Another shockingly anemic Trump jobs report - only 22k jobs added in August

[Walt]

Maybe this will help @cawacko :

Decreasing the cost of money, increases the borrowing, which in turn increases the money supply, and that causes inflation. It is not the only cause of inflation, but it is the easiest to control cause of inflation. So there is not a perfect interest rate for all situations, but interest rates should be decreased when inflation is low, and increased when inflation is high. That way we work out the perfect interest rate for the moment.

Yes, when we were in danger of deflation, 1% or even lower made sense to try to spur inflation. Now that we are in danger of inflation, we need to increase interest rates to fight inflation.

The solution for drought and floods are different. We are in danger of flood, so it is not time to turn on the spigot.

I do think dropping rates to 1% would fuel inflation, but that’s not the same as saying it guarantees double-digit inflation

It is possible that it will "only" be 9% inflation, but in my opinion such an extremely inflationary monetary policy along with an inflationary trade policy, and actual real inflation will lead to double digit inflation. If your claiming that it would just lead to near double digit inflation, I disagree, but admit it is not completely impossible.

And we have not even touched on inflation expectations. Near double digit inflation would fuel inflation expectations so much that it would cause double digit inflation. The only way to prevent that would be to take a much harder line against inflation than we did last time. Do you think trump is willing to let that happen?

After the GFC we had ZIRP and QE for years without runaway inflation.

Again with the claim that because we turned on the spigot when we had a drought, we should also turn on the spigot when we have a flood.

That’s why calling 1% ‘free cash’ that guarantees high inflation is oversimplified.

It is free money, no matter what else. It is money at an interest rate much below inflation. There is no cost to the cash.

And it does guarantee higher inflation, at a time we are already on the verge of high inflation. When you are on the verge of higher inflation, and you make it higher, it is called high inflation.

It depends on the broader conditions.

The most reasonable thing you have ever said. In any situation, lowering interest rates helps raise inflation, but in some situations that is a good thing. In the current situation, it would be a disaster. The Fed would lose all credibility in caring about inflation.

 

[cawacko]

Maybe this will help @cawacko :

Decreasing the cost of money, increases the borrowing, which in turn increases the money supply, and that causes inflation. It is not the only cause of inflation, but it is the easiest to control cause of inflation. So there is not a perfect interest rate for all situations, but interest rates should be decreased when inflation is low, and increased when inflation is high. That way we work out the perfect interest rate for the moment.

Yes, when we were in danger of deflation, 1% or even lower made sense to try to spur inflation. Now that we are in danger of inflation, we need to increase interest rates to fight inflation.

The solution for drought and floods are different. We are in danger of flood, so it is not time to turn on the spigot.


It is possible that it will "only" be 9% inflation, but in my opinion such an extremely inflationary monetary policy along with an inflationary trade policy, and actual real inflation will lead to double digit inflation. If your claiming that it would just lead to near double digit inflation, I disagree, but admit it is not completely impossible.

And we have not even touched on inflation expectations. Near double digit inflation would fuel inflation expectations so much that it would cause double digit inflation. The only way to prevent that would be to take a much harder line against inflation than we did last time. Do you think trump is willing to let that happen?


Again with the claim that because we turned on the spigot when we had a drought, we should also turn on the spigot when we have a flood.


It is free money, no matter what else. It is money at an interest rate much below inflation. There is no cost to the cash.

And it does guarantee higher inflation, at a time we are already on the verge of high inflation. When you are on the verge of higher inflation, and you make it higher, it is called high inflation.


The most reasonable thing you have ever said. In any situation, lowering interest rates helps raise inflation, but in some situations that is a good thing. In the current situation, it would be a disaster. The Fed would lose all credibility in caring about inflation.

We agree that dropping rates to 1% right now would fuel inflation, but that is not the same as saying it guarantees double digit inflation. You keep presenting it as automatic when history shows context matters. After the GFC, ZIRP and QE were in place for years without runaway inflation.

On your ‘free money’ point, negative real rates are not the same as costless cash. Borrowers still pay interest, lenders still take risk, and credit is not unlimited. Low rates can add fuel, but they do not guarantee the outcome you are describing.

Also, you keep framing this as if the President personally controls rates. Trump can want lower rates (1%) but the Fed makes those decisions, not him.

 

[Jarod]

I heard Trump now has a two year timeline for when we will supposedly see the grand benefits of his trade war.

In other words, Trump seems to be asking voters not to judge him on the economy in the 2026 midterms.

I thought the same thing. It’s like when he says, in about two weeks …

 

[tigerred59]

What must it take for the American Stupid to get the memo, Trump is a failure on all levels of government, cept for talking feel good bullshit to the brain dead. I love you farmers, I love you MAGA, I love I love I love...meanwhile he's slowly placing the nation on federal funded welfare of which he's cutting.

 

[Walt]

After the GFC, ZIRP and QE were in place for years without runaway inflation.

This one has been bugging me for a while. GFC is the Global Financial Crisis. It was not "put in place", but rather happened. It was not inflationary; it was deflationary. It was the drought that the spigots needed to be turned on to counter act.

We no longer have the drought(GFC). Now we have a flood. Turning on the spigots with a flood will cause a worse flood. Worse yet, it signals to the economy that the Fed is not serious about fighting inflation. It is going to cause inflation, the question is how much.

credit is not unlimited.

Fed credit is literally unlimited. Demand is what is limited, through interest rates. The Fed creates money out of thin air, so can create an infinite amount of it. It is the lender of last resort, so is require to create as much as is required. The only mechanism it has to limit the creation of credit is charging a reasonable, or even high interest rate.

On your ‘free money’ point, negative real rates are not the same as costless cash. Borrowers still pay interest, lenders still take risk

OK, picture you can borrow at 1%, and use that money to buy Treasurys at 5%. Even if those Treasurys default, you can use them to pay back your borrowing. There is no way to lose money, and you will make a 4% return on whatever you borrow. That is free money.

Also, you keep framing this as if the President personally controls rates.

I have never said anything like that.

 

[cawacko]

This one has been bugging me for a while. GFC is the Global Financial Crisis. It was not "put in place", but rather happened. It was not inflationary; it was deflationary. It was the drought that the spigots needed to be turned on to counter act.

We no longer have the drought(GFC). Now we have a flood. Turning on the spigots with a flood will cause a worse flood. Worse yet, it signals to the economy that the Fed is not serious about fighting inflation. It is going to cause inflation, the question is how much.


Fed credit is literally unlimited. Demand is what is limited, through interest rates. The Fed creates money out of thin air, so can create an infinite amount of it. It is the lender of last resort, so is require to create as much as is required. The only mechanism it has to limit the creation of credit is charging a reasonable, or even high interest rate.


OK, picture you can borrow at 1%, and use that money to buy Treasurys at 5%. Even if those Treasurys default, you can use them to pay back your borrowing. There is no way to lose money, and you will make a 4% return on whatever you borrow. That is free money.


I have never said anything like that.

I get what you’re saying, I just don’t buy that credit is literally unlimited or that free money works the way you describe. We could go back and forth on this forever, but I think we’ve both made our points.