Fed raises interest rates...

[MattTuck]

I had been waiting for many months to post in the stock market thread from last January, but I guess I have to start a new one since that got closed down.

Indeed, it was a one and done, last time.

I think the inflation pressures are mounting more than a year ago, and have cajoled the fed into action.


Edit: This is all in good fun, not meant to be mean spirited, as it sounded like I might have been thinking about this for months. Not true, I just wanted to revisit our predictions. While some here are financial professionals, I'm just an arm chair prognosticator :)

[OtayBW]

Geez - so what'd they raise it to? You think I look at other websites???? :)

[merlinmurph]

Not exactly news. ;-)

What will be interesting is the showdown between Trump and the Fed in the future. He will want rates to be held low, while the Fed may want to raise them.

Stay tuned.

[Tony T]

I had been waiting for many months to post in the stock market thread from last January, but I guess I have to start a new one since that got closed down.

Indeed, it was a one and done, last time.

I think the inflation pressures are mounting more than a year ago, and have cajoled the fed into action.


Edit: This is all in good fun, not meant to be mean spirited, as it sounded like I might have been thinking about this for months. Not true, I just wanted to revisit our predictions. While some here are financial professionals, I'm just an arm chair prognosticator :)


Wow, I had forgotten that I was right about that last year :)
So, this year I expect 3 more (1% for 2017) and then 2% in 2018 to slow down the economy (in 2018) from the excesses of the Stupendous Tax Plan that we will get this year.

[ultraman6970]

If the interest rates go up you generate some recession, here a climb in the interest rate doesnt generate all the different effects that occur in the other countries, either way... what do the feds want to achieve?? what's the purpose?

[ColonelJLloyd]

If the interest rates go up you generate some recession, here a climb in the interest rate doesnt generate all the different effects that occur in the other countries, either way... what do the feds want to achieve?? what's the purpose?

https://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy

[joosttx]

Not exactly news. ;-)

What will be interesting is the showdown between Trump and the Fed in the future. He will want rates to be held low, while the Fed may want to raise them.

Stay tuned.

Having higher interest rates will help promote the initiative for cutting budgets and lowering the Federal debt.

[Bruce K]

No one better type the dreaded 3 letters.....

Just sayin'.... :cool:

BK

[sg8357]

No one better type the dreaded 3 letters.....

Just sayin'.... :cool:

BK

WIN, Whip Inflation Now ?

A golden oldie from the Ford Administration.

[Bruce K]

Wrong 3 letters

I wonder how many members are even old enough to remember that ridiculousness

BK

[flydhest]

Having higher interest rates will help promote the initiative for cutting budgets and lowering the Federal debt.



I am curious why you say that, given that historically, that hasn't been the case.

For the budget, for example, the deficit went from 9.8 percent of GDP down to 2.4 percent of GDP over the period when the Fed was keeping interest rates at zero.

The times when the deficit has risen, interest rates have been higher (if only because they have essentially always been higher than now).

[flydhest]

Wrong 3 letters

I wonder how many members are even old enough to remember that ridiculousness

BK



During the 2010 to 2011 period when inflation was threatening to fall below zero, a friend and colleague made up gag buttons that said "WDN" (Whip Deflation Now). I thought they were hilarious, but--to your point--the audience was pretty narrow.

[cachagua]

Ha! I WIN!!

Just refinanced about two weeks ago. Fixed-rate VA loan. Probably never see a better mortgage as long as I live. And.. I won't NEED to!

[sokyroadie]

No one better type the dreaded 3 letters.....

Just sayin'.... :cool:

BK


:banana: FRN :banana:

Jeff

[MattTuck]

Potd.

:banana: Frn :banana:

Jeff

[Bruce K]

BINGO!!!

Now stop it! :crap::crap::crap:

BK

[johnniecakes]

Hopefully soon it make sense again to save money. We have an entire generation who have no concept of planning and saving. Who remembers 4-5% on passbook saving and 11% mortgages with 20% down? When financial planning was really consideration and you had to deny yourself instant gratification.

Sorry, just a grumpy old man rant. :banana:

[93legendti]

Hopefully soon it make sense again to save money. We have an entire generation who have no concept of planning and saving. Who remembers 4-5% on passbook saving and 11% mortgages with 20% down? When financial planning was really consideration and you had to deny yourself instant gratification.

Sorry, just a grumpy old man rant. :banana:

Yup, money market at 5%...

Heck, I remember 9% cd rates on 30 day notes in Canada...1990 or so iirc.

[joosttx]

I am curious why you say that, given that historically, that hasn't been the case.

For the budget, for example, the deficit went from 9.8 percent of GDP down to 2.4 percent of GDP over the period when the Fed was keeping interest rates at zero.

The times when the deficit has risen, interest rates have been higher (if only because they have essentially always been higher than now).

It took me two times to read you wrote. I think my message is easier to understand. That's my point. You are a smart guy with access to your info. Not everyone is

[zap]

Hopefully soon it make sense again to save money. We have an entire generation who have no concept of planning and saving. Who remembers 4-5% on passbook saving and 11% mortgages with 20% down? When financial planning was really consideration and you had to deny yourself instant gratification.

Sorry, just a grumpy old man rant. :banana:

I would say generations....

I used to earn 12% +- point (early 80's) on the portion of my allowance that I put in my Bank of Montreal savings account. Now I have to be happy with 6% returns

[Tandem Rider]

I remember 18% construction loans and Farm Aid concerts. Be very careful what you ask for, you might get it.

[rounder]

I am old.

Worked at the Federal Reserve (Baltimore Branch) in the discount window department during the 1970s when rates were high. I do not remember how high the Fed Funds rate was then, but the prime rate was 22+% during the Jimmy Carter years. The rates were so high that many credit card departments of banks moved to Delaware to avoid the usury interest rate ceilings.

By today's standards, rates are really low, But any rate increase today is a big increase.

[verticaldoug]

The FED usually hikes until something breaks. We will see if this time if different.

Bob Shiller released his paper on how the narrative (story telling) drives a lot of market activity. The problem is the narrative usually starts out with assumptions that are more or less correct, but over time as the economy moves, the narrative doesn't change. (Late comers are intellectually lazy)

Eventually, the market realizes the narrative is wrong (usually too late in the cycle) and there is hell to pay. (See the original housing assumption about never having a national recession in housing for details)

Since we came into the QE new-normal from the housing break, and it is part of this narrative, it is hard to see how we exit without some new 'break'. Do you remember CITI's CEO Chuck Prince quote from the FT in 2007?

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance."

http://cowles.yale.edu/sites/default/files/files/pub/d20/d2069.pdf
Link to Shiller's paper at Yale.

[soulspinner]

i remember 18% construction loans and farm aid concerts. Be very careful what you ask for, you might get it.

+1

[flydhest]

It took me two times to read you wrote. I think my message is easier to understand. That's my point. You are a smart guy with access to your info. Not everyone is

I must have missed your point, then. I thought you were suggesting that higher interest rates will lead to fiscal discipline, or at least increase the impulse toward fiscal discipline. I was just wondering why you would say that, given that such a relationship is at odds with history.

I am always looking to learn.

Totally agree that I am not a random draw from the population when it comes to understanding the relationships among interest rates, the economy, monetary policy, and debt issuance. I think in part because of that I ask simple questions but don't like to get into debates on the webbernet.

On a different note, for those waxing nostalgic for higher interest rates, don't forget to adjust for inflation/inflation expectations. It is true that even on an inflation-adjusted basis, rates are low these days, but not the lowest ever. There was a lot to loathe about the days when passbook savings earned 12 percent in nominal terms.