Inflation Scaremongering
ridski said:
Oh, I’m going to have to ask you re-write that sentence, DaveSchmidt.
Certainly. Without the Fed’s increases in interest rates, it’s possible that consumer demand would have risen faster in the hot economy than the gentle curve in Drum’s chart.
To elaborate: A steeper increase in consumer demand would have created stiffer headwinds for the salutory effects of the easing supply chains, making it harder for supply and demand to fall back into balance. Drum asserts that for dampening to succeed, it has to decrease demand; it doesn’t. (Kind of like inflation can be dampened without decreasing prices.)
And it’s not as if the Fed hasn’t always acknowledged the impact of supply chains on inflation and kept a close eye on them. Google is riddled with news articles about the Fed’s attention to supply chains during and after the pandemic. The Fed believes it has a tool, though, that can work in concert with those and other aspects of the economy, so it uses it.
DaveSchmidt said:
Only one can be a favorite, but other commenters noted that consumer demand can rise at a rate that’s dampened from it might have been, so joey didn’t have to.
"dampened from *what* it might have been" would have clarified it, and I agree.
jimmurphy said:
"dampened from *what* it might have been" would have clarified it, and I agree.
Even with ridski’s encouragement I missed that. Thanks.
from what I've read, even the Fed wasn't certain that raising interest rates would bring down inflation. But it was a bad look for them not to do something in the face of high inflation, even if that something wasn't going to be effective.
and they only tool they have in their box is interest rates. It's the old joke that if all you have is a hammer...
we'll never know what would have happened in a parallel universe where the Fed didn't raise rates, or raised them less than they did. But given how much supply chain disruptions and a degree of price gouging caused inflation, coupled with the fact that consumer demand and the job market are still strong, yet inflation has plummeted, makes me skeptical that rates needed to go as high as they are.
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
Which broad measures did you have in mind?
Growth since the Fed started raising rates in March 2022:
DaveSchmidt said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
Which broad measures did you have in mind?
Growth since the Fed started raising rates in March 2022:
not a fan of charts that don't base the vertical axis at 0
ml1 said:
not a fan of charts that don't base the vertical axis at 0
I intended those charts to show direction, not degree.
This year-over-year GDP growth chart puts the spike last quarter in a little more perspective.
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
IIRC you previously argued against rate hikes because they'd unnecessarily hurt the economy. Now there have been rate hikes, inflation is way down, and at least to date, the economy has not been hurt much. Like a dream scenario for the incumbent Democrat President you support. Yet you still whinge about rate hikes?
What do you want, exactly?
DaveSchmidt said:
ml1 said:
not a fan of charts that don't base the vertical axis at 0
I intended those charts to show direction, not degree.
but the direction on the charts look a lot more dramatic than they really are.
given your skepticism when others present data I thought you'd also not be a fan of truncated axes.
ml1 said:
but the direction on the charts look a lot more dramatic than they really are.
given your skepticism when others present data I thought you'd also not be a fan of truncated axes.
I don’t share your skepticism in this case and gave my reason. If I could edit the Federal Reserve Economic Data’s y-axis, I would. The change wouldn’t de-illustrate that GDP, PCE and jobs growth has slowed (how dramatically, or not, wasn’t the point), as have improvements in the unemployment rate.
Another thought that occurred to me while I was compiling the FRED graphics: Drum’s consumer spending chart is inflation-adjusted. That means the line in the chart could rise even if demand fell. (If inflation fell faster than demand fell, real demand would rise. In effect, the success of falling inflation would obscure a decline in demand.)
ETA: Nope, still an increase.
DaveSchmidt said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
Which broad measures did you have in mind?
Growth since the Fed started raising rates in March 2022:
Yes, while I erred in using the phrase "no slowing down" in my one sentence summary of a 27 trillion dollar economy, the fact remains that the economy has continued to grow and remain quite strong during the rate hike period while inflation has substantially moderated. This is strong evidence that the Fed's actions are probably not the reason for inflation falling. These are obvious facts which are beyond chart sophistry.
drummerboy said:
Yes, while I erred in using the phrase "no slowing down" in my one sentence summary of a 27 trillion dollar economy, the fact remains that the economy has continued to grow and remain quite strong during the rate hike period while inflation has substantially moderated. This is strong evidence that the Fed's actions are probably not the reason for inflation falling. These are obvious facts which are beyond chart sophistry.
I look forward to your PhD dissertation on the subject, since this is so obvious, even to the most casual observer. Even if the FED can’t see it.
