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This is wrong IMO - the fed has NO tools in its hands. Its last tool was inflation rates, and it burned that during the great recession. It is now caught in a p

This is wrong IMO - the fed has NO tools in its hands. Its last tool was inflation rates, and it burned that during the great recession. It is now caught in a pickle: raise interest rates, causing a mass exodus of wealth from securities to savings accounts and CDs and causing the stock market to tumble (like it arguably always should have done since 2008), or let inflation take its course. I am not an economist, and I'd love to be proven wrong. I just don't see how this ends in a good way for the economy.

kqr 5y ago
That the fed has no tools is correct to the best of my understanding. The central banks are tasked with solving problems they have no mandate to solve. Inflation is, among other things, a problem of the market having too low a demand for money compared to the supply. One obvious way to fix that is by taxing money out of existence faster, decreasing the supply and thus increasing its value assuming demand stays fixed. (And there's reason to think it will; demand for money is a relatively unflexible parameter.) But of course, central banks do not control taxation, so there's not much they can do.
baron816 5y ago
> I am not an economist Yeah, if you’re interested in this stuff, you should do some research. The Fed’s options aren’t 0% rates vs 15% rates. It’s going to raise rates .25% at a time. .25% is not much of a difference. It’ll move slowly and act cautiously. The Fed, and other central banks have dealt with inflation many times before. And very effectively at that. Stocks could fall, but the stock market is not the economy, and the Fed has no mandate to prop up stocks.
- snuxoll 5y ago
  > and the Fed has no mandate to prop up stocks. Not true in the least anymore - retirement savings for a large percentage of our population are tied up in stocks thanks to the death of the pension. Asset and securities prices as a whole are a large concern for the fed when changing policy, as a result.
  - chalst 5y ago
    The Fed has a dual mandate: price stability and maximal sustainable employment. Nothing about supporting the value of investments. https://www.chicagofed.org/research/dual-mandate/dual-mandate https://www.chicagofed.org/research/dual-mandate/dual-mandat...
    - thow-58d4e8b 5y ago
      FED actually has three mandates, one of them almost never mentioned: * employment * price level * moderate long term interest rates
      - chalst 5y ago
        The requirement to pursue moderate long-term interest rates is usually seen as part of price stability, since the level of long-term interest rates is determined by inflation expectations. Cf. https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm https://www.federalreserve.gov/faqs/what-economic-goals-does...
- mellavora 5y ago
  You ask others to do some research, which implies that you have good sources on how "The Fed, and other central banks have dealt with inflation many times before. And very effectively at that" I'd be interested to see them, especially any from the last 40 years (i.e. post-Volker). For pre-Volker, I'm interested in your sources from the early-mid 70s, and the way inflation was "controlled" in the years immediately surrounding the release of the gold standard.
carom 5y ago
Inflation isn't bad, it is part of the interest rate cycle. You cut rates until you can't then you use inflation.
- walkhour 5y ago
  Could you elaborate? Why is the interest rate cycle good?
  - carom 5y ago
    It's not good or bad, it just is. We're at the bottom right now, we'll stay here for a bit then experience inflation. Allocate assets accordingly. There isn't a good way up from zero interest rates besides printing money.
colinmhayes 5y ago
> I am not an economist People who don't know shit about economics sure love to bust out their ignorant opinions.

kqr 5y ago

That the fed has no tools is correct to the best of my understanding. The central banks are tasked with solving problems they have no mandate to solve. Inflation is, among other things, a problem of the market having too low a demand for money compared to the supply. One obvious way to fix that is by taxing money out of existence faster, decreasing the supply and thus increasing its value assuming demand stays fixed. (And there's reason to think it will; demand for money is a relatively unflexible parameter.) But of course, central banks do not control taxation, so there's not much they can do.

baron816 5y ago

> I am not an economist Yeah, if you’re interested in this stuff, you should do some research. The Fed’s options aren’t 0% rates vs 15% rates. It’s going to raise rates .25% at a time. .25% is not much of a difference. It’ll move slowly and act cautiously. The Fed, and other central banks have dealt with inflation many times before. And very effectively at that. Stocks could fall, but the stock market is not the economy, and the Fed has no mandate to prop up stocks.

snuxoll 5y ago
> and the Fed has no mandate to prop up stocks. Not true in the least anymore - retirement savings for a large percentage of our population are tied up in stocks thanks to the death of the pension. Asset and securities prices as a whole are a large concern for the fed when changing policy, as a result.
- chalst 5y ago
  The Fed has a dual mandate: price stability and maximal sustainable employment. Nothing about supporting the value of investments. https://www.chicagofed.org/research/dual-mandate/dual-mandate https://www.chicagofed.org/research/dual-mandate/dual-mandat...
  - thow-58d4e8b 5y ago
    FED actually has three mandates, one of them almost never mentioned: * employment * price level * moderate long term interest rates
    - chalst 5y ago
      The requirement to pursue moderate long-term interest rates is usually seen as part of price stability, since the level of long-term interest rates is determined by inflation expectations. Cf. https://www.federalreserve.gov/faqs/what-economic-goals-does-federal-reserve-seek-to-achieve-through-monetary-policy.htm https://www.federalreserve.gov/faqs/what-economic-goals-does...
mellavora 5y ago
You ask others to do some research, which implies that you have good sources on how "The Fed, and other central banks have dealt with inflation many times before. And very effectively at that" I'd be interested to see them, especially any from the last 40 years (i.e. post-Volker). For pre-Volker, I'm interested in your sources from the early-mid 70s, and the way inflation was "controlled" in the years immediately surrounding the release of the gold standard.

carom 5y ago

Inflation isn't bad, it is part of the interest rate cycle. You cut rates until you can't then you use inflation.

walkhour 5y ago
Could you elaborate? Why is the interest rate cycle good?
- carom 5y ago
  It's not good or bad, it just is. We're at the bottom right now, we'll stay here for a bit then experience inflation. Allocate assets accordingly. There isn't a good way up from zero interest rates besides printing money.

colinmhayes 5y ago

> I am not an economist People who don't know shit about economics sure love to bust out their ignorant opinions.