Fed increases target rate to 3.75-4.00%(federalreserve.gov)
federalreserve.gov
Fed increases target rate to 3.75-4.00%
https://www.federalreserve.gov/newsevents/pressreleases/monetary20221102a.htm
182 comments
> Real inflation seems to be due to price gouging by companies
A IGM poll of ~100 of the world's leading economists pretty thoroughly show that your belief is very, very far to the fringe, more so than just about any other topic. [1]
They answer the "A significant factor behind today’s higher US inflation is dominant corporations in uncompetitive markets taking advantage of their market power to raise prices in order to increase their profit margins." with 2% strongly agree (with 3% confidence in this answer), 5% agree (7% confidence), 19% uncertain (12% confidence), 51% disagree (52% confidence), 16% strongly disagree (27% confidence), and 7% of no opinion or did not answer.
As to economic questions posed to this forum, this one is pretty slam dunk to the side opposite your claim.
Reich is about as far to the fringe of economists you can find. Try reading more widely. This forum is a much better place to get information about economics than opinion pieces in papers vying for views.
Real reasons for inflation: trillions were added to keep people afloat during COVID, and prices have gone up due to supply chain issues and the war in Ukraine.
If companies could simply raise prices willy-nilly, they'd have done it already.
[1] https://www.igmchicago.org/surveys/inflation-market-power-an...
A IGM poll of ~100 of the world's leading economists pretty thoroughly show that your belief is very, very far to the fringe, more so than just about any other topic. [1]
They answer the "A significant factor behind today’s higher US inflation is dominant corporations in uncompetitive markets taking advantage of their market power to raise prices in order to increase their profit margins." with 2% strongly agree (with 3% confidence in this answer), 5% agree (7% confidence), 19% uncertain (12% confidence), 51% disagree (52% confidence), 16% strongly disagree (27% confidence), and 7% of no opinion or did not answer.
As to economic questions posed to this forum, this one is pretty slam dunk to the side opposite your claim.
Reich is about as far to the fringe of economists you can find. Try reading more widely. This forum is a much better place to get information about economics than opinion pieces in papers vying for views.
Real reasons for inflation: trillions were added to keep people afloat during COVID, and prices have gone up due to supply chain issues and the war in Ukraine.
If companies could simply raise prices willy-nilly, they'd have done it already.
[1] https://www.igmchicago.org/surveys/inflation-market-power-an...
> Real inflation seems to be due to price gouging by companies
Yes, it is too bad that our previously benevolent corporations all decided to end that benevolence in the year 2021 and gouge prices.
> crash the economy for his buddies on Wall Street
Of course, exactly what Wall Street wants.
Yes, it is too bad that our previously benevolent corporations all decided to end that benevolence in the year 2021 and gouge prices.
> crash the economy for his buddies on Wall Street
Of course, exactly what Wall Street wants.
It's an unexpected result that shortages of core consumer goods - specifically gas and food - cause a rise in prices due to demand but this has become more decoupled from underlying input costs thus... high corporate profits in these areas. It's true that Exxon isn't any more or less rapacious than ever, but their profits are objectively much, much higher.
Of course it depends on the market but many of these "shortages" are only relative to record-high consumer demand for durable goods.
Yes, during periods of extremely high demand relative to current supply, profit for suppliers increases. This encourages new entrants to the market who can help boost supply.
This is just the basic functioning of the economy and price signals in action. If producing things in short supply weren't profitable, that short supply wouldn't get resolved.
Yes, during periods of extremely high demand relative to current supply, profit for suppliers increases. This encourages new entrants to the market who can help boost supply.
This is just the basic functioning of the economy and price signals in action. If producing things in short supply weren't profitable, that short supply wouldn't get resolved.
Gas prices are significantly higher than 2019, total vehicle miles travelled are about the same (https://fred.stlouisfed.org/series/M12MTVUSM227NFWA) so there must be a reduction in supply or just straight price gouging to justify the price increase.
There are both supply shocks and demand shocks. Gas prices are definitely undergoing a supply shock right now, which contributes to the price increases (and which the Fed can't help.) But there are also broad-based demand increases.
I agree with your first statement but per the data on aggregate miles travelled I disagree there's actually a demand increase. Ultimately the Fed can't control either supply or demand directly but they try to indirectly control demand by increasing the cost of borrowing. Will it work? Consult your magic 8 ball.
My statement about demand and supply shock is about the broader economy. Gas price is not the only indicator or driver of inflation.
In the case of gas, supply issues predominate, although it is worth noting that price of gas going up and number of miles staying the same indicates both supply and demand shocks at the same time.
The Fed has almost perfect control of aggregate demand. Inflation is more challenging because it bakes in expectations.
In the case of gas, supply issues predominate, although it is worth noting that price of gas going up and number of miles staying the same indicates both supply and demand shocks at the same time.
The Fed has almost perfect control of aggregate demand. Inflation is more challenging because it bakes in expectations.
Is there some shortage of oil or gasoline that I'm not aware of?
It wasn't said that corporations were good but now are not, and it is not a requirement for the above to be relevant or true.
The theory is that corporations will price at the highest price the market will bear and know that price from price tests they are willing to perform. "Inflation in the air" gave them all an impetus to more aggressively explore the space of prices consumers would bear, and it turns out, people who eat chips mostly won't stop buying them when they're 1.5x the price and the packaged weight is cut by 25% over a 2 year period -- and the same follows for a huge number of similar goods.
This is an acceleration of processes that were already under way, but it's also likely enabled by, likely not directly caused by, and likely feeding into "inflation", and it's likely not something that rate changes will directly impact -- though, maybe a second order change, e.g. a crash to the economy, could hurt workers to such a degree that they simply cannot possibly both buy chips and live. That might finally curb price hikes and would indirectly have fought inflation.
The theory is that corporations will price at the highest price the market will bear and know that price from price tests they are willing to perform. "Inflation in the air" gave them all an impetus to more aggressively explore the space of prices consumers would bear, and it turns out, people who eat chips mostly won't stop buying them when they're 1.5x the price and the packaged weight is cut by 25% over a 2 year period -- and the same follows for a huge number of similar goods.
This is an acceleration of processes that were already under way, but it's also likely enabled by, likely not directly caused by, and likely feeding into "inflation", and it's likely not something that rate changes will directly impact -- though, maybe a second order change, e.g. a crash to the economy, could hurt workers to such a degree that they simply cannot possibly both buy chips and live. That might finally curb price hikes and would indirectly have fought inflation.
The straightforward solution is that measurable surging consumer demand in durable goods allowed firms to set higher prices.
Your theory around sticky prices doesn't explain firms running out of things despite keeping increasing inventory.
Certainly, prices can be sticky and may be less sticky during the pandemic but firms still have to compete with each other on cost.
Your theory around sticky prices doesn't explain firms running out of things despite keeping increasing inventory.
Certainly, prices can be sticky and may be less sticky during the pandemic but firms still have to compete with each other on cost.
It doesn't take a genius to see there is spiking demand
https://fred.stlouisfed.org/series/DGORDER
https://fred.stlouisfed.org/series/DGORDER
This is the current talking point du-jour of the American progressive left, but I think it's safe to say the Fed knows what they're doing and have done this before.
The "Fed" isn't some apolitical entity. It's lobbied and banks want to crash the economy so their wealthy clients can get in at the bottom.
They have an agenda.
They have an agenda.
Those wealthy clients are already heavily "in." You can make up motives for anything, I guess, but the obvious motive for the Feds actions is surging prices.
>banks want to crash the economy so their wealthy clients can get in at the bottom
This is like the left wing version of q anon craziness. Banks don't want the economy to crash - they are big losers when it crashes.
This is like the left wing version of q anon craziness. Banks don't want the economy to crash - they are big losers when it crashes.
Ah yes, the almighty Fed which knew exactly what to do in 2020, 2008, 2001, 1990, 1987...
Yes, the Fed that stopped the much longer, more frequent, and deeper panics and recessions that occurred before it.