I will note that Galileo, Pasteur, Einstein and Columbus all had their outlier theories ultimately validated, so there's some precedent for db here.
Smedley said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
IIRC you previously argued against rate hikes because they'd unnecessarily hurt the economy. Now there have been rate hikes, inflation is way down, and at least to date, the economy has not been hurt much. Like a dream scenario for the incumbent Democrat President you support. Yet you still whinge about rate hikes?
What do you want, exactly?
If the Fed does not reverse the hikes, the existing hikes may well still harm the economy going forward, as their effects on the economy as a whole are generally considered to be delayed. Even if they are reversed, they could still harm the economy. Depends on how fast they are reversed and to what degree. In reality, who TF knows?
However, the rate hikes have clearly hurt the housing market and have increased borrowing costs for consumers, perhaps unnecessarily. And for you deficit hawks, it has increased "borrowing" costs for the Federal government by close to 650B over the next five years.
jimmurphy said:
drummerboy said:
Yes, while I erred in using the phrase "no slowing down" in my one sentence summary of a 27 trillion dollar economy, the fact remains that the economy has continued to grow and remain quite strong during the rate hike period while inflation has substantially moderated. This is strong evidence that the Fed's actions are probably not the reason for inflation falling. These are obvious facts which are beyond chart sophistry.
I look forward to your PhD dissertation on the subject, since this is so obvious, even to the most casual observer. Even if the FED can’t see it.
what makes you think the Fed can't see it? Of course they can see it. Doesn't mean they have to admit that maybe they made a mistake.
drummerboy said:
Smedley said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
IIRC you previously argued against rate hikes because they'd unnecessarily hurt the economy. Now there have been rate hikes, inflation is way down, and at least to date, the economy has not been hurt much. Like a dream scenario for the incumbent Democrat President you support. Yet you still whinge about rate hikes?
What do you want, exactly?
If the Fed does not reverse the hikes, the existing hikes may well still harm the economy going forward, as their effects on the economy as a whole are generally considered to be delayed. Even if they are reversed, they could still harm the economy. Depends on how fast they are reversed and to what degree. In reality, who TF knows?
However, the rate hikes have clearly hurt the housing market and have increased borrowing costs for consumers, perhaps unnecessarily. And for you deficit hawks, it has increased "borrowing" costs for the Federal government by close to 650B over the next five years.
Why do you seem to believe rates are onerously high now? Who's to say what the appropriate rate is? On a long-term historical basis, current rates aren't high at all. Yeah, rates are way higher than 2019-2021, but who's to say current rates now aren't appropriate and those free-money years weren't unduly low. Those years did just happen to be followed by massive inflation.
Smedley said:
drummerboy said:
Smedley said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
IIRC you previously argued against rate hikes because they'd unnecessarily hurt the economy. Now there have been rate hikes, inflation is way down, and at least to date, the economy has not been hurt much. Like a dream scenario for the incumbent Democrat President you support. Yet you still whinge about rate hikes?
What do you want, exactly?
If the Fed does not reverse the hikes, the existing hikes may well still harm the economy going forward, as their effects on the economy as a whole are generally considered to be delayed. Even if they are reversed, they could still harm the economy. Depends on how fast they are reversed and to what degree. In reality, who TF knows?
However, the rate hikes have clearly hurt the housing market and have increased borrowing costs for consumers, perhaps unnecessarily. And for you deficit hawks, it has increased "borrowing" costs for the Federal government by close to 650B over the next five years.
Why do you seem to believe rates are onerously high now? Who's to say what the appropriate rate is? On a long-term historical basis, current rates aren't high at all. Yeah, rates are way higher than 2019-2021, but who's to say current rates now aren't appropriate and those free-money years weren't unduly low. Those years did just happen to be followed by massive inflation.
regardless of what the "appropriate" rate might be, the fact is that rates rose very quickly and by historically high amounts. That can't be anything but disruptive.
as for your last sentence - post hoc ergo propter hoc.
drummerboy said:
Yes, while I erred in using the phrase "no slowing down" in my one sentence summary of a 27 trillion dollar economy …
I gave you something that you found laughable (not to mention desperate and other disparaging words), and now you’ve reciprocated. DB, this could be the continuation of a beautiful relationship.
… the fact remains that the economy has continued to grow and remain quite strong during the rate hike period while inflation has substantially moderated.
I thought that was the Fed’s goal, not something to hold against it.
