Fed plans to raise rates as soon as March to cool inflation
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  Fed plans to raise rates as soon as March to cool inflation
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Author Topic: Fed plans to raise rates as soon as March to cool inflation  (Read 19667 times)
Clarko95 📚💰📈
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« Reply #200 on: October 13, 2022, 02:23:18 PM »

Sounds like it's a great time to pass another nice big tax increase
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Clarko95 📚💰📈
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« Reply #201 on: October 25, 2022, 03:42:54 PM »
« Edited: October 25, 2022, 03:52:41 PM by Clarko95 📚💰📈 »

Natural gas prices are back to pre-war levels on both sides of the Atlantic:

Europe:


And the United States:


Weather forecasts are for a mild winter on both sides as well, even if there may be a cold snap in December in Europe and January in the United States. Fingers crossed that climate change may actually defeat the Russian invasion of Ukraine, in a hilarious twist on the "Don't invade Russia in winter" meme.



In other important news, I received my annual bill for gas and electricity this past month. On top of the estimated payments I made since last summer, had to cough up 200 Euros extra for gas and 140 extra for electricity. Not fun.

But this year I invested/am investing in insulation for the windows, carpets on the floors, shorter and colder showers, using the oven less, having more tea, coffee, soup, etc., a snuggie for when I am at my computer, heavier blankets and going to the office more often. I also think I may have shorted myself over the past year by putting my estimated payments too low (at just 42 EUR per month for gas and 49 for electricity). All of these are like 100 Euros in investments that will prob save me like 300-500 by next summer and more by mid-2024 when my contracts lapse.

I was extremely fortunate that I signed a two-year contract with decent rates just two days before Russia invaded Ukraine. While I got 200 EUR from the government as part of the energy relief payment thing, in the end I really don't need this and would much rather than aid be targeted to people who actually need it, instead of these universal payments. I can take the hit, other people can't.
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jaichind
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« Reply #202 on: October 25, 2022, 03:56:37 PM »

What Fed does with QE is basically borrowing short-term floating and getting paid long-term fixed.  While the short-term rates were low the Fed makes a profit.  In 2021 this profit was  $107.8 billion which was handed over to the USA Treasury

https://www.federalreserve.gov/newsevents/pressreleases/other20220114a.htm

It is now certain that the Fed will now operate at a loss going forward.  So in 2022 and beyond the Treasury can no longer expect funding from this source.

https://www.yahoo.com/now/fed-losing-billions-wiping-profits-060001473.html

"Fed Is Losing Billions, Wiping Out Profits That Funded Spending"

Fed "profit" will go from $100 billion in 2021 to a negative $80 billion this year.  A lot of this is because of QE which will need to be unwound eventually triggering more losses down the line.
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jaichind
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« Reply #203 on: October 30, 2022, 06:33:47 AM »

Goldman Sachs Now Sees Fed Rates Peaking at 5% in March 2023.  This sort of make sense.  On on YoY basis, I expect CPI to fall to around 5% around the same time.  I guess the idea is that once the Fed Rates are above CPI it makes sense to stop and assess how CPI falls from there.
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jaichind
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« Reply #204 on: November 04, 2022, 04:14:07 PM »

https://www.bloomberg.com/news/articles/2022-11-04/summers-sees-risk-fed-needs-to-hike-past-6-to-quell-inflation

"Summers Sees Risk Fed Needs to Hike Past 6% to Curb Inflation"

Summers must be spooked by the CPI MoM surge recently.  I am now more dovish than Summers.  I think CPI MoM will slow down going forward which means CPI YoY will slow down to around 5% by April/May 2023.  If so then I think if Fed goes to 5% by Spring of 2023 would be good enough.  Summers clearly does not take my optimistic view of the future.
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Fmr. Pres. Duke
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« Reply #205 on: November 07, 2022, 11:50:09 AM »

I think we get to 5% at the very least before the Fed slows down. I suspect the CPI number this week will be hotter than expected given energy prices ticked up last month. Anyone who thinks the Fed will slow down or pivot anytime soon is not paying attention to persistent inflation.
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buffalobillsfan4444life
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« Reply #206 on: November 07, 2022, 05:39:58 PM »

