The case against a rate cut

Just wait until this ACOE issue ripples through the development business. Boats and all kinds of toys are going to get cheaper

 

I don't know where unlent money goes. I do know when the banks don't lend, the project doesn't get built and people don't get paid. That's happening in real time. Contrary to what many believe when the "rich developers" don't build, it hurts the working in a lot more than them.

A very reputable architect friend of mine told me that the commercial side of his business came to an absolute screeching halt six months ago.

 

Not in my county or city.

 

Higher rates are like a HUGE TAX on the poor people. It's okay if you have money, because you can always find a way to make more profits. Bubbles are caused by abuses in the system... like the sub-prime crimes...

 

Inflation is a tax on poor people. You think a billionaire gives a shit if the price of turkey or bread triples? Higher rates equal less inflation.

 

Usually... but that's not what's happening right now.

 

I don’t think that doc is trying to say that “the middle class didn’t benefit” from the rate cuts back in 08. I believe what he is saying, accurately, the benefits to financial sector far outpaced any benefit to middle class.

Rate cuts are an effective way to stimulate and economy. Fours years ago they were cut too much and held down too long. We need to get back to equilibrium rates where inflation is low and growth is slow and stable. I would like to see the dual mandate erased. Let the Fed manage inflation.

 

I don’t think Doc was saying that either. The article (an opinion piece) that he referenced stated that about the middle class. Apologies if I wasn’t clear, but I actually liked his rationale to keep rates flat on a previous thread more than the points made in the WSJ opinion pages.

Rate cuts absolutely benefit the financial sector, and within it asset managers (in particular private equity and hedge funds) more than they help the middle class. A healthy economy and reasonable rates benefit everyone though.

You are kinda contradicting yourself in the last paragraph with the call for the elimination of the dual mandate, but starting by stating rate cuts are an effective way to benefit an economy (of which unemployment is a very important measure of economic health).

Regarding the 2020 rate cut to zero, you don’t have much of a leg to stand on regarding the fed’s decision. We have the benefit of hindsight and our economy and inflation rates are in better shape than everywhere else on the planet. There was no playbook for how to manage a current global shutdown. There is nothing from that time frame that suggests we should change the structure or mission of our central bank.

 

I should have been clearer. I agree on the lack of playbook, but the Fed waited much too long to raise rates even after it became apparent that the government was over stimulating the economy. Giving the USG zero or near so interest rates is an invitation for foolish spending.

 

That is exactly what's happening right now. Increased rates from 2 years ago have helped drive YOY inflation back down to ~3%.

 

You have no idea where I stand on this... You need to worry about putting into words your point of view, instead of trying to invent mine.

 

The fed is going to very likely start lowering rates before the election even happens. They're pretty apolitical contrary to what you might think.

 

That's Year Over Year, Rick. YOY. Not YOU.

lmao