DaveSchmidt said:
drummerboy said:
Yes, while I erred in using the phrase "no slowing down" in my one sentence summary of a 27 trillion dollar economy …
I gave you something that you found laughable (not to mention desperate and other disparaging words), and now you’ve reciprocated. DB, this could be the continuation of a beautiful relationship.
… the fact remains that the economy has continued to grow and remain quite strong during the rate hike period while inflation has substantially moderated.
I thought that was the Fed’s goal, not something to hold against it.
there goal was to increase unemployment and Powell bemoaned the ongoing strength of the jobs market. This makes for interesting reading.
drummerboy said:
there goal was to increase unemployment and Powell bemoaned the ongoing strength of the jobs market. This makes for interesting reading.
Increased unemployment wasn’t a goal; the Fed saw it as a cost of slowing down an overheating economy. From the highlighted Google hit:
"I wish there were a painless way to do that," Powell said. "There isn't."
In reality, who TF knows?
My money’s on you and Kevin Drum. You both sound confident.
drummerboy said:
Smedley said:
drummerboy said:
Smedley said:
drummerboy said:
I don't see how it can be more obvious that the rate hikes did not have their intended effect. Pretty much every broad measure of the economy shows no slowing down.
To try and argue that "akshually, the hikes slowed down the rise" is laughable, desperate and probably other disparaging words.
IIRC you previously argued against rate hikes because they'd unnecessarily hurt the economy. Now there have been rate hikes, inflation is way down, and at least to date, the economy has not been hurt much. Like a dream scenario for the incumbent Democrat President you support. Yet you still whinge about rate hikes?
What do you want, exactly?
If the Fed does not reverse the hikes, the existing hikes may well still harm the economy going forward, as their effects on the economy as a whole are generally considered to be delayed. Even if they are reversed, they could still harm the economy. Depends on how fast they are reversed and to what degree. In reality, who TF knows?
However, the rate hikes have clearly hurt the housing market and have increased borrowing costs for consumers, perhaps unnecessarily. And for you deficit hawks, it has increased "borrowing" costs for the Federal government by close to 650B over the next five years.
Why do you seem to believe rates are onerously high now? Who's to say what the appropriate rate is? On a long-term historical basis, current rates aren't high at all. Yeah, rates are way higher than 2019-2021, but who's to say current rates now aren't appropriate and those free-money years weren't unduly low. Those years did just happen to be followed by massive inflation.
regardless of what the "appropriate" rate might be, the fact is that rates rose very quickly and by historically high amounts. That can't be anything but disruptive.
well when inflation is rising to 9% as the fed funds rate is still near zero (as was the case in early 2022), yeah you better move with alacrity, disruption be damned.
Being that this is a political thread, I will point out that the presidential candidate whose worldview on interest rates is closest to yours is Donald J. Trump, who called on the know-nothing idiots at the Fed to slash rates repeatedly in 2019, and presumably would do the same again if elected. So perhaps you should vote for him.
Smedley said:
well when inflation is rising to 9% as the fed funds rate is still near zero (as was the case in early 2022), yeah you better move with alacrity, disruption be damned.
Being that this is a political thread, I will point out that the presidential candidate whose worldview on interest rates is closest to yours is Donald J. Trump, who called on the know-nothing idiots at the Fed to slash rates repeatedly in 2019, and presumably would do the same again if elected. So perhaps you should vote for him.
your first sentence doesn't make much sense.
the second even less.
drummerboy said:
your first sentence doesn't make much sense.
the second even less.
There’s never a lot that a thinking person can do with these empty dismissals of yours.
DaveSchmidt said:
drummerboy said:
your first sentence doesn't make much sense.
the second even less.
There’s never a lot that a thinking person can do with these empty dismissals of yours.
there certainly isn't, but I didn't have much to work with.
oops. Did I do it again?
DaveSchmidt said:
drummerboy said:
your first sentence doesn't make much sense.
the second even less.
There’s never a lot that a thinking person can do with these empty dismissals of yours.
Drummerboy always struggles with being one of the few high-information citizens conversing with us lower-information citizens.
High inflation and low fed funds rate -- Fed saw need to move quickly and decisively.
Db and DJT both whinge about high rates and say (often counterintuitively and nonsensically) that rates should be cut -- bedfellows on rates. Strange bedfellows, but bedfellows.
Not sure why either premise is difficult to understand. But if you don't, as you would say -- I can't help you.
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