Fed announces first rate cut in nine months, to support a weakening job market.
- Thread starter Trumpet
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Trumpet
Verified User
You need a reality pill.
gfm7175
Mega MAGA
You need a discernment pill.
Trumpet
Verified User
You don
You don't say.
We have done this before. Nixon pressured Burns to ignore inflation, and instead concentrate on making the economy look good. It was no where near as extreme an attack on the Fed as trump is doing, but it was severe enough to cause a decade of stagflation.
Once confidence in the Fed is lost, it takes a long time to get rid of inflation. Confidence is almost lost right now. It is easier to accept a recession right now than to have to accept half a dozen recessions over the next decade or two.
Once confidence in the Fed is lost, it takes a long time to get rid of inflation. Confidence is almost lost right now. It is easier to accept a recession right now than to have to accept half a dozen recessions over the next decade or two.
cawacko
Well-known member
You are not wrong about Nixon and Burns. But interesting you leave out LBJ. Johnson was all over Fed chair Martin to keep rates low while he ramped up spending for Vietnam and the Great Society. There’s the famous story of LBJ pinning Martin against the wall at his ranch pushing for lower rates.
None of us are totally consistent, but a modicum of it isn’t going to hurt anyone.
The same solution to different problems is not consistency.
Deflation is a worse problem to have than high inflation. It is literally an empire killer. When it started to hit, the Fed did the right thing and lowered interest rates as low as they could go. When that was not enough, they got innovative and started doing quantitive easing. It was a time of desperation to get out of the liquidity trap.
We returned to reasonable inflation, and everything was fine again. Then we had the pandemic. At first the Fed thought the inflation was transitory, so not an issue. It turns out they were wrong, and had to increase rates. Inflation is close to target inflation, but not there yet. That last percent or so turns out to be very difficult.
If the Fed cannot close that last percent, it will lose credibility. It will take a decade or two of punishing stagflation to get that credibility back again. That takes priority over Republicans' midterm strategy.
So it is completely consistent to raise interest rates, and just accept trump's recession.
cawacko
Well-known member
You’ve shifted your argument three times now depending on which era we’re talking about. First it was ‘low rates = bad economy,’ then it was about context, and now it’s deflation vs. inflation. The reality is rates move for a lot of reasons, which is why I don’t buy partisan definitions that only apply when it helps your side.
(And from a partisan perspective your definition boxed you into a corner regarding Biden and the 100bps drop at the end of 2024.)
It is never a good sign when the Fed has to push low interest rates. Notice that I did not say low interest rates, but that the Fed(or any central bank) pushing interest rates low.
You rebutted that right before Obama came to office, the Fed had to lower interest rates... And I agree that was a sign of a terrible economy. The Great Recession was worse than our current economy so far... much worse.
So, yes, the economy that Obama came to office on was bad. Your point?
Actually, I said fighting deflation(like Obama was) is worse than just fighting a recession(like trump is).
One more time, it was 50 points, not 100.
The Fed decided it was time to go to a more neutral interest rate, and thought that inflation would continue to drop hitting 2%. They were afraid of overshooting. I disagreed with it at the time, but that was just my opinion. Now that we have seen that inflation did not continue to drop, it is no longer just opinion. No sane person would want the Fed to push interest rates to near zero with inflation in the danger zone.
As for "partisan perspective", I was against it, and am more against it now that we know the outcome. More importantly, it was too late to help Biden out, so had no partisan reason.
cawacko
Well-known member
I enjoy talking about Fed policy, but you boxed yourself in with your first definition because you were trying to score a partisan point. Since then you have kept shifting the terms to get out of that corner. Rates move for many reasons, which is why it does not work to tie them neatly to one president.
(I realize in the partisan world alternative realities can exist. I do not understand how that works with Fed cuts. They cut 50bps in Sept. They cut 25bps in Nov and another 25bps in Dec. That's 100bps, I'm not sure how that can be debated.)
There are two reasons for the Fed to push rates low: either to fight a recession(bad), or to fight deflation(worse). Can you think of a third reason?
cawacko
Well-known member
Claiming there are only two reasons is too narrow. The Fed also cuts preemptively. We weren’t in a recession in 2019 and Powell cut as insurance. In 1998 during the LTCM and Asian financial crisis, Greenspan cut multiple times for the same reason. Go back further to 1987, after the stock market crash, Greenspan cut even though there was no recession. (Those are just off the top of my head.)
Dutch Uncle
* Tertia Optio * Defend the Constitution
Trumpet
Verified User
That's exactly rightTrump crashes the US economy then, literally, needs the Fed to bail him out. Sad.
Preemptively to fight recessions or deflation?
cawacko
Well-known member
You skipped over 1987, 1998, and 2019 in your reply. None of those were about fighting a recession or deflation. That’s why I said your two-reason definition is too narrow
Dutch Uncle
* Tertia Optio * Defend the Constitution
Reagan, Clinton, Trump. What were those years about?
Pretty damn good, I would say.