In fact, it did so well for so long compared to previous methods, that the Great Moderation is a term in economics for the stability it gave.
Instead of snarkily listing places you think it failed, compare that to pre-Fed failures, and you'll see that the Fed is a lot better than other solutions.
And there's ample economic evidence central banking is much better than anything before it, which is why every single country in the world has adopted it.
https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
In fact, it did so well for so long compared to previous methods, that the Great Moderation is a term in economics for the stability it gave.
Instead of snarkily listing places you think it failed, compare that to pre-Fed failures, and you'll see that the Fed is a lot better than other solutions.
And there's ample economic evidence central banking is much better than anything before it, which is why every single country in the world has adopted it.
https://en.wikipedia.org/wiki/List_of_recessions_in_the_Unit...
The Great Depression wasn't so good.. that came after the Fed.
One example does not negate the evidence I just posted including 51 examples, nor does it change the vastly better trends under the Fed.
So why pick a single event, ignore 50 others, ignore the trends shown in US (and 100's of other country) datasets, covering hundreds of years?
I just posted a decent intro to the evidence. Please read it. The economic evidence for the benefits of central banking versus not having a central bank are so thoroughly answered in economic literature that not a single country is stupid enough to go without one, despite those 100s of countries having a lot of other variety.
So why pick a single event, ignore 50 others, ignore the trends shown in US (and 100's of other country) datasets, covering hundreds of years?
I just posted a decent intro to the evidence. Please read it. The economic evidence for the benefits of central banking versus not having a central bank are so thoroughly answered in economic literature that not a single country is stupid enough to go without one, despite those 100s of countries having a lot of other variety.
Because feels before reals is how so many people live their life these days. Reality doesn’t let them blame the people they want to blame, or reality doesn’t assuage the fears they fear, or reality doesn’t let them feel smarter than everyone else, so they fall back to empty platitudes and fantasies to protect themselves from reality.
2008 was clearly a failure for the Fed but I would love to see the counterfactuals of no Fed action for many of the other times you are mentioning.
"Crashing the economy"? Any definition of that? It's not like it's a car or a plane. Some metrics will be 5% different than before?
Sounds like fearmongering, to me, this kind of language.
Sounds like fearmongering, to me, this kind of language.
If inflation is caused by selfish companies raising their prices, why are they only doing it now and not, say, three years ago? Did they only decide recently that they want to make more money?
It's a good question, seems like corporations have more power to do so now, from linked article:
>Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.
>Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.
Hmmmm, I suppose we did just spend two years crushing small businesses into the ground, so I imagine that big corporations do have less competition than ever at the moment.
I like how the law of supply and demand in economics has been renamed "price gouging" by democrats.
You're not wrong, but we see the same thing with the "labor shortage" rhetoric, which is just conservatives and business owners refusing to acknowledge supply and demand in the labor market.
Both are valid concerns when demand is inelastic. I'd say this is true in regards to essential goods and services (you can't choose not to buy medicine or healthcare). I have yet to see many cases where it's true for labor. It seems in most cases companies can either implement new automation or just choose not to run as much if they have a labor shortage.
Laws of supply and demand work very differently when dealing with monopolies/consolidated industries and inelastic goods. Laws of supply and demand only work "how they're supposed to" with either perfect competition or perfect elasticity. So yeah, people don't like that companies are getting away with destroying competition so they can jack up their prices.
energy companies are simply acting rationally based on the fact that governments have made it clear they want to eliminate them, short term profit maximization is logical. Why would oil companies invest in refineries that will not only cut their profit margin by increasing supply but be shut down by the government in 20-50 years making the investment worthless? This is logic a 5 year old can understand but apparently is too much for the current executive branch to grok
every single current economic issue is a direct result of government actions during the pandemic and trying to achieve long term ideological goals that weren't based on rational decision making
every single current economic issue is a direct result of government actions during the pandemic and trying to achieve long term ideological goals that weren't based on rational decision making
None of what you wrote makes any sense to me. Almost without exception, corporations don’t plan 20 years into the future.
You left out supply chain disruptions and consumer demand fluctuation due to the pandemic.
It more seems to me like you have an ideological story you’d like to sell.
You left out supply chain disruptions and consumer demand fluctuation due to the pandemic.
It more seems to me like you have an ideological story you’d like to sell.
> This will do nothing for actually impacting inflation. Instead it will crash the economy.
This is literally nonsensical.
Businesses will lose pricing power in a recession and will slash prices. Nobody will be buying new cars and their prices will drop, the used market will similarly drop until it finds a new floor. People who are out of work and can't afford their car payments will flood the used car market, etc. Multiply this by all the other goods markets. Same things for rents as people get fired and move back in with their parents or move out of the expensive cities.
I think I've responded to you before and I think you've got a nonsensical opinion that price gouging and inflation are in opposition to each other, when they just aren't. If prices rise, that is inflation. If prices rise due to price gouging because demand is inelastic, then that is also inflation. If the fed crashes the economy that will be deflationary and cause a recession, that will reduce prices. Companies can only collude to pump prices when they have inelastic demand, once the economy contracts sharply they have to defect and slash prices again.
By crashing the economy Powell intends to break the back of the nascent labor movement and by dropping asset prices will allow the rich to buy up more of the country.
This is literally nonsensical.
Businesses will lose pricing power in a recession and will slash prices. Nobody will be buying new cars and their prices will drop, the used market will similarly drop until it finds a new floor. People who are out of work and can't afford their car payments will flood the used car market, etc. Multiply this by all the other goods markets. Same things for rents as people get fired and move back in with their parents or move out of the expensive cities.
I think I've responded to you before and I think you've got a nonsensical opinion that price gouging and inflation are in opposition to each other, when they just aren't. If prices rise, that is inflation. If prices rise due to price gouging because demand is inelastic, then that is also inflation. If the fed crashes the economy that will be deflationary and cause a recession, that will reduce prices. Companies can only collude to pump prices when they have inelastic demand, once the economy contracts sharply they have to defect and slash prices again.
By crashing the economy Powell intends to break the back of the nascent labor movement and by dropping asset prices will allow the rich to buy up more of the country.
> This will do nothing for actually impacting inflation.
Correct and incorrect. You are correct about the causes of inflation. But it's the Feds mandate to tame inflation, and their only tool is rates. The correct solution would be for congress to act - but they won't.
Correct and incorrect. You are correct about the causes of inflation. But it's the Feds mandate to tame inflation, and their only tool is rates. The correct solution would be for congress to act - but they won't.
It already seems to have had an impact on inflation though - we are in a much better place today than 6 months ago with inflation. If real wages decline, and housing declines (both tied to interest rates), then rents will decline. If we need to get energy prices down, we have abundant domestic supply waiting for extraction. High prices are currently a executive branch policy choice.
> his goal is to crash the economy for his buddies on Wall Street
nah, any avid trader can take any direction of the market to capitalize on any opportunity
it doesnt matter what someone is lobbying for
when he was increasing the fed balance sheet, who do you think he was buying from and giving free money to at every transaction? his buddies on wall street
its the same any direction
nah, any avid trader can take any direction of the market to capitalize on any opportunity
it doesnt matter what someone is lobbying for
when he was increasing the fed balance sheet, who do you think he was buying from and giving free money to at every transaction? his buddies on wall street
its the same any direction
Raising rates will curb people’s savings and consumer cash in general. This WILL reduce inflation.
Can't wait for your even handed replies to being challenged on literally anything here, lmao
Not much to say here since this was foretold / expected.
All eyes on the 2:30pm press conference, where people will hope to divine the future from Powell's statements. I'm going to bet ~40 minutes of "Inflation isn't at 2% yet and we're committed to reducing inflation to that level".
I think what people really want to know is, where do these rate-increases end? In Sept. 22nd meeting, Powell thought 4.5% was roughly where things would end. Is the target rate higher now? Inflation is still strong, job numbers are also strong. Are we looking at additional hikes to 5% as we enter May 2023 or so??
