in an era of 2 % inflation than to demand a 1 % reduction in salary in a zero inflation environment!)
inflation is a byproduct of a growing economy.
what is not so good is the growth. it could be better. this would benefit all.
@MsMorrisine said "inflation is a byproduct of a growing economy"
Milton Friedman, among others, would not have agreed with that.
(he would have been more likely to have said that inflation is a byproduct of excessive money creation)
Powell is a product of the Carlyle group.
We have been conditioned to accept 2% inflation. Inflation is not a byproduct of a growing economy, it is the byproduct of wreckless money printing, which is needed to support wreckless spending. Fed fed prints what the congress orders. . . herein lies the problem; no real controls on those who spend other peoples' money.
If you understand the power of compounded interest on a savings account over the long term, then you more easily realize the harm in the compounded effect of a "small" 2% annual dollar devaluation. The only way a 2% inflation results in a zero effect on consumers is if the resulting 2% increase in the cost of living is matched each year with an equal 2% pay increase.
Until there are effective safeguards in place (restraints), the value of money will continue to be whittled away by politicians who have the Fed printing press at their disposal.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The central banks wont have inflation until they rates rates.
Interest creates money.
The Fed was on the right path, but the ECB is clueless.
Knowledge is the enemy of fear
Theres an "lol".
. Besides jmski and i are BFFs. 
Knowledge is the enemy of fear
looks like I'm going to be wrong
I fear 2008 made ANY rate increases of any note impossible forever.
we've raised rates several times over the previous few years
There is no need for higher rates at this time. If the US and China come to a trade agreement, then I would agree that a rate increase should occur. Until that happens, I see no reason to increase rates, especially when other competing economies and central banks (China, Japan, EU) are all cutting their rates to increase their exports...which in turn makes US manufacturers less competitive.
When you have $22,000,000,000,000 in debt and want to get rid of it (or at least pay it down) the last thing you should want to do is to pay more in interest. I doubt the US fed fun rate will ever get back to Pre-2008 interest rates ever again (5%+) since our debt was increased by 89% overnight to bail out the bankers.
Agree, that's how you ensure consumption grows.
Spending future income now is temporary growth. Once future paychecks are spoken for by today's spending there will be no future growth. Today's spending with credit steals from future spending with cash.
Debt by a manufacturer to grow his output is not the same as debt by a consumer who has to have it before he has the money to pay for it. The first is a business investment, the latter is poor money management.
My sigline says it all.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Not to the 6% level that any SAFE passive income investment SHOULD pay.
Anything under that level is senseless to risk anything on long term.
Death to retirees!
gold continues to impress, up over 20 dollars today, golds 4 year forecast, peaks out at 1,840 in January 2023, 2.5 years from now
https://longforecast.com/gold-price-today-forecast-2017-2018-2019-2020-2021-ounce-gram
@coinpalice....That is certainly a bullish forecast.....I would be very surprised if it approached true performance... If it does, I want their crystal ball....I will monitor this going forward, but with no real confidence that it will play out. Cheers, RickO
Very logical and rational thought. I agree.
Knowledge is the enemy of fear
When you have $22,000,000,000,000 in debt and want to get rid of it (or at least pay it down) the last thing you should want to do is to pay more in interest
We have made zero attempt to pay it down. In fact, the rate of debt growth has increased in recent years.
Knowledge is the enemy of fear
According to Modern Money Theory (MMT), US sovereign debt is irrelevant as long as there is no limit to what can be printed.
Critics of MMT, myself included, refer to it as the "Magic Money Tree" theory. Regardless of its irresponsible management, it does not grow on trees.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Today's q&a included a reiteration the the debt path we are on is unsustainable.
This really happened
https://www.zerohedge.com/news/2019-07-10/wharton-grad-confuses-libor-and-libra-during-powell-hearing-hilarity-ensues
Easy money juices the system NOW. That is all that seems to matter.
Gold standard = periodic severe depressions. Fiat currency = inflation and periodic recessions.
Pick your poison.
Here's a warning parable for coin collectors...
"fixed it for you" makes it clear that the statement has been modified. You are wrong, again.
It's hard to tell what the economy is really doing. The baseline parameters keep changing.
I don't like that Trump changed his rhetoric on the Fed and interest rates after being elected. It's the nature of the beast, I suppose - but it's grossly inconsistent.
Same s**t, different day. Still, much better than what we'd have had if we hadn't dodged the bullet in 2016.
I knew it would happen.