I can believe you or I can believe my eyes.
Posted on 10/17/2018 2:09:24 PM PDT by bananaman22
Isn’t it cool that higher prices for oil is good for our economy now?
I’m having trouble wrapping my mind around it. Even when I was a little tyke, high oil prices were ... bad .. and ...
... and now ... ?
We seem to have forgotten just how very low interest rates are today, compared to historic norms. I bought my first house in 1993 because I thought I’d never see interest rates that low again. It was 7%. In a healthy economy, savings accounts and CD’s are rewarded with a stable return. That’s not the case now, no one in their right mind would try to live off of interest from savings, yet not so long ago that was once a mainstay for retirees. That needs to return. That means interest rates have got to rise. Yes it will mean interest paid on loans will increase also, but we somehow survived normal interest rates in the past. We’ll survive again.
Regarding this economic gloom and doom, note that it’s directed at emerging markets meaning the third world. We are not an export driven economy. We are now the world’s number one oil producer. We are benefitting from oil prices as they stand. Fracking continued to expand even in the face of OPEC attempts to shut it down by tanking the price of oil by flooding the market, not all that long ago, just a few years.
Also, the article’s assumption appears to be that this economic expansion somehow dates to early in the Obama era. I’ll go out on a limb and say we’re experiencing the first real, sustainable growth that is not wholly a phenomenon of government stimulus spending since before 9/11. This expansion, the real one, began with the Trump administration. So, the expansion is really in it’s infancy yet.
But, I don’t want to sound too pollyannish about things, global finance is still in a rather precarious state. Trouble in emerging markets could rapidly escalate into a contagion given the global nature of finance, so it’s not wise to dismiss the matter, just as it’s not wise to give into excessive doomer prognostications that are oddly arising just now, right before US elections.
We as a nation need to keep doing what we’ve been doing, keep working, building, producing, saving, investing and spending. We’re our own source of continued economic success, no one else is, they’re all dependent upon us. If the financial system melts down again, well, that will hurt but our economy is not dependent upon exports, we’re dependent upon imports and trying mightily to change that. The US is still a safe haven, scared money will flee from around the world into US financial instruments, even bonds, driving interest rates back down again. That’s how it’s supposed to work.
If you really believe things are that precarious, buy precious metals although I think they’re still too high for any real upside to buying them, personally. Just don’t turn into a gold bug and think it’s a buy and hold investment for the long term. Get out of it the minute that economic fear begins to ease, because that’s when precious metals will begin to fall once again.
Just my two cents on the matter, I’m sure opinions will vary.
7% wasn’t the norm.
It was a fluke.
I was purchasing property at 14% a few years prior to that.
It was the great bank enrichment of the baby boom.
2 to 4 were norms in the fifties and sixties.
Please point out where I stated that 7% is the norm. I didn’t. I stated that I thought at the time that I’d never see interest rates that low again. Obviously that was not correct. Interest rates are quite low by historical norms now, though. It’s impossible to live off of interest from savings or CD’s, whereas it was a mainstay for retirees in decades past, a stable place to put your nest egg and earn a decent return. There hasn’t been a decent rate of return on savings or CD’s for decades now. That has to change in order to have a healthy economy.
Your stand on the Fed is philosophical. And I get it. But you are attributing powers to them that they do not have. A rise in short term interest rates does not, by itself, directly affect mortgages or car loan rates. Businesses look to the 10 year T bond rate for direction as to where their rates should be. Once again, that 10 year rate is fixed by the market.
Please refer to the silliness from those thinking an inverted yield curve will automatically cause a market crash.
The Fed does more manipulation of the markets than any other entity on the planet, but the brainwashing is so great, even some Conservatives will defend them.
I can believe you or I can believe my eyes.
You don’t have to believe just me. What I am saying is just stone fact. You can put up an Escher drawing and it doesn’t change that fact.
That’s not me defending the Fed. That’s me defending the truth.
If you told me Tesla was the greatest car ever because it flies and can act like a submarine and I point out the fact that they do neither I am not defending Tesla.
The Fed manipulates interest rates and it causes recessions.
That’s a stone cold fact.