All eyes on the 2:30pm press conference, where people will hope to divine the future from Powell's statements. I'm going to bet ~40 minutes of "Inflation isn't at 2% yet and we're committed to reducing inflation to that level".
I think what people really want to know is, where do these rate-increases end? In Sept. 22nd meeting, Powell thought 4.5% was roughly where things would end. Is the target rate higher now? Inflation is still strong, job numbers are also strong. Are we looking at additional hikes to 5% as we enter May 2023 or so??
The answer from the meeting was effectively, "we don't know".
People continue to underestimate the final rate and duration we'll end up at.
The market shot up initially on a 3 line statement in the released notes that was interpreted as beginning of the end of rate hikes.
Then the press conference started and the market shot right back down as Powell said we don't know how high and how long rates will go for.
I'm banking on another 75 bps raise in December and then another in January and then maybe a slow down to one or two 50 bps raises and then maybe a 25 bps finale.
I'm starting to love the yields on bonds. 3 month T Bill at 4+% is sweet. Hoping to continue collecting this sweet sweet guaranteed returns that I can ladder into.
People continue to underestimate the final rate and duration we'll end up at.
The market shot up initially on a 3 line statement in the released notes that was interpreted as beginning of the end of rate hikes.
Then the press conference started and the market shot right back down as Powell said we don't know how high and how long rates will go for.
I'm banking on another 75 bps raise in December and then another in January and then maybe a slow down to one or two 50 bps raises and then maybe a 25 bps finale.
I'm starting to love the yields on bonds. 3 month T Bill at 4+% is sweet. Hoping to continue collecting this sweet sweet guaranteed returns that I can ladder into.
> The market shot up initially on a 3 line statement in the released notes that was interpreted as beginning of the end of rate hikes.
I'm not sure about that.
My coworkers are arguing that a bunch of people are buying put options, effectively shorting the stock market, in the days prior to these FOMC meetings. At 2pm, the meeting notes come out, and we see that the expected .75% rate happened.
Since that was "expected", all the put options are now sold. That causes the stock market to jump up (since the effective-short positions are liquidated).
Its just a hedge, just in case the numbers come in and the Fed chooses like 1% hike or higher instead of the expected .75%.
I'm not sure about that.
My coworkers are arguing that a bunch of people are buying put options, effectively shorting the stock market, in the days prior to these FOMC meetings. At 2pm, the meeting notes come out, and we see that the expected .75% rate happened.
Since that was "expected", all the put options are now sold. That causes the stock market to jump up (since the effective-short positions are liquidated).
Its just a hedge, just in case the numbers come in and the Fed chooses like 1% hike or higher instead of the expected .75%.
I don’t think “A bunch of people” could affect the entire market like that even with derivatives unless it’s including substantial institutional investors.
Maybe a single stock but not the entire market.
I see this as, everyone bought on the news that the fed would begin tampering down rate hikes in the near future.
Powell spoke and said we remain committed to getting inflation down and will continue to do what is necessary.
All the buying switched to selling and the market plopped.
Maybe a single stock but not the entire market.
I see this as, everyone bought on the news that the fed would begin tampering down rate hikes in the near future.
Powell spoke and said we remain committed to getting inflation down and will continue to do what is necessary.
All the buying switched to selling and the market plopped.
> I see this as, everyone bought on the news that the fed would begin tampering down rate hikes in the near future.
But this pattern has occurred over and over again in the last 4 rate hikes. You are suggesting that people haven't learned their lesson yet, which seems absurd to me. This is the 4th consecutive rate hike, with the numbers (0.75 increase) exactly the amount everyone expected.
It seems more likely that the people "buying at 2pm" today were covering hedged bets (such as selling off their put options, bought to protect against the volatility today).
The fundamental question is whether or not you want to believe that these buyers (and sellers) knew what they were doing. I think its more likely (than not) that they knew what they were doing, and favor the stories that have that mindset.
But this pattern has occurred over and over again in the last 4 rate hikes. You are suggesting that people haven't learned their lesson yet, which seems absurd to me. This is the 4th consecutive rate hike, with the numbers (0.75 increase) exactly the amount everyone expected.
It seems more likely that the people "buying at 2pm" today were covering hedged bets (such as selling off their put options, bought to protect against the volatility today).
The fundamental question is whether or not you want to believe that these buyers (and sellers) knew what they were doing. I think its more likely (than not) that they knew what they were doing, and favor the stories that have that mindset.
> But this pattern has occurred over and over again in the last 4 rate hikes. You are suggesting that people haven't learned their lesson yet
Yes.
> which seems absurd to me
Yes. It seems absurd to me as well. :). Markets aren’t quite as rational as everyone likes to believe
I think they “knew what they were doing” when they heard something they thought meant this would soon be ending and then knew what they were doing when Powell spoke and wiped that idea out of existence.
We are witnessing the end of over a decade of cheap if not free money. This has all taken place in ~6 months. 14 years of expectations and beliefs will take some undoing before markets accept the new reality.
Yes.
> which seems absurd to me
Yes. It seems absurd to me as well. :). Markets aren’t quite as rational as everyone likes to believe
I think they “knew what they were doing” when they heard something they thought meant this would soon be ending and then knew what they were doing when Powell spoke and wiped that idea out of existence.
We are witnessing the end of over a decade of cheap if not free money. This has all taken place in ~6 months. 14 years of expectations and beliefs will take some undoing before markets accept the new reality.
Money for your parents but not for you.
Replace the Fed with an AI. They have a well defined objective function
Replace the Fed with an AI. They have a well defined objective function
I just started to have enough money for a decent downpayment on a house when all this rate hike started. Now I'm basically priced out.
This affects mortgage rates, but not housing prices. If anything, housing prices should decrease a bit as rates go up, since people tend to buy based on monthly payment which is house price + rate.
Therefore, your down payment should be just as effective as it was before, particularly if it's enough to pay for much of the house and keep your monthly payment lower.
Therefore, your down payment should be just as effective as it was before, particularly if it's enough to pay for much of the house and keep your monthly payment lower.
This should be happening, but prices do not seem to be falling in-line with what we would expect. I have no answer as to why this is.
It takes years for existing sellers to wake up to market shifts, unless they’re desperate is why.
If it’s a nicer area, many can ride it out through an entire bust cycle.
Most folks can get 30 yr fixed rates, so any area where most owners have stable employment and/or strong capital reserves, can cruise with zero movement for years if conditions aren’t favorable, barring estate sales, forced sales from divorces, etc.
If it’s a nicer area, many can ride it out through an entire bust cycle.
Most folks can get 30 yr fixed rates, so any area where most owners have stable employment and/or strong capital reserves, can cruise with zero movement for years if conditions aren’t favorable, barring estate sales, forced sales from divorces, etc.
Your second sentence is the position we're in. We were very fortunate to buy a house in a nice area a year ago. Right at the peak, but it was a fixer-upper from a friend, so we got a good deal and skipped a lot of fees/commissions. Even with what we've put in to fix it up, we should still be above water post-dip.
And that sweet, sweet 2.375% mortgage...
And that sweet, sweet 2.375% mortgage...
It's a good place to be in! Pretty much only secondary to the folks who did it a couple cycles ago and paid everything off, and managed to not explode things/screw it up.
Enjoy, and hopefully no one comes around to give you grief about it.
Enjoy, and hopefully no one comes around to give you grief about it.
Thank you! We're incredibly fortunate, and did everything fully permitted and whatnot to try and avoid all those wrinkles. Fingers crossed it all goes well.
I think partially because housing is inelastic, the demand outweighs the supply. People already in homes would rather not move than sell at a loss, especially those who have a low mortgage rate from the past few years locked in. New homes being built were delayed due to COVID(and now maybe due to interest rates?).
So even with rising rates its moreso a matter of staying stagnant rather than rising more, at least up to a certain point.
At least thats how I've read it explained.
So even with rising rates its moreso a matter of staying stagnant rather than rising more, at least up to a certain point.
At least thats how I've read it explained.
Homeowners are just reluctant to lower, so they are happy to sit with fewer sales and higher prices. It will go down, it is just sticky because nobody wants to admit their home is worth less.
