Does Anyone Know What the Fed Is Doing? \ stacker news ~econ

1008 sats \ 14 comments \ @Undisciplined 21 Dec 2023 econ

Push down rates and risk a debt spiral or increase/maintain rates and struggle to service the debt?

Or, if it really is just about electoral politics, what's going to piss voters off more, high interest rates or high price inflation?

On this episode of Radio Rothbard, Ryan McMaken and Tho Bishop are joined by Mark Thornton to discuss Jerome Powell's most recent announcement. As the Fed signals its potential for a policy pivot, other members of the FOMC are sending other signals. What does this mean for monetary policy, the dollar, and the performance of the real economy? Thornton is here to answer these questions and more.

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443 sats \ 1 reply \ @TomK 22 Dec 2023

Inflating bubbles and trying to save their product (USD) from de-dollarization simultaneously. Nice story

0 sats \ 0 replies \ @Undisciplined OP 22 Dec 2023

450 sats \ 3 replies \ @davidw 21 Dec 2023

Do they? 😂

0 sats \ 2 replies \ @Undisciplined OP 21 Dec 2023

Are you excluding them from the category of "anyone"?

429 sats \ 1 reply \ @davidw 21 Dec 2023

I would rather believe they sit around and play card games all day. Moving pieces around the monopoly board.

Unfortunately the signs point to the fact that they genuinely believe they are doing good for the world. When they are consistently doing precisely what is NOT needed at precisely the wrong time. Repeatedly.

0 sats \ 0 replies \ @Undisciplined OP 21 Dec 2023

Broadly speaking, I think it's more accurate to imagine them as misguided true believers than nefarious villains twirling their mustaches.

They are demonstrably political, though, and clearly swayed by powerful interests. Even most of that could just be due to selection bias.

429 sats \ 1 reply \ @grayruby 22 Dec 2023

I believe Luke Gromen describes it as trying to ride two horses with one ass.

100 sats \ 0 replies \ @Undisciplined OP 22 Dec 2023

Good description

429 sats \ 1 reply \ @shado_op 22 Dec 2023

Ok, so the US will never default on it's debts, as it can print whatever is required. Markets and politicians know this, which fully explains what otherwise seems to be highly illogical behaviour.

So a quarter point here or there on interest rates is presented as the big issue, when it's pretty much irrelevant long term. Western economies are now addicted to the debt cycle anyway so changes to interest rates affect nothing.

It's in no-one's interest to stop this. The economy would collapse, as others have pointed out.

But higher inflation is the cost of more money chasing the same amount of goods/services. The Cantillion effect keeps the already uber rich one step ahead of the chaos anyway... It's ordinary people who suffer. (btw higher productivity would break the cycle which is why the pundits are obsessed with so called AI).

But everyone involved has to be seen to play the game. Playing the game provides ample rewards to politicians and functionaries that say/do the "right things".

Are you not entertained, as they say ..

(Or it might just be I'm an anti-establishment cynic and really they do all know what they're doing...)

25 sats \ 0 replies \ @Undisciplined OP 22 Dec 2023

What you're describing is often referred to as "soft default". Everyone knowing that a soft default strategy is being played also means a more rapid devaluation of the currency.

The minor tweaks to interest rates can change sentiments about how close we are to the currency's ultimate collapse, which everyone knows is where this story ends. If that end is perceived to be near, people will begin ditching the dollar and at that point printing money will just be pushing rope.

429 sats \ 1 reply \ @faithandcredit 21 Dec 2023

Imo the US will default on its debt in the near future. Markets will crash and probably remain deflated for a generation. Socialist policies will gain momentum across the west and they will become so weakened and desperate that world War 3 will start which they will lose. I think this will happen within the next 20 years. Low tech for the win.

0 sats \ 0 replies \ @Undisciplined OP 21 Dec 2023

That's a pretty bleak prediction. I think the US would break up in a scenario like that and some of the new nations would be extremely anti-socialism.

I also think WWIII will be here sooner than that, assuming it hasn't already started.

429 sats \ 1 reply \ @quark 21 Dec 2023

In my opinion, they are trying to fight inflation without a crash in the economy, doing a soft landing. But as soon as they hint to cut rates, the market is already way ahead of them and inflation comes back strongly. The debt problem is not going to go away, just going to get worse and worse as the Fed is in a very bad situation if the pretend they can do a soft landing. They always insist they are politically independent. I think they know they just have to align the policy with Bitcoin halving now 😋

0 sats \ 0 replies \ @Undisciplined OP 21 Dec 2023

I was with you right up to that last sentence. I can pretty much guarantee you (as someone who went through a mainstream econ PhD program) that they're at least 10x stupider about money than you think they are.