The government should NEVER be involved with inflation to begin with. ABOLISH THE FED
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jaichind
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« Reply #207 on: November 10, 2022, 08:30:53 AM »

Oct CPI YoY came in at 7.7% MoM at 0.3%.  Both less than expected
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jaichind
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« Reply #208 on: November 10, 2022, 08:50:58 AM »

These latest CPI numbers seem to indicate the peak Fed rate early next year is more likely to be 5% as advocated by GS versus 6% as advocated by Larry Summers.
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jaichind
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« Reply #209 on: November 15, 2022, 09:05:19 AM »

Oct PPI MoM came in at 0.2% ... Adding to the inflation-peaking narrative.
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Fmr. Pres. Duke
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« Reply #210 on: November 15, 2022, 10:58:11 AM »

Oct PPI MoM came in at 0.2% ... Adding to the inflation-peaking narrative.

Yes, really a home run across the board with today's PPI number. I'm not going to pop the champagne yet. We need to see a pattern. We had a good number in August before inflation re-accelerated, but the rate hikes are clearly working their way through the economy now.
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Clarko95 📚💰📈
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« Reply #211 on: November 18, 2022, 08:30:28 AM »

Shipping costs are back to pre-pandemic levels as well

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PSOL
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« Reply #212 on: November 18, 2022, 01:14:57 PM »

There is no excuse on my where needs to be more rate hikes. Not one.
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« Reply #213 on: November 18, 2022, 02:15:55 PM »

I was planning to buy into European ETFs in February during the worst of what would be a serious energy crisis in Europe, but the low gas prices and mild weather means there will be less dooming about Europe this winter. So, I'll see how my recently made bets into German and Polish ETFs pay off.
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jaichind
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« Reply #214 on: December 02, 2022, 06:35:42 AM »

Personal Savings Rate 3M Moving Average ⁦hits record low.  Pretty much all the cash handed out during COVID-19 is being burned up.  Good news on the inflation front.  Pretty soon cash for unsustained consumption will run out and prices will finally stop increasing and then start to fall.
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Benjamin Frank
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« Reply #215 on: December 03, 2022, 04:16:26 PM »

One thing with inflation with the 1970s is that the perception that inflation harmed the economy then has had to be revised. Real GDP growth of the 1970s in the U.S paled the Real GDP growth of the 1950s and 1960s, but was better than the Real GDP growth of every decade since then with the exception of the 1990s. So, the anomaly was not the economy of the 1970s with the high inflation, but the economy of the 1950s and 1960s coming out of the Great Depression and World War II with the U.S as by far the leading exporter in the world.

For the most part, the only time the economy did not perform well in the U.S in the 1970s was during the oil shocks/embargoes in 1973 and 1979/1980.

I think we are clearly seeing that again. This is not to say that inflation doesn't have negative consequences on an economy or on individuals in an economy or that it wouldn't be best to get it back into the 2% range, but it is to say that it seems that people and the economy do ultimately adjust to most anything.
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Tintrlvr
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« Reply #216 on: December 03, 2022, 10:20:48 PM »

Personal Savings Rate 3M Moving Average ⁦hits record low.  Pretty much all the cash handed out during COVID-19 is being burned up.  Good news on the inflation front.  Pretty soon cash for unsustained consumption will run out and prices will finally stop increasing and then start to fall.


I think this chart only goes through July, but this seems to suggest a lot of COVID-era savings remain, notwithstanding low savings rates now (chart is excess above February 2020 total savings).

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jaichind
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« Reply #217 on: December 04, 2022, 11:05:41 AM »

One thing with inflation with the 1970s is that the perception that inflation harmed the economy then has had to be revised. Real GDP growth of the 1970s in the U.S paled the Real GDP growth of the 1950s and 1960s, but was better than the Real GDP growth of every decade since then with the exception of the 1990s. So, the anomaly was not the economy of the 1970s with the high inflation, but the economy of the 1950s and 1960s coming out of the Great Depression and World War II with the U.S as by far the leading exporter in the world.

For the most part, the only time the economy did not perform well in the U.S in the 1970s was during the oil shocks/embargoes in 1973 and 1979/1980.

