US Core CPI Tops Estimates, Pressuring Fed as It Weighs Hike - Slashdot
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US Core CPI Tops Estimates, Pressuring Fed as It Weighs Hike
Here's my opinion (I was an actuary long ago).
The Federal funds rate was effectively 0% from 2010 through 2015, and then again from 2020 through 2022:
https://fred.stlouisfed.org/se... [stlouisfed.org]
Lots of assumptions were based on this "trend" and money was pretty close to free to borrow (institutional level). This led to a lot of startup funding/venture capital. With money close to free, it can pay to be risky, it's take less successes to cover failure without interest expense strain.
Now the yield curve is inverted (short term rates higher than long term), so banks holding long term treasury debt are in a bad position, they have to sell those securities at a loss if they are called (this is self-reinforcing, "run on the bank"). Exactly what happened at Silicon Valley Bank.
It's a Catch 22 now. The Fed can't continue to raise rates to tame inflation as it would kill the banking system (this is just now coming into focus).
I've seen articles about the Fed possibly pulling back and reducing rates to help the banking system.
THE LONG TERM ZERO INTEREST RATE ON FEDERAL FUNDS CAUSED THIS. THE FED CAUSED THIS.
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Mid to Upper end wage increases have gotten out of hand. If everyone gets a raise every year it severely devalues money. Those in the lower half don't get raises like that and wind up with not enough for basic survival because of this.
It's not the borrowing rates it is the constant raises and inflated wages that got us here and now it will be the high borrowing rates that doom everyone with a lower salary.-
I think you have it backwards. Wages are growing in response to people complaining about inflation, not the other way around. And mid-to-upper-end wage growth would not drive inflation of basic commodities. It's not like rich people are suddenly buying more sandwiches.
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Most inflation is now being driven by housing costs, and mid-to-upper-end wage growth is having a strong effect on rising housing prices.
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With population growth hitting new lows I wonder what the long-term housing price trend will be. Seemingly the zoomers that are suffering housing un-affordability today will all have 3 mcMansions from the 1980's by late middle age.
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Sadly new housing growth has slowed even faster than population growth, so housing affordability is still likely to get worse in the future and not better.
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Yet, we're not seeing increased housing accessibility with all those "inflated wages." There's a concentration on real estate leverage and rents, however. Following that big injection of funds into the investment sector, we've got 1/7 of the stock moved into rent portfolios and increased large-scale land-lording. The problem isn't that more 'mid to upper' people have money; we have a pile of middle-men rent-seeking in every damned thing. Mid hasn't functionally had a significant cost of living increase in d
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An increase in wages or economic assistance to buy homes cannot increase housing accessibility without an increase in new housing construction. The only thing more buying power can do on its own is increase housing prices.
All of the rent seeking behavior you describe is only possible because housing construction is being artificially limited by people who want to see real estate prices increase. This is probably the easiest problem the US has to fix. Have the federal government start really start investing
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This is probably the easiest problem the US has to fix. Have the federal government start really start investing in new homes.
Ok, I'm lost on this one....
The Federal govt building private housing?!?!?
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I believe he's suggesting that the government offer tax breaks on new home construction to influence the market toward building more homes.
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I'm not convinced that it's artificially limited. The US has tons and tons of empty land, but the vast majority of it is in places where people don't want to live. If you go near the major cities, the land is pretty full. Good luck trying to find somewhere to build any significant amount of new housing near New York City or San Francisco.
If you want to increase home supply in those areas, you're going to need to tear down houses and replace them with large apartment complexes. But doing that is only going t
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We can encourage that for sure but the reason housing in cities is in such high demand is people actually want to live in the cities because they have lots of ameneties, culture, entertainment and other advantages. A certain percentage of people are open to the idea of rural living but there are lifestyle sacrifices to make for moving either one to the other. and thats a major preference of people.
And yes, building more housing in major metros is going to involve density which doesn't necessily mean only
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No, housing prices are rising because there are not enough houses to meet demand. Builders greatly reduced building after the last market crash. Demand for housing outstrips supply, and that is what is pushing prices up.
If there were a lot more houses built, the prices would come down, regardless of what people's salaries are.
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New construction isn't cheap. Land isn't cheap either.
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No one's building houses near the major cities because the land is already fully developed. There's nowhere left to put any significant amount of housing.
