Why the Fed was right to hike

[McRocket]

Why the Fed was right to hike

it's not often the MSM get it right on these things. But they did this time, IMO.

 

[Crepitus]

Why the Fed was right to hike

it's not often the MSM get it right on these things. But they did this time, IMO.

Ya gotta have somewhere to go when things turn south.

 

[CrusaderFrank]

We dont need the Fed.

 

[MisterBeale]

We dont need the Fed.

Agreed.

 

[MarathonMike]

As much as I support what Trump is doing, I like the fact that Powell stood his ground. Lack of true independence between our institutions is the cause of many of our problems.

 

[McRocket]

We dont need the Fed.

Agreed. I despise the Fed.

But we are stuck with them.

 

[Toddsterpatriot]

Why the Fed was right to hike

it's not often the MSM get it right on these things. But they did this time, IMO.

Why does the real rate have to be positive?
No one borrows Fed Funds right now.

 

[The Banker]

There's more than just a hike there are the projections and language. If it would've been a "dovish hike" meaning dovish language with regards to future hikes then that would have been much better.

Trump screwed up when he got rid of Yellen. She was good at calming markets and and reassuring them through her speeches, remember "data dependent". Powell needs to dial back his aggressive rhetoric that is scaring markets.

 

[McRocket]

There is nothing wrong, IMO, with what the Fed is doing.

What they did under Bernanke and Yellen was irresponsible...artificially propping up the equity markets (by their own admission) with ZIRP and trillions in QE.
And whom did that benefit - virtually no one but the wealthy...which is largely why the income disparity gap has widened so much lately.
And it wrecked the Money Velocity:

So now the Money Velocity is BY FAR the worst it has been since at least 1959. And look when it goes down - it's usually during a recession. Because it means money is not moving/changing hands.
And it is not moving now because the economy is being powered by cheap debt. People don't spend their money - they just take out cheap loans and spend that. But all that debt has to be paid back...and no one wants to start paying it back.
By raising rates, the Fed is forcing corporations to stop living off of record amounts of stock buybacks. And the corporations don't like it because it was easy money. Plus, some (like GE) don't like it because they took out too much money for buybacks.

Look at US Prime rate history:

United States Prime Rate History

It is still FAR lower than it was historically...even in the 1990's (which was generally a good time for the economy). Rates should come up so that people stop taking out SO MUCH debt. And force the corporations to live on solid fundamentals instead of sitting back getting fat on stock buybacks - that they knew were guaranteed when Bernanke/Yellen were in charge because these two said they would do almost anything to keep equity prices rising.

Will this hurt? Yup...maybe big time.

But that was inevitable when the Fed started this madness back in 2008. It HAD to end and end badly.

But the faster it ends - the less badly it will be because the less debt that will have to be dealt with.

Powell is doing the responsible thing for America's future...finally (though I don't know if he is doing it for that reason or just because he is worried about a recession and he wants to give the Fed some room to drop rates when it begins).

 

[Toddsterpatriot]

There is nothing wrong, IMO, with what the Fed is doing.

What they did under Bernanke and Yellen was irresponsible...artificially propping up the equity markets (by their own admission) with ZIRP and trillions in QE.
And whom did that benefit - virtually no one but the wealthy...which is largely why the income disparity gap has widened so much lately.
And it wrecked the Money Velocity:

So now the Money Velocity is BY FAR the worst it has been since at least 1959. And look when it goes down - it's usually during a recession. Because it means money is not moving/changing hands.
And it is not moving now because the economy is being powered by cheap debt. People don't spend their money - they just take out cheap loans and spend that. But all that debt has to be paid back...and no one wants to start paying it back.
By raising rates, the Fed is forcing corporations to stop living off of record amounts of stock buybacks. And the corporations don't like it because it was easy money. Plus, some (like GE) don't like it because they took out too much money for buybacks.

Look at US Prime rate history:

United States Prime Rate History

It is still FAR lower than it was historically...even in the 1990's (which was generally a good time for the economy). Rates should come up so that people stop taking out SO MUCH debt. And force the corporations to live on solid fundamentals instead of sitting back getting fat on stock buybacks - that they knew were guaranteed when Bernanke/Yellen were in charge because these two said they would do almost anything to keep equity prices rising.

Will this hurt? Yup...maybe big time.

But that was inevitable when the Fed started this madness back in 2008. It HAD to end and end badly.

But the faster it ends - the less badly it will be because the less debt that will have to be dealt with.

Powell is doing the responsible thing for America's future...finally (though I don't know if he is doing it for that reason or just because he is worried about a recession and he wants to give the Fed some room to drop rates when it begins).

So now the Money Velocity is BY FAR the worst it has been since at least 1959.

So what? It's a useless stat.

Because it means money is not moving/changing hands.

But it doesn't mean that at all.