Why everyone and their dog says Fed is raising rates, when Fed just barely raised rates. Year over year inflation is 9.3% and Fed interest rate is only 1.5%, while it should be 2% points over inflation.
Do you really think we solved central banking in 1992 [1], and if only you were one of the central bank chiefs we would be fine?
As I like to say, we launch spacecraft based on models of celestial mechanics from the 1680s. Doesn’t make them wrong or disaster-prone. If you replied to someone that “oh you think celestial mechanics was perfected in the 1680s?”, then a lay reader should be equally confused as to why they should doubt the person you replied to.
If you have a reason some rule is invalid, post it, FFS. Don’t just say it’s from $YEAR. And definitely don’t rely on ambiguity as a way to look smart and unquestionable.
But of course, he’s a longtime poster, so I guess he gets a free pass.
Covid has been the greatest transfer of wealth upward in our lifetime, but sure it’s cheap personal debt.
This ignores the realities of the market. A much lower rate than 11.3% (e.g. a 4%) would lead to a deep recession due to a shrinking money supply, which in turn would "counteract" inflation.
This doesn't make sense to me. Rate hikes decrease spending overall, so why would rent be any different?
And rate hikes make it harder to purchase a home, by raising the cost of them. That forces out of the home-buying market those who would have bought a home at the pre-hike rate … and forces them back into the rental market. Seems to me like demand goes up.
(Certainly, it makes it harder for landlords to acquire new properties, but I think corporations are going to weather it better than people — i.e., people will be forced out of that market before corporations.)
Rate hikes appear to be doing the opposite to rents here in NZ
how is higher rents fueling inflation? People paying higher rents (but on the same income) will have to forego some spending, thus reducing demand for some goods/services. So you'd actually expect that higher rents would drive _down_ inflation!
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
if rents rise, and other CPI items also rise, then it's not true that this is "all else being equal". If other items also rise, it means that there's more money being spent, which implies that people have more money to spend, and thus, income must be rising.
If rent rises are offset by costs of other items going down, then CPI won't rise - and this would happen if the rent is consuming more proportion of income, and thus, less is left available for the other CPI items.
I dont know which situation we are currently in today. I suspect that income is rising, and thus, inflation is high. Increasing rates would push up rent, but not push up income, and thus the proportion of rent vs income grows higher and thus lower inflation (in the future).
Or they will increase costs; which is (1) people (labor) demanding higher wages or (2) business increasing the costs of good to cover rent costs. Given that rent is already the biggest cost and has been growing steadily, it may be the case the other spending areas have been dialed to a minimum already.