There's a lag in the index, but in August (most recent data available) housing prices were down 0.7% month over month, and 0.6% the month before https://www.fhfa.gov/AboutUs/Reports/Pages/US-House-Price-In....
But, as others have pointed out, housing prices are sticky for a variety of reasons.
But, as others have pointed out, housing prices are sticky for a variety of reasons.
There hasn't been enough time. Mortgage rates have only been high (-ish, not really that high historically) for a matter of months. Home sales are down quite a bit, so people are now sitting on houses that are priced at old prices, but are slow to sell because buyers consider it "too much". The sellers will be forced to cut prices to make sales, but that takes a while because it's emotional.
Housing prices are very sticky in the downward direction. Sellers really hate taking a hit on their asking price, and they will just stay in the house rather than sell for a long time. It will take years of elevated interest rates before prices start to come down significantly.
There is a lag.
It just takes time. Even in 2008 prices took a few years to bottom out.
Be more patient. Watch Canada and Australia.
Builders are holding off building more housing because interest rates going high means they get less. The lowered prices actually reduce the stock, making housing even less available.
https://www.businessinsider.com/housing-market-outlook-downt...
https://www.businessinsider.com/housing-market-outlook-downt...
This is a pretty blanket statement. That same down payment will not be effective at all. Current interest rates have definitely impacted housing prices but its not significant enough to make up for the difference in monthly payment. Think of it this way:
Scenario 0: 500k house, 30yr/3% interest rate, 100k down (20% standard) = 400k total loan amount and 1,686 monthly payment
Scenario 1: 400k house, 30yr/7% interest rate, 100k down (let's say you still have that cash and put it all towards down payment) = 300k total loan amount and 1,996 monthly payment.
This is assuming in your housing market prices have cooled by 20%, I'm not seeing drops like that in my market. Your monthly payment just increased $300.
Scenario 0: 500k house, 30yr/3% interest rate, 100k down (20% standard) = 400k total loan amount and 1,686 monthly payment
Scenario 1: 400k house, 30yr/7% interest rate, 100k down (let's say you still have that cash and put it all towards down payment) = 300k total loan amount and 1,996 monthly payment.
This is assuming in your housing market prices have cooled by 20%, I'm not seeing drops like that in my market. Your monthly payment just increased $300.
Scenario 2: 400k house, 20% down, 30yr/7% = 320k loan, $2129 payment. You save $20k cash, which covers your increase in payment for ~4 years. By then maybe you can refinance back to Scenario 0.
Back down to 3% that’s a stretch, historical rates average 5%+. But you’re right, however no one can predict the future.
Home prices will fall materially once people are forced to sell. That won't happen until broad layoffs occur.
If you have good credit, you'd be surprised how low PMI can get when you put less than 20% down. I wish I had learned it sooner. Saved 6 figures for a down payment only to find out that my PMI was only $103/mo on a $600k mortgage. Ended up doing 5% down instead and threw the rest of the cash into immediate home improvements and the market.
Disclaimer: I did get in when rates were in the low 3s. No clue what PMI is like nowadays or if it changes with the current rate environment.
Disclaimer: I did get in when rates were in the low 3s. No clue what PMI is like nowadays or if it changes with the current rate environment.
that is the exact purpose of the action,
reduce demand
it does suck being on the receiving end - I do sympathise - and I am simply making an observation
reduce demand
it does suck being on the receiving end - I do sympathise - and I am simply making an observation
(Not sure if this is good advice, but...) remember that you can always refinance at a lower rate when the rates come back down.
It's obviously still not advisable to buy a house if you can't afford the monthly payments, but remembering that you can always refinance in a couple years when the rates normalize might help if you have FOMO from the super low rates of the past few years.
It's obviously still not advisable to buy a house if you can't afford the monthly payments, but remembering that you can always refinance in a couple years when the rates normalize might help if you have FOMO from the super low rates of the past few years.
Same here. When I started my search last year, while I could afford the mortgage payments, I kept getting outbid on everything I could find within my price range ($550,000). This year I'm priced out due to the doubling of interest rates. Home prices in the area I'm looking at (the Monterey Bay Area and some of the Central Valley exurbs of the Bay Area) have fallen a little bit since this summer, but they are still dramatically higher (roughly 30-50%) than they were in 2020 when the pandemic started. My performance-based salary increases haven't kept up with inflation. Thus I'm stuck renting my one-bedroom apartment longer.
I don't understand this fear. I was in same boat over 10 years ago, when the household bubble popped, so did prices (over a few years period). Then my downpayment was like 30-40% of the home costs.
There are always people who want or need to sell, even if people who bought high hold on to their homes.
There are always people who want or need to sell, even if people who bought high hold on to their homes.
A few months from now will be the best time to buy. You can renegotiate the terms of the loan, but you can never renegotiate the price you pay!!!!
The damage in the housing market will play out over several years. A few months from now will still be far too early into the damage. Wait longer. The hit to the housing market will run on a longer delay than that from the Fed's hikes, historically it always does.
Don't worry. You wouldn't want to be the bag holder in an economy where there are wholesale layoffs.
Not a huge increase. Inflation is under control in the sense it's not rising, but they need to still pull a ton of money out of the economy; or let it ride.
Powell's speech doesn't matter at all until we see the results of midterms.
Powell's speech doesn't matter at all until we see the results of midterms.
The way I see it, it is still rising. But that was hidden by the fact that oil & gas prices dropped during the last period which was largely due to dipping into strategic reserves pretty heavily. Unfortunately I don't think oil & gas will continue to drop, or even stay even going forward. Especially with the middle east cutting production.
Oil dropped in the US because the current administration is depleting the strategic reserve. It's almost gone but the current administration doesn't care. The current administration punched down Trump attempting to top off the reserve for $24/barrel. Once the reserve runs out we'll be at 5.50 a gallon again but midterms will be over and I'm sure the other party will get the blame.
The whole point of the SPR is to deal with supply shocks. I know, it's weird to see an administration doing something that's actually popular while using the exact legal mechanism for achieving that popular thing. Frankly, I'm surprised too. Furthermore, the SPR was already at 90% of its all-time high when the previous administration proposed to top it off; enough perhaps to make a marginal difference, but not nearly enough to change the outcome of a drawn-out crisis.
It's not gone but -35% YoY certainly doesn't look good. Especially when it's the 'better' medium-sore oil that is getting depleted faster:
https://ycharts.com/indicators/us_ending_stocks_of_crude_oil...
https://www.washingtonpost.com/business/energy/the-us-is-dep...
https://ycharts.com/indicators/us_ending_stocks_of_crude_oil...
https://www.washingtonpost.com/business/energy/the-us-is-dep...
> Oil dropped in the US because the current administration is depleting the strategic reserve. It's almost gone but the current administration doesn't care.
This is not exactly true, there are still hundreds of millions of barrels in the reserve, well over 50% of its alleged capacity.
While it is true that stock has been dropping more quickly in the past year, the reserve has been slowly depleting since February of 2017.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
This is not exactly true, there are still hundreds of millions of barrels in the reserve, well over 50% of its alleged capacity.
While it is true that stock has been dropping more quickly in the past year, the reserve has been slowly depleting since February of 2017.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
There is also a Diesel shortage that's going to have some impact on next quarters GDP: https://oilprice.com/Energy/Energy-General/The-US-Diesel-Sho...
well good news for you then, a year from now they’ll just say inflation rose 2% from November 2022
despite still being 10% above November 2021
and your people will say “we did it guys!”
despite still being 10% above November 2021
and your people will say “we did it guys!”
Oh I assure you this is quite likely to occur. Deflation is certain to not occur; this inflation is locked in.
Im not sure who you think 'my people' are... my people aren't in power and wont be for years. Remember, not all people live in the USA.
Im not sure who you think 'my people' are... my people aren't in power and wont be for years. Remember, not all people live in the USA.
I dont get it. Prices are rising because fossil fuels are more expensive.
How do interest rate hikes fix that?