I think we are clearly seeing that again. This is not to say that inflation doesn't have negative consequences on an economy or on individuals in an economy or that it wouldn't be best to get it back into the 2% range, but it is to say that it seems that people and the economy do ultimately adjust to most anything.

I agree there is nothing magical about 2% inflation being superior to, say 5% inflation.  What is needed is predictable inflation.  Erratic inflation makes long-term economic decisions difficult to make.    And the most predictable inflation is 0%.  The problem with 0% inflation, which I am obviously for,  is that the stickiness of prices makes relative market price adjustments more difficult.  As a result, 2% inflation as a target became a compromise between these two goals.  I am fine with a stable 4%-5% inflation as long as it is stable 4%-5% inflation per year.  The risk of a price spiral is much greater with a 4%-5% inflation environment which makes it a lot more risky economic steady state to be in.
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Saint Milei
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« Reply #218 on: December 04, 2022, 01:38:56 PM »

Personal Savings Rate 3M Moving Average ⁦hits record low.  Pretty much all the cash handed out during COVID-19 is being burned up.  Good news on the inflation front.  Pretty soon cash for unsustained consumption will run out and prices will finally stop increasing and then start to fall.


I think this chart only goes through July, but this seems to suggest a lot of COVID-era savings remain, notwithstanding low savings rates now (chart is excess above February 2020 total savings).



Excess savings? Americans don't save to begin with, but when rates are so low, what do you expect. The fed is in for a ride awakening.
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Saint Milei
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« Reply #219 on: December 04, 2022, 01:41:05 PM »

It does seem like since 1970, we have experienced an era of permanent decline. A "recession" or two will occur every decade, but the economy will remain stagnant for most of the decade. No real growth. Savings is a myth. Prices going up. It's unfortunate. The fed changed the nature of the world
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MillennialModerate
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« Reply #220 on: December 05, 2022, 09:27:26 PM »

Don’t want to read back further but does anyone who knows about these things see at least a period where they don’t raise rates? A decrease would be awesome but at least a period where rates aren’t raised
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jaichind
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« Reply #221 on: December 07, 2022, 06:59:13 AM »

Amazing what a rise in real short term interest rates would do in combination of years of QE
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World politics is up Schmitt creek
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« Reply #222 on: December 07, 2022, 08:58:38 PM »

It does seem like since 1970, we have experienced an era of permanent decline. A "recession" or two will occur every decade, but the economy will remain stagnant for most of the decade. No real growth. Savings is a myth. Prices going up. It's unfortunate. The fed changed the nature of the world

The big monetary policy change around 1970 was the Nixon shock, not the Fed, but yeah, there is decent circumstantial evidence (if you start from certain priors) that the shift to pure fiat money contributed to our economy's long-term unsoundness.
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Alcibiades
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« Reply #223 on: December 07, 2022, 09:04:13 PM »

It does seem like since 1970, we have experienced an era of permanent decline. A "recession" or two will occur every decade, but the economy will remain stagnant for most of the decade. No real growth. Savings is a myth. Prices going up. It's unfortunate. The fed changed the nature of the world

The big monetary policy change around 1970 was the Nixon shock, not the Fed, but yeah, there is decent circumstantial evidence (if you start from certain priors) that the shift to pure fiat money contributed to our economy's long-term unsoundness.

I have to say, I didn’t have you pegged down as a goldbug, Nathan.
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World politics is up Schmitt creek
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« Reply #224 on: December 07, 2022, 10:34:15 PM »

It does seem like since 1970, we have experienced an era of permanent decline. A "recession" or two will occur every decade, but the economy will remain stagnant for most of the decade. No real growth. Savings is a myth. Prices going up. It's unfortunate. The fed changed the nature of the world

The big monetary policy change around 1970 was the Nixon shock, not the Fed, but yeah, there is decent circumstantial evidence (if you start from certain priors) that the shift to pure fiat money contributed to our economy's long-term unsoundness.

I have to say, I didn’t have you pegged down as a goldbug, Nathan.

The "certain priors" include "being a monetarist", which I'm not (thank God and thank my mother for raising me with Milton Friedman as a hate object, once I was old enough to be told about him).
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