Fed monetary policy

Not an unusual chemical fire. This is an unusual inflation fire.

 

I’m the guy who likes to assure others that the doomsayers are almost always wrong. But how can we avoid being dragged into the Next Great Depression ?

“Today we see very similar dynamics at play in the world today. Debt has been building up in the Western economies for decades but has become particularly acute in the past three years. This is due, firstly, to the enormous spending required to keep people fed during the lockdowns and, secondly, due to the mounting costs — especially energy costs — that are being borne due to the war in Ukraine.”

The next Great Depression? | Philip Pilkington | The Critic Magazine

 

1. We are already IN A Recession.
2. This is the most inept Federal Reserve during my lifetime, instead of virtue signaling "inflation is transitory" they should have started raising interest rates during the first COVID stimulus under Trump, any dumbarse knows that federal spending by the government is inflationary.
3. Their inflation target has always been 2% but they got caught with their pants down so now they are playing catch-up, they are still 6-8 months behind.
4. As I have mentioned on here several times before, they are going to have to get to 5.75% on the fed Funds rate as soon as possible.
5. This admin will never do it but you have to bring the price of oil down by drilling anything and everything oil related to bring down inflation.

 

There’s really nothing unusual at all about it. There have always been supply disruptions, though I will grant you none of this magnitude. But to throw fuel on the fire with massive government spending, much of it directly to consumers was insane. The results of that were entirely predictable and exactly what we have right now.

Would have been a whole lot easier to not go into a frothing panic about Covid. Like I said in 2020, we will be dealing with the ramifications of our stupidity for at least a decade. Interest rates will need to go up more while we are already in recession.

I sincerely hope that people learn from this nonsense.

 

Consumer stimulus is loooooooooong gone and only replaced normal spending by the country…. GDP has not ballooned. Overall spending is steady… it’s just spent on fewer things. I don’t know what is so hard for you guys to grasp.

 

1. Caused by the fed
2. That would have been stupid
3. No amount of interest rate rising is going to make microchips cheaper. They are in short supply. Go find a car. Lots are bare but not from selling too much.
4. Doesn’t make more warehouse workers available.
5. Not enough oil in the US to replace 4M barrel cutback by opec. Last 4 weeks US output was 12.0M barrels against a high for these same weeks under Trump of 12.1M. We aren’t producing less.

 

Inflation was helped to be in check by decades of Just-In-Time inventory improvements. The JITs theory is the cheapest way to deliver a product is for said product to appear on the shelf the moment the consumer reaches for it at the store. JITs eliminates costs of producing over-runs, reduces storage costs, and reduces transportation costs and in theory, only the exact amount of product is shipped. Improvements in computer and tracking technology has helped with JITs and when the system works, it is the most efficient possible.

The downside to JITs is any break in the supply chain causes massive bottlenecks. And because of the pandemic, we had major breaks in the supply chain all over the world. Effects that we are still feeling today. Here's a blog that follows the microchip shortage causing a shortage of new cars. For months, the updates have all been almost verbatim. Nothing new to report. Still a shortage of microchips causing a shortage of new cars.

The good news is the last two months, total inflation has been .1%. But the expected was -.1%, which is why the FED raised rates again. The bad news is, we're still not there in terms of repairing the supply chain issues, though it is getting better. More bad news is the war in Ukraine is dragging on, which is causing oil and food issues with Russia.

Another issue at home is labor shortages. Trump cut 1 million legal immigrants since 2019. The pandemic likely caused an additional 2 million to be kept in Mexico waiting under Title 42. Not a total answer to our current labor shortage woes, but certainly something that would help. The fact that we still have 1.6 jobs for every person on unemployment is also a promising sign. Might mean the recession will have a soft landing, as those laid off do not have a difficult time finding new work. Time will tell.

 

Personally I feel like their actions are dominated by risk aversion and avoidance of any pain. That's simply not possible in the real world. Sometimes you have to cut off the foot to stop the infection or risk slowly losing the entire leg.

I think pussyfooting around is going to bring less immediate pain but that the pain will last a very, very long time and infect everything. Leadership is about making the right choice not being a nice guy and helping everyone all the time, and that's something our leaders seem to have problems with as of late. Being the chairman of the fed probably sounds awesome until now, but now is when it's most important. I don't think Powell wanted the job of leading, just being in a leadership position.

 

Should have begun raising many years ago. But housing was the new manufacturing. Ymmv

 

Because it’s somewhere between fiction and fantasy in your head.

 

The average Fed Fund rate since 1954 is 4.67%. It's currently at 3.08%. From what I've heard on financial podcasts, they expect gradual increases up to 4.50% before easing occurs.

 

Oil companies won't drill anything and everywhere because they'll destroy their own profits. It won't happen unless the government forces the companies to do it. That won't happen either. Even if it did, the government would have to give even more subsidies to the oil companies.

 

I think they are depending on hard working Americans to make up for stupid policy.

 

jobless claims just hit a 5 month low. what are you talking about?

I am very excited. My wife & are going to look at two properties tomorrow. When people are scared, be greedy.

 

Of course there will be job losses. taming inflation ain't free. It's not like we're starting at 7-8% UE. You make it sound like the fed's making some monumental mistake b/c there actions will result in job losses. See 1982.