How do interest rate hikes fix that?
Flip the causality: fossil fuel (and everything else) prices are increasing because of an increased money supply. Raising the interest rate indirectly lowers the money supply.
https://fred.stlouisfed.org/series/M1SL
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
https://fred.stlouisfed.org/series/M1SL
https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...
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prices are rising because we want to use the same amount of fuel as before
use less and the prices will be falling
use less and the prices will be falling
"I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas.
(This should be the new Deleuze meme.)
(This should be the new Deleuze meme.)
Here's my try:
- Unlike popular perception, money is not created by "printing it". Money is created, or the supply of money is added to, when entities (corporations, institutions, people) borrow money from a bank.
- When interest rates go up, the cost of borrowing goes up because you have to pay back more over time.
- When the cost of borrowing goes up people borrow less.
- When their is less borrowing their is less money in the economy. Less of a currency trying to purchase the same amount of goods lowers prices.
- When interest rates go up, the cost of borrowing goes up because you have to pay back more over time.
- When the cost of borrowing goes up people borrow less.
- When their is less borrowing their is less money in the economy. Less of a currency trying to purchase the same amount of goods lowers prices.
Lots of companies make money from the cash flow spread between interest rates and whatever their investment is. And when interest rates rise, entire segments of their business become fundamentally unprofitable. It's not just banks either.
Say a company buys a $100k asset, and they can use it to generate $10k in revenue. That's a profitable investment at 5% interest ($5k), but not at 10% ($10k). So at high enough interest rates, it's not economically viable for that company to expand. That lack of expansion has upstream implications, and can have a cooling effect on asset prices at broad levels.
Say a company buys a $100k asset, and they can use it to generate $10k in revenue. That's a profitable investment at 5% interest ($5k), but not at 10% ($10k). So at high enough interest rates, it's not economically viable for that company to expand. That lack of expansion has upstream implications, and can have a cooling effect on asset prices at broad levels.
> and can have a cooling effect on asset prices at broad levels.
Well asset prices aren't the prices of food and gas.
Well asset prices aren't the prices of food and gas.
> ... borrowing... borrowed...
Borrowed money is rarely spent on food and gas.
You can be stupid and talk about buying food and gas on credit cards. Very few people in this country will stop buying food and gas to prevent default. People need food and gas to survive. So it's not really the borrowed money that is spent on food and gas.
Borrowed money is rarely spent on food and gas.
You can be stupid and talk about buying food and gas on credit cards. Very few people in this country will stop buying food and gas to prevent default. People need food and gas to survive. So it's not really the borrowed money that is spent on food and gas.
Oh, but people will stop buying so much food and gas, just not directly. Without enough money, some people will cancel their planned trip to Hawaii. That's a lot of gas not burning right there. Or they won't buy another TV, which needs gas to be delivered to your home. With less people competing for precious gas, its prices drop.
> Without enough money, some people will cancel their planned trip to Hawaii.
By this logic, why doesn't Congress illegalize travel? Is that going to reduce the cost of travel? Will that reduce CPI, which measures prices, not demand?
> Or they won't buy another TV,
What if we illegalized buying TVs? Would that make TV prices fall? You think that is going to reduce CPI?
I'm not saying your explanation here is stupid. It is the first one in a while that seems to at least appeal to common sense. I am just trying to show that CPI measures prices, it does not measure demand or supply alone for goods.
> With less people competing for precious gas, its prices drop.
Gas prices rise and fall all the time. Lots of factors go into its price. You could illegalize gas, would this cause the price of gas to rise or fall?
By this logic, why doesn't Congress illegalize travel? Is that going to reduce the cost of travel? Will that reduce CPI, which measures prices, not demand?
> Or they won't buy another TV,
What if we illegalized buying TVs? Would that make TV prices fall? You think that is going to reduce CPI?
I'm not saying your explanation here is stupid. It is the first one in a while that seems to at least appeal to common sense. I am just trying to show that CPI measures prices, it does not measure demand or supply alone for goods.
> With less people competing for precious gas, its prices drop.
Gas prices rise and fall all the time. Lots of factors go into its price. You could illegalize gas, would this cause the price of gas to rise or fall?
> > Without enough money, some people will cancel their planned trip to Hawaii.
> By this logic, why doesn't Congress illegalize travel? Is that going to reduce the cost of travel? Will that reduce CPI, which measures prices, not demand?
Hey, you asked for a "common sense explanation" how the policy works, and people gave it to you. If your intention was "I want to debate unrealistic what-ifs with as many people as possible," then you could have made yourself clear in the first question.
> By this logic, why doesn't Congress illegalize travel? Is that going to reduce the cost of travel? Will that reduce CPI, which measures prices, not demand?
Hey, you asked for a "common sense explanation" how the policy works, and people gave it to you. If your intention was "I want to debate unrealistic what-ifs with as many people as possible," then you could have made yourself clear in the first question.
> By this logic, why doesn't Congress illegalize travel?
Because then the money just gets spent in other places shifting around the inflation.
Because then the money just gets spent in other places shifting around the inflation.
You’re talking on a micro level, the OP is talking about macro monetary theory. It’s not about individuals borrowing money, it’s about companies and banks borrowing money and how difficult that is. Monetary supply past m1 is produced by banks borrowing and lending money, and limiting that directly limits monetary supply.
Money circulates between people. Person A takes out a loan and pays person B to do some work. Person B buys food and gas with the money.
Person A stops paying person B.
Is person B going to stop buying food and gas?
Is person B going to stop buying food and gas?
Person B might not be able to afford the gas in food now so possibly. The main way it functions is ultimately depressing wages and putting people out of work so there's less demand.
I suppose he could barter for it.
If person A holds on to the borrowed cash and doesn't spend it, that money doesn't circulate (the velocity of money decreases).
If person A doesn't take the loan, there is less money in the system (money supply is reduced).
If there's less money circulating, people won't "bid-up" the prices of food and gas as much, reducing their price (assuming constant supply of food and gas).
If person A holds on to the borrowed cash and doesn't spend it, that money doesn't circulate (the velocity of money decreases).
If person A doesn't take the loan, there is less money in the system (money supply is reduced).
If there's less money circulating, people won't "bid-up" the prices of food and gas as much, reducing their price (assuming constant supply of food and gas).
More expensive credit to businesses leads to less investment and growth leading to less hiring leading to higher unemployment. Higher unemployment means some people won't be able to afford food and gas lowering the demand for food and gas.
That's the theory anyway, they don't say it in plain terms like that though.
That's the theory anyway, they don't say it in plain terms like that though.
or it could mean people waste a lot less - we all know in the western world waste is gigantic
Easy to waste less of something you don't have much of.
Starvation because you can't afford enough food in the US is incredibly rare.
> Higher unemployment means some people won't be able to afford food and gas lowering the demand for food and gas.
People need food and gas to survive. They're not going to stop buying food and gas, unless they are dead.
People need food and gas to survive. They're not going to stop buying food and gas, unless they are dead.
Well the US isn't setup for it in most places but in larger cities it is possible although sometimes less convenient to take transit or bike, so I don't think people "need" gas to survive.
Even if you're not put fully out of work if you have less money you'll only take essential trips reducing gas demand even if you're somewhere without public transit at all. Same with food, less money means you'll buy cheaper alternatives that are generally easier to produce.
Just because something is 'essential' doesn't mean you'll always spend the same amount on it regardless of your economic situation.
Just because something is 'essential' doesn't mean you'll always spend the same amount on it regardless of your economic situation.
I people are not on a fixed immutable diet and routine.
I would not put instant ramen and a steak in the same "food to survive" category.
I would not put instant ramen and a steak in the same "food to survive" category.
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The Fed's tools are very blunt, and the only way it can reduce at-the-register prices for things like food and gas are indeed by hammering down aggregate demand, i.e. inducing a recession.
Of course, whatever the Fed does may be counterbalanced by supply-side issues, whether economic or political; a warmer-than-expected winter moderating gas prices, or executive actions impeding investment into O&G raising prices, and so on; and other demand-side issues, such as more helicopter money sprayed against fixed supply.
Of course, whatever the Fed does may be counterbalanced by supply-side issues, whether economic or political; a warmer-than-expected winter moderating gas prices, or executive actions impeding investment into O&G raising prices, and so on; and other demand-side issues, such as more helicopter money sprayed against fixed supply.
What's the guarantee that inducing a recession would be recoverable at some point in the future?
> The Fed's tools are very blunt, and the only way it can reduce at-the-register prices for things like food and gas are indeed by hammering down aggregate demand, i.e. inducing a recession.
By some measures, it's not even succeeding in inducing a recession. Demand isn't even necessarily declining - you would need a common sense explanation why the rate of increase in demand doesn't sometimes fluctuate or go down anyway, in the absence of fed action.
The Fed's tools are extremely effective at taking a huge shit on bond prices. They have huge financial impacts. But you are not giving me a common sense explanation for how raising interest rates will reduce the prices of food and gas.
By some measures, it's not even succeeding in inducing a recession. Demand isn't even necessarily declining - you would need a common sense explanation why the rate of increase in demand doesn't sometimes fluctuate or go down anyway, in the absence of fed action.
The Fed's tools are extremely effective at taking a huge shit on bond prices. They have huge financial impacts. But you are not giving me a common sense explanation for how raising interest rates will reduce the prices of food and gas.
They're trying to reduce the rate of inflation, not "the price of food and gas". Depending on the measure of inflation you're using, food and gas might not even be in that measure.
> "I am once again asking for" a common sense explanation for how increasing interest rates will reduce the prices of retail food and gas.
It will not. The only way to reduce prices of oil/gas and fertilizers (for food) is to bring back the amount of oil/gas and ammonia that went offline due to Russia. There is no amount of digging anywhere in the world that will quickly replace this much lost natural resource.
What raising interest rates will do is cause less spending in all non-oil/gas goods and services. This means every other industry must expect a reduction in revenues because the average customer is going to be spending more on oil/gas and food.
In other words, the choices for companies are: be ok with reduced revenue or be ok with reducing prices.
The choices for individuals are: be ok with consuming less non-oil/gas/food things or sell assets to fund oil/gas/food things.
It will not. The only way to reduce prices of oil/gas and fertilizers (for food) is to bring back the amount of oil/gas and ammonia that went offline due to Russia. There is no amount of digging anywhere in the world that will quickly replace this much lost natural resource.
What raising interest rates will do is cause less spending in all non-oil/gas goods and services. This means every other industry must expect a reduction in revenues because the average customer is going to be spending more on oil/gas and food.
In other words, the choices for companies are: be ok with reduced revenue or be ok with reducing prices.
The choices for individuals are: be ok with consuming less non-oil/gas/food things or sell assets to fund oil/gas/food things.
Oil isn't a serious problem, neither is gasoline. The West can safely maintain the situation with Russia indefinitely.
Brent has been in the $90s for a while now. That's equivalent to $65-$70 from ten years ago, which also wasn't a problem then. It's very modestly elevated at present.
Natural gas may be a different matter, although the Europeans look like they can have that permanently solved over the next few years through diversification and greater energy conservation.
Brent has been in the $90s for a while now. That's equivalent to $65-$70 from ten years ago, which also wasn't a problem then. It's very modestly elevated at present.
Natural gas may be a different matter, although the Europeans look like they can have that permanently solved over the next few years through diversification and greater energy conservation.
You can't mention oil prices without mentioning the U.S. SPR (Strategic Petroleum Reserve) releases (around ~250M barrels released this year, around 1/3 of the total reserve):
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
Without those, the price of crude oil would likely be higher than it is at the moment (although hard to say how much higher). The fact that China is still pursuing a COVID-0 policy has also helped keep global demand depressed - but we can't rely on that indefinitely.
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
Without those, the price of crude oil would likely be higher than it is at the moment (although hard to say how much higher). The fact that China is still pursuing a COVID-0 policy has also helped keep global demand depressed - but we can't rely on that indefinitely.
> Oil isn't a serious problem, neither is gasoline.
Isn't a serious problem, yet. That's because China is offline and EU is still purchasing oil from Russia.
Isn't a serious problem, yet. That's because China is offline and EU is still purchasing oil from Russia.
If it wasn't a problem, Biden wouldn't tour Iran, Venezuela and Saudi Arabia to get their oil and wouldn't open the national reserve. Nations literally live and die by the oil.
> The only way to reduce prices of oil/gas and fertilizers (for food) is to bring back the amount of oil/gas and ammonia that went offline due to Russia. There is no amount of digging anywhere in the world that will quickly replace this much lost natural resource.
At least this has a modicum of common sense to it.
As others have pointed out, oil prices fluctuate all the time though. So do food prices.
Gas can affect retail prices, because to me, common sense says, you use gas, not oil, to move food from wherever it is to the supermarket and into people's carts, back to their homes. And gas prices are not oil prices. And a lot of the price of many goods is, secretly, gas, because that is how the people get to where they work, how the goods that are otherwise useless without transportation get to where they're sold, etc.
> What raising interest rates will do is cause less spending in all non-oil/gas goods and services.
So what? The CPI, even the "core" CPI, is food and gas, or food and gas in disguise.
Even if you buy less clothing, a lot of the price of the clothes doesn't come from demand. It comes from the price of the gas used to move it from A to B and all the people involved moving it, and the price of the food to feed all the people who made it and sell it. Gas and food are hiding in all the inputs of clothes. There is a floor on the cost of clothes, it keeps rising, what exactly will increasing interest rates do to the rising (producer's) cost of clothes?
At least this has a modicum of common sense to it.
As others have pointed out, oil prices fluctuate all the time though. So do food prices.
Gas can affect retail prices, because to me, common sense says, you use gas, not oil, to move food from wherever it is to the supermarket and into people's carts, back to their homes. And gas prices are not oil prices. And a lot of the price of many goods is, secretly, gas, because that is how the people get to where they work, how the goods that are otherwise useless without transportation get to where they're sold, etc.
> What raising interest rates will do is cause less spending in all non-oil/gas goods and services.
So what? The CPI, even the "core" CPI, is food and gas, or food and gas in disguise.
Even if you buy less clothing, a lot of the price of the clothes doesn't come from demand. It comes from the price of the gas used to move it from A to B and all the people involved moving it, and the price of the food to feed all the people who made it and sell it. Gas and food are hiding in all the inputs of clothes. There is a floor on the cost of clothes, it keeps rising, what exactly will increasing interest rates do to the rising (producer's) cost of clothes?
There is a floor to the cost of clothes. And at an extreme people will have to buy 2 t-shirts a year instead of 20. That means that tshirt producers will make less sales and go bust. The remaining few tshirt companies will bargain with all the suppliers to reduce their prices.
Families will have to go back to hand me downs, wearing the same shoes and socks for years.
The reality is that as long as so much of oil/gas inflation exists and interest rates rise, something other things will HAVE to give. People will just have to be ok with a life of less abundance.
The reality is that as long as so much of oil/gas inflation exists and interest rates rise, something other things will HAVE to give. People will just have to be ok with a life of less abundance.
There are several mechanisms:
1. choice: The idea is that you can put your money in the bank and get some interest or you can spend it. So when interest rates go up, people will chose to spend less and save more. Obviously rates have to be higher than inflation which is now 10%, for this strategy to work, but at high enough rates, they will choose to save rather then spend. Less spending, demand falls, so prices should drop.
2. money supply: For the non-financial sector of the economy, money is created when households borrow from banks, and money is destroyed when loans are repaid. Increasing interest rates reduces loan growth and thus the money supply. A smaller money supply should lead to lower prices.
3. business investment: higher interest rates means that the cost of capital to firms goes up. They must earn a higher margin in order to service whatever debt they have at the higher rates, and investors can choose to invest in the business or buy a bond, and so the business has to earn a return at least as high as the bond. So higher interest rates means that ventures which would have been profitable at a lower rate are no longer profitable. So less business investment at higher rates.
1. choice: The idea is that you can put your money in the bank and get some interest or you can spend it. So when interest rates go up, people will chose to spend less and save more. Obviously rates have to be higher than inflation which is now 10%, for this strategy to work, but at high enough rates, they will choose to save rather then spend. Less spending, demand falls, so prices should drop.
2. money supply: For the non-financial sector of the economy, money is created when households borrow from banks, and money is destroyed when loans are repaid. Increasing interest rates reduces loan growth and thus the money supply. A smaller money supply should lead to lower prices.
3. business investment: higher interest rates means that the cost of capital to firms goes up. They must earn a higher margin in order to service whatever debt they have at the higher rates, and investors can choose to invest in the business or buy a bond, and so the business has to earn a return at least as high as the bond. So higher interest rates means that ventures which would have been profitable at a lower rate are no longer profitable. So less business investment at higher rates.
Reduce demand, broadly, as credit tightens with increased interest rates. Can't borrow at basically free money rates across the board anylonger.
Translates into, Less money for stock buybacks, less Yolo with stimy checks, left over money to yolo is also reduced == the market returns to mean. People feel less wealthy == slow purchases. Reduced purchases == Business struggle. Businesses lay people off == less demand. All of this == Less driving, less food.
Really very simple.
Translates into, Less money for stock buybacks, less Yolo with stimy checks, left over money to yolo is also reduced == the market returns to mean. People feel less wealthy == slow purchases. Reduced purchases == Business struggle. Businesses lay people off == less demand. All of this == Less driving, less food.
Really very simple.
That's not quite right, because if you only reduce demand you could also reduce supply and prices would be unchanged. Higher interest rates reduces money supply (which can induce a recession) but does not necessarily reduce the supply of goods. Less money chasing the same amount of goods (ideally) causes lower prices.
I don't think you are wrong intuitively. I am just trying to be a little more specific because get very vague about monetary policy and it leads to some bad assumptions.
I don't think you are wrong intuitively. I am just trying to be a little more specific because get very vague about monetary policy and it leads to some bad assumptions.
> but does not necessarily reduce the supply of goods
Every mainstream economist agrees that rising interest rates increases unemployment.
Well you need human beings to go and make stuff like food and gas. That stuff is also already made as efficiently as possible. So supply is definitely, also, going to be reduced.
Every mainstream economist agrees that rising interest rates increases unemployment.
Well you need human beings to go and make stuff like food and gas. That stuff is also already made as efficiently as possible. So supply is definitely, also, going to be reduced.
I think you are right, but keep in mind we are currently in the middle of raising interest rates and unemployment has not gone up. So what I am trying to say is, rather than say A (rising interest rates) -> D (recession), acknowledge what happens is A (rising interest rates) -> B (less money supply) -> C (less employment) -> D (recession)
Because if you don't acknowledge the steps, you can't explain what is happening today. Rates are going up and unemployment isn't. The economy is complicated.
Because if you don't acknowledge the steps, you can't explain what is happening today. Rates are going up and unemployment isn't. The economy is complicated.
They're increasing the cost of borrowing, which directly affects the cost of loan financing for something like a car or a house.
But probably more importantly the increased cost of borrowing hits businesses which are living on the edge and have been rolling over short term loans at low interest rates. When that debt service triples then those unprofitable businesses will start facing negative cash flow losses and can be pushed into insolvency.
For just one example, look at all the commercial real estate vacancies in downtown SF and Portland. Behind a lot of that will be very cheap financing which will go under when interest rates rise (and it is all reasonably short-term financing because it had to be in order to get the lowest interest rates and keep the businesses barely treading water -- so think of this as ARM mortgages for business).
So you have reduced demand for anything funded by loans, along with businesses at the margins going under because their cost of borrowing increases. You get layoffs from the businesses going under which will remove demand for goods. The reduced demands for goods then filters through the system producing more layoffs and more reduced demands for goods across every sector and the economy contracts into a recession.
All the Fed does is raise the cost of borrowing money which causes enough businesses on the edge of failure to fail that it pushes the economy into a recession--amplified by all the positive feedback loops in the economy.
Honestly don't know why this is such a mystery to everyone or why the question needs to be a "meme", it is pretty straightforwards. The only tricky part might be understanding why failures of businesses on the margins could lead to an economic collapse, but you'd think that with the audience of engineering-oriented people here that we'd collectively understand positive feedback loops amplifying small changes into big ones.
Oh there's also purely subjective psychological positive feedback loops as well. Layoffs at FAANGs right now (or whatever they're called these days) is more due to forward expectations and those businesses getting a bit more runway for the recession. But by doing that they're helping to create the very recession that they're getting prepared for. Similarly in the middle of a recession businesses cut jobs and curb spending because they're in a recession, making the recession worse.
But probably more importantly the increased cost of borrowing hits businesses which are living on the edge and have been rolling over short term loans at low interest rates. When that debt service triples then those unprofitable businesses will start facing negative cash flow losses and can be pushed into insolvency.
For just one example, look at all the commercial real estate vacancies in downtown SF and Portland. Behind a lot of that will be very cheap financing which will go under when interest rates rise (and it is all reasonably short-term financing because it had to be in order to get the lowest interest rates and keep the businesses barely treading water -- so think of this as ARM mortgages for business).
So you have reduced demand for anything funded by loans, along with businesses at the margins going under because their cost of borrowing increases. You get layoffs from the businesses going under which will remove demand for goods. The reduced demands for goods then filters through the system producing more layoffs and more reduced demands for goods across every sector and the economy contracts into a recession.
All the Fed does is raise the cost of borrowing money which causes enough businesses on the edge of failure to fail that it pushes the economy into a recession--amplified by all the positive feedback loops in the economy.
Honestly don't know why this is such a mystery to everyone or why the question needs to be a "meme", it is pretty straightforwards. The only tricky part might be understanding why failures of businesses on the margins could lead to an economic collapse, but you'd think that with the audience of engineering-oriented people here that we'd collectively understand positive feedback loops amplifying small changes into big ones.
Oh there's also purely subjective psychological positive feedback loops as well. Layoffs at FAANGs right now (or whatever they're called these days) is more due to forward expectations and those businesses getting a bit more runway for the recession. But by doing that they're helping to create the very recession that they're getting prepared for. Similarly in the middle of a recession businesses cut jobs and curb spending because they're in a recession, making the recession worse.
> The reduced demands for goods then filters through the system producing more layoffs and more reduced demands for goods across every sector and the economy contracts into a recession.
Yes, but prices are not demand, they are supply and demand. What if you shut down the parts of the economy that make food and gas?
For example, how do fed interest rates shut down the parts of Saudi's economy that makes oil?
Anyway, in your explanation, you do not use the words "food" or "gas" which is how the "CPI" is calculated.
> Honestly don't know why this is such a mystery to everyone or why the question needs to be a "meme", it is pretty straightforwards.
Using the words in the question to answer the question is "straightforwards."
Yes, but prices are not demand, they are supply and demand. What if you shut down the parts of the economy that make food and gas?
For example, how do fed interest rates shut down the parts of Saudi's economy that makes oil?
Anyway, in your explanation, you do not use the words "food" or "gas" which is how the "CPI" is calculated.
> Honestly don't know why this is such a mystery to everyone or why the question needs to be a "meme", it is pretty straightforwards.
Using the words in the question to answer the question is "straightforwards."
When people are fired from their jobs they no longer have money to spend, they don't take that trip to Disneyland this year (or whatever) and that shows up as reduced airline trips and miles driven, which impacts gas prices. Similarly because they're not buying as much consumer stuff that impacts deliveries. Businesses tighten spending which means less B2B stuff being bought which reduces manufacturing demand (and deliveries). That all drops demand for all kinds of energy and petroleum products.
I didn't mention the words "food" or "gas"[*] because I thought it was obvious, this stuff is really, really basic economics. The economy is all connected, so someone's contraction in spending is another market participant's contraction in demand--and as businesses see a contraction in their demand they adjust to contract their own spending.
When it comes to food, people contract their spending by starting to make coffee at home or just buy starbucks less often as a splurge rather than a daily thing, so that contracts revenue for starbucks, that leads to layoffs, which leads to less consumer spending, etc. The prices of staples don't usually drop as much because people still need to eat, but with reduced energy and transportation costs the supermarkets can reduce the cost of milk to try to attract customers.
[*] Actually on re-reading I did mention food and gas: "The reduced demands for goods then filters through the system producing more layoffs and more reduced demands for goods across every sector and the economy contracts into a recession." And "every sector" really means literally every sector of the economy--including "food and gas".
I didn't mention the words "food" or "gas"[*] because I thought it was obvious, this stuff is really, really basic economics. The economy is all connected, so someone's contraction in spending is another market participant's contraction in demand--and as businesses see a contraction in their demand they adjust to contract their own spending.
When it comes to food, people contract their spending by starting to make coffee at home or just buy starbucks less often as a splurge rather than a daily thing, so that contracts revenue for starbucks, that leads to layoffs, which leads to less consumer spending, etc. The prices of staples don't usually drop as much because people still need to eat, but with reduced energy and transportation costs the supermarkets can reduce the cost of milk to try to attract customers.
[*] Actually on re-reading I did mention food and gas: "The reduced demands for goods then filters through the system producing more layoffs and more reduced demands for goods across every sector and the economy contracts into a recession." And "every sector" really means literally every sector of the economy--including "food and gas".
Lamontcg offered you the simple explanation of why interest rate management is used to manage inflation. They didn't muddy the waters by talking about market distortions and why it is best to minimalise these. They didn't go into an explanation of why interest rate hikes are themselves a marketplace intervention preventing the proper movement of debt pricing. They didn't even get lost in the labyrinth of exchange rates, and the impact all of this has upon a global trade currency.
Their explanation was about as simple as you can get.
> Yes, but prices are not demand, they are supply and demand. What if you shut down the parts of the economy that make food and gas?
Think this through and remember that food and fuel are must haves. There will always be demand, even at high prices. Just less of it. Which is what the point is.
Their explanation was about as simple as you can get.
> Yes, but prices are not demand, they are supply and demand. What if you shut down the parts of the economy that make food and gas?
Think this through and remember that food and fuel are must haves. There will always be demand, even at high prices. Just less of it. Which is what the point is.
I think a lot of people aren't approaching the problem correctly.
Prices going down (Deflation) in a modern economy is very very very bad even if it's for Food and Gas. Since WW2 our economic system has been based on prices going up because that means people are producing goods to make money to spend it on goods. The real goal of these interest rate is to slow the rate of price increase because now there is less money available to borrow / print into the system. People / Businesses will now use debt less often to leverage their purchases which will slow down the economy. If prices increase too quickly the system burns itself alive. If prices lower it decays and dies.
So to answer your question prices will continue to rise because inflation will remain positive, however the rate of it will be lower.
Prices going down (Deflation) in a modern economy is very very very bad even if it's for Food and Gas. Since WW2 our economic system has been based on prices going up because that means people are producing goods to make money to spend it on goods. The real goal of these interest rate is to slow the rate of price increase because now there is less money available to borrow / print into the system. People / Businesses will now use debt less often to leverage their purchases which will slow down the economy. If prices increase too quickly the system burns itself alive. If prices lower it decays and dies.
So to answer your question prices will continue to rise because inflation will remain positive, however the rate of it will be lower.
Economists have predicted "soft landings" before every recession I can remember where I've followed what the Fed has been saying (I don't quite remember the Volker Fed, I was a little too preoccupied with Star Wars toys and Legos).
And economists have predicted 9 of the last 5 recessions. And in an economy with 3.5% unemployment, the odds of a recession seem pretty low in my opinion.
We are pretty early into the cycle to declare such a thing. The rate increases are likely not close to ending. It takes time for this stuff to unwind.
Also note that we are in a similar situation as when Nixon propped up the economy before an election in 1972. It took a while for his policies to backfire. Unemployment rate was 3.5% when Nixon was elected and doubled by 1974.
The current dominating party in the US is not taking as many extreme measures as Nixon of course, but for me I want to see where the economy stands after the election dust has settled.
Also note that we are in a similar situation as when Nixon propped up the economy before an election in 1972. It took a while for his policies to backfire. Unemployment rate was 3.5% when Nixon was elected and doubled by 1974.
The current dominating party in the US is not taking as many extreme measures as Nixon of course, but for me I want to see where the economy stands after the election dust has settled.
We are also pretty early into the cycle to declare that a recession is inevitable. Yet that's what a lot of people are saying. The only thing that can be said with certainty is that the future is risky and unclear. IOW, situation normal, all f^#$ed up.
It's not the election, it's Black Friday that will be the bellweather, I think. If inflation is still ongoing, discounts will be minimal. If the economy is going south, sales will be tepid. Nobody is ready to lower prices permanently, but temporarily? Massive discounts are the traditional way for retailers to lower prices in times of uncertainty. The rise of the dollar and the inflation of the past year will give retailers lots of room for discounts, so I expect to see them liberally applied. And with unemployment so low and low-income wages rising so quickly, I expect to see record retail spending this month.
It's not the election, it's Black Friday that will be the bellweather, I think. If inflation is still ongoing, discounts will be minimal. If the economy is going south, sales will be tepid. Nobody is ready to lower prices permanently, but temporarily? Massive discounts are the traditional way for retailers to lower prices in times of uncertainty. The rise of the dollar and the inflation of the past year will give retailers lots of room for discounts, so I expect to see them liberally applied. And with unemployment so low and low-income wages rising so quickly, I expect to see record retail spending this month.
The Fed is doing 0.75bp rate hikes every meeting and talking affectionately about Paul Volker. And Powell was pretty clearly saying that rates are going to go higher and stay higher longer than the market expects. We're going to have a recession.
This Black Friday is unlikely to be any kind of bellweather. It normally takes 6-12 months after rate hikes stop for them to be felt in the broader market. Next Black Friday might be a bellweather, but I expect that we'll already be in it by then.
This Black Friday is unlikely to be any kind of bellweather. It normally takes 6-12 months after rate hikes stop for them to be felt in the broader market. Next Black Friday might be a bellweather, but I expect that we'll already be in it by then.
Keep pushing out those goalposts. People on HN last spring were confident we'd be in a recession by now. Now you're saying that it's 6-12 months away? If you keep pushing those goalposts eventually you will be right. There will be a recession some time in the future.
Once the effects of the Fed rates hikes are felt broadly throughout the economy and unemployment is running closer to 8% let me know if that feels more like a recession or not.
They're not trying to reduce existing prices per se. They're trying to reduce the extent of price increases going forward.
The Fed can do that be damaging demand by damaging the labor market and reducing the value of assets (which also damages spending power ultimately in numerous ways).
There should be a lot more consideration given to increasing and improving on the production side right now, however the US is not nearly so skilled at that these days (whether industrially or policy wise). If you walk into your typical CVS or Walgreens and look at their empty baby formula section, it tells all. Supply chains are still a mess in the US.
The Fed can do that be damaging demand by damaging the labor market and reducing the value of assets (which also damages spending power ultimately in numerous ways).
There should be a lot more consideration given to increasing and improving on the production side right now, however the US is not nearly so skilled at that these days (whether industrially or policy wise). If you walk into your typical CVS or Walgreens and look at their empty baby formula section, it tells all. Supply chains are still a mess in the US.
>There should be a lot more consideration given to increasing and improving on the production side right now
The US knows how to drill for oil and frack. It would help curb inflation and help Europe deal with Russia.
The US knows how to drill for oil and frack. It would help curb inflation and help Europe deal with Russia.
> They're trying to reduce the extent of price increases going forward.
What is the common sense explanation for how increasing interest rates reduce the extend of price increases of food and gas?
What is the common sense explanation for how increasing interest rates reduce the extend of price increases of food and gas?
Both groceries