Building lots of houses in the rural area doesn't help because there aren't enough jobs there.
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Most inflation is now being driven by housing costs,
Inflation is ALWAYS a monetary phenomenon. It's what you get, eventually, when you introduce more money in the system.
All of these things like housing costs or wages, these are all just bling men feeling parts of an elephant and missing the elephant itself.
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The only people saying wages cause inflation are the people who benefit by paying lower wages.
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There are plenty of society challenges being caused by the growth of the upper middle class along with the hollowing out of the middle class, but inflation is not one of them. Wage growth is not a major driver of current inflation, since real hourly wages actually dropped in 2022. Wages are feebly trying to keep up with inflation, and while that still has an effect on inflation it is not the driving force.
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The wages are not the factor that is primarily increasing the money pool. You see, if they don't pay high wages, they just invest the money into stocks and bonds instead. Either way the money is circulating and the money pool is the same size. Lending money actually increases the pool, as does the government spending.
Higher interest rates are only one part of a comprehensive solution The government must curtail its own spending of borrowed money, and ours has not.
And of course there is the need to repai
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It's not the borrowing rates it is the constant raises and inflated wages that got us here and now it will be the high borrowing rates that doom everyone with a lower salary.
No, it's the $2.2T that Biden poofed into existance last year. Add 11% to the money supply without adding 11% to the supply of things that can be purchased with that money is pretty much a guarantee of 11% increase in prices for everything.
Which we're in the middle of right now. If (and I don't really think the government will be abl
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No. Everyone should be getting raises every year as they accumulate experience and provide more value to their employers. Inflation gets kept in check by people at the top of their pay scale retiring, and new employees being hired at the bottom. Anyone who claims inflated wages are more of a problem than inflated profits is pushing a pro-corporate, anti-worker agenda. [epi.org]
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It's got nothing to do with how much money we printed and everything to do with who we gave it to.
Our economy has been growing and that requires us to print money. That's why we came off the gold standard.
The problem is that in the last 40 years we've shifted 50 trillion in wealth to the 1%. They used that money to buy up all their competitors and to buy up apartment blocks, houses and even trailer parks.
Because we stopped and forcing antitrust laws we have monopolies and trusts at scales greate-
I agree that monopolism is a contributing factor, in particular in the housing/rental market. It's actually pretty bad right now, there is basically no price competition for rent as the very-few companies who own all the rental property use price-recommending computer software to fix prices while seeming to keep their hands clean. The makers of this software are being sued over this, as I recall, though I don't know the current state. In any event, the housing cartel's price fixing is really blatant and
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Mod parent up to counteract bullshit moderation. Then stop giving whoever did that mod points. You might disagree. I might disagree. But a troll is a post intended to raise ire, usually with as little effort as possible. We need to stop abusing mod points.
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Dude the mod system is totally gamed it’s designed around a time when the best threads would get over 1000 comments and people took Slashdot seriously enough that the m2 system was getting lots of feedback for every single mod event.
Present day it mostly just takes a little work off whipslash’s plate.
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Would the banking system really be killed? What happened to Silicon Valley Bank appears to be perfect. The investors and lenders lost their money, but depositors are going to get their deposits back. This seems to be how a bank should be allowed to fail. And banks have been doing very well lately. Chase has had their stock raise 500% since the banking crisis, and BofA is up 600%. Let all of them have their stock drop 75% and they are still doing fine.
I don't understand everyone's fascination with having suc
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The problem is when it happens to too many banks, which the Fed action may cause.
It's s tough nut. Banks need to be liquid enough to handle withdrawals. This requires some scale (and initial equity).
I worked at a life insurance company that had a run on a LIBOR+20 Points vehicle that they were treating as a long term investment fund (it wasn't, and it got called). Small spreads can kill and the Fed has been making very large changes (haven't seen such fast raises since the 1970's/80s).
https://fred.stloui [stlouisfed.org]
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Well I have seen some discussion that perhaps this size of bank sortof should not exist if they can't be assed or able to comply with the liquidity regulations the larger banks are;
The proposal I saw was so combine most of the $50-250B regionals into a few more larger banks to compete with BoFA, JPM, etc and get some more up top competition and also still allow that smaller $50B cap local banks to operate.
