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Comment by cheaprentalyeti | Hacker News Reader

I suspect some of this is because the level of economic activity is dropping.

As expected. As interest rates rise more capital that would otherwise be allocated on businesses, real estate, stocks, etcetera is redirected into safer and now more attractive bets like bonds and interest rates tied instruments

It’s amazing seeing all of society stumbling towards re-learning basic economics after being in a collective fugue/mass delusion for 2020-2021.

Fed discovers relationship between interest rates and inflation, more at 11.

People have been "delusional" in a sense since the late 90's when inflation slowed to a crawl and everyone got used to stable prices. If inflation had been ~1% higher over these last decades, prices wouldn't be far off from where they are now and people wouldn't have flipped out so dramatically over the sudden adjustment.

Similarly, I find myself laughing when people describe this as a high-rate environment. Or when they blame the relatively brief Covid ZIRP for wide ills. The ZIRP of the 2010s is still confusing people.

There are 35 year olds now that were only just graduating college in 2009 (I'd argue before then most people are largely oblivious to economics) and don't know anything other than ZIRP plus the pandemic.

Unrelated to this exactly, but on perception: There was some sort of tax break that was going to be repealed around 2014 or 2015 that had been in place for around 10 years, and I got into a conversation with someone who didn't understand why so many were against it. Honestly I thought it was pretty obvious: Roughly school to retirement is 40-50 years, so for around 20-25% of the workforce that repeal wasn't a return to normal, it was a straight tax increase. They were actually surprised and had never considered that viewpoint before.

And we'd likely have had more economic growth, higher employment, and better investment in US infrastructure and education.

>It’s amazing seeing all of society stumbling towards re-learning basic economics

You mean capital will follow the best rates to fight inflation? Crazy!

That would make sense, but the Atlanta Fed's GDPNow estimate for Q4 is still surprisingly high: https://www.atlantafed.org/cqer/research/gdpnow

> The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 is 3.2 percent on December 9, down from 3.4 percent on December 6.

This is it, the economy is grinding to a halt. Not good either.

You can't slow inflation by raising interest rates without slowing the economy. There are no rainbow unicorns here. The best outcome here is a so-called "soft-landing" in which growth slows but we don't have a recession or spike in unemployment. Taking the recent jobs report and this CPI report, we might just get that soft landing we need.

Also, fyi, while wages overall did not keep up with inflation, they did in the service sector and largely for lower paying jobs. I see that as correcting an imbalance in the economy, and as a stabilizer for American society as a whole.

We're not going to get a soft landing. They're going to push unemployment up to 6-8% to accomplish their policy goals of containing wage inflation and breaking the back of unionization drives (probably closer to 8% after something like CMBS detonates in about a year or so). That wage inflation in lower paying jobs is actually what concerns policymakers.

Talk about a "soft landing" is very 2006-ish.

What evidence is there for this?

Gut-felt cynicism mostly, I think.

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