You can tell me your name is Nancy Pelosi, but it wouldn’t change that fact.
When the Fed sets its fund rate target it should use the yield curve as a guide. Anything else is manipulation.
Trump is right to be criticizing the Fed.
You are stuck on an incorrect and simplistic idea about what they do. I obviously can’t correct you so please, remain ignorant if that is what you want.
The Fed adjusts short term interest rates both up and down as part of their dual role of attempting to keep inflation under control (or, as seen recently, deflation at bay) or to stimulate a lagging economy.
...
That’s manipulation. They stimulate the economy they wreck, and they wreck the economy they stimulate. Economic growth doesn’t cause inflation. They need to step aside and let the markets work and get out of the way the American people. And they need to stop working against the benefits of Trump’s policies. The trade deficit and budget deficit are going up because of them.
President Trump is doing the right thing by criticizing them. And if he needs to use the Treasury to put them in their place, so be it.
The Fed is not a government agency. In your uneducated opinion what is the Treasury going to do to them?
I feel it necessary to remind you again that I am not a fan of the Fed, but unlike you I do understand what they are and what they are not.
By law the Treasury sets our foreign exchange policy. They can set the policy to counteract whatever the Fed is doing to manipulate the markets (in practice the Fed is a currency manipulator, even though that isn’t their stated goal). The Treasury prevails by law when there is a conflict.
You are getting weirder and weirder.
The Treasury REPORTS on foreign exchange, and will report currency manipulation to Congress. Here is their latest report: https://home.treasury.gov/news/press-releases/sm528
Foreign exchange and short term interest rates are mildly correlated at best.
I understand that this forum is a great place to learn things, but you are proving how little you know about the American financial system.
Here’s how I would criticize the Fed for something they actually did:
During the Obama administration the Fed was facing a failing economy at the same time as bad fiscal and regulatory policies. Americans were in a dire situation and feared another Great Depression. The supposedly independent body COULD have denounced the Keynesian attempts at kick starting the economy as they were obviously failing. Instead the Fed began the most expensive monetary experiment in the history of mankind. It included ZIRP, Stimulous, Operation Twist and Quantitative Easing. They got little back in economic stimulus for adding $4.5 Trillion to their bond balance sheet. Yes, they monetized the debt and they now face a long and risky road to unwind that balance sheet over decades while hoping not to be caught flat footed and out of tools when the next recession strikes.
“Instead the Fed began the most expensive monetary experiment in the history of mankind. It included ZIRP, Stimulous, Operation Twist and Quantitative Easing.”
It appeared to me that Bernanke was implementing the sort of policies that Milton Friedman and Anna Schwartz recommended should have been done in 1930 to prevent the cascading bank collapses that made the Great Depression such a disaster.
The Fed at that time failed to act to provide liquidity and banks that otherwise would have remained sound collapsed like a series of dominoes. Making matters worse was the absence of any depositor insurance so account holders were wiped out as well as the owners of the banks.
It’s my guess that a number of large banks were technically bankrupt by the events of 2008 and QE, ZIRP, etc were intended to keep them alive and prevent cascading failures. My main complaint is that this was done in a fashion that let irresponsible lenders off the hook and transferred the pain to taxpayers. IIRC Sweden had a similar crisis years before, albeit smaller, and had a much better solution that didn’t transfer the cost to their citizens.
“Interest rates should be determined by the markets, not Ivy League elites.”
You must not remember the 1970s and The Bond Vigilantes.
Interest rates are determined by the market. The Fed at best can try to influence them, particularly at the very shortest end, but the bond market will do what it wants.
Preventing a further collapse in housing prices helped responsible and irresponsible lenders alike. Home owners too.
What pain was transferred to taxpayers?
“What pain was transferred to taxpayers?”
Good question. None?
I think in the Swedish example the state took over the bank, improved its balance sheet, then sold it back to the private sector earning a few books for their taxpayers.
Actually Iceland did it better.
The Fed’s initial actions weren’t so bad; they kept the banking system solvent enough to get us through the initial panic created by Mortgage Backed Securities. It’s their action for the next 5 years or so that I described that were both incredibly expensive and ineffective.
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