Basicallt SVB did lobby and succeeded in exempting themselvs from the additional scrutiny that the larg
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"The estimated weighted average duration of SIVB's investment securities portfolio spiked to 5.7 years at December 31, 2022 compared to only 4.0 years at December 31, 2021." (https://seekingalpha.com/article/4587030-svb-financial-group-reached-for-yield-failed-perhaps-a-canary-in-the-coal-mine) The fed started raising rates in march of 2022. It seems that SVB bet against the fed following through and actually fighting inflation and extended the duration of their bonds poorly. I did the same thing (sadly)
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The government printing loads of extra money also caused this. And government deficit spending also caused this. Everything that expands the money supply is a contributing factor. Our government could make a significant contribution to reducing inflation by abstaining from spending borrowed money. That budget reduction would go a long way. But of course, they won't.
Also, broken supply chains could still be a contributing factor, and repairing those will also help reduce inflation.
So, there are meaningf
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Also, broken supply chains could still be a contributing factor, and repairing those will also help reduce inflation.
I'm done with this excuse. If you're telling us that private industry is so fragile that it can't get its act together two years after a minor inconvenience, then that only shows how incompetent they are.
At this point there is no excuse not to have full shelves, yet it can be weeks before bags of cat food are stocked. And which point they promptly disappear and not return for a few
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The Federal funds rate was effectively 0% from 2010 through 2015, and then again from 2020 through 2022:
And who was in charge in those heady, care-free days? Who was the president? Who was the Fed back then?
That gap from 2016 to 2019 is damning, isn't it. It's like a little ray of sunshine in a decades-long spat of dreariness. But people hated Mean Tweets more than they hated EASY MONEY.
THE LONG TERM ZERO INTEREST RATE ON FEDERAL FUNDS CAUSED THIS. THE FED CAUSED THIS.
Correct. now how are we gonna fix it? By voting the same imbeciles in time and time again?
This is just more "Fundamental Transformation" of America.. into a communist, 3rd-world also-ran country. Step 1, kill the middle class. Mostly done. Step 2, sow chaos and divsion.. mostly done. Step 3... profit Take over, eliminate your opponents, sit in power forever.
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While the years look close, it doesn't match up.
The Fed rate started its nosedive under Bush. It stayed close to zero, but started to edge up the last two years of Obama's last term. Under Trump it continued to edge up, but then it went back down during Trump's last year in office.
In other words, the Fed's activity has not been absolutely correlated with either party.
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Can you elaborate on this communist plot? I’m genuinely curious who is behind it and how they benefit from turning the country communist. The middle class is being killed with stagnant wages, expensive health insurance, and corporate greed keeping prices high. Your rant sounds like the Putin playbook but even Russian isn’t a communist country.
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Wasn't it Mr. Mean Tweets who tried to stay in office after he got voted out?
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Oh, the sock puppet mods are out in force on this thread, lol.
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What does the President have to do with Federal Reserve? He can send mean tweets at them?
Trump was mad the fed raised rates.
"RAISING RATES - REALLY?"God damn you are stupid, and I don't say that often. What else did Trump do for the fed, you tell me.
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It's a Catch 22 now. The Fed can't continue to raise rates to tame inflation as it would kill the banking system (this is just now coming into focus).
Just imagine the increase in unrealized losses if the Fed hikes even 25 basis points this next meeting.
And everyone is paying attention to those unrealized losses now in a way that almost no-one was before SVB.
I still think they may try given the CPI results but... I don't think the results will be pretty. Maybe the government saying they would backstop all d
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Yes, the previous Fed administrators caused this issue.
Most Fed administrators are cautious at bumping up the Fed interest rate because of the effect it can have on the economy. Too much bump and the economy goes into recession. No Fed administration wants to unintentionally cause a recession. The current Fed administration does want to encourage the economic effects of a recession economy in order to slow down inflation because out of control inflation makes everything unaffordable, can stop or drastically
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I think this is a lie - "the fed can't raise rates because it would kill the banking system". Banks who are structurally unsound "fail" - i.e. have to be restructured. It's not the end of the banking system. It sure seems like the people who control the financial press and have a vested interest in having low rates (because it gets them cheap money) are pushing this false narrative awfully hard. The Fed wants to give banks time to adjust their structures, but having a bank have to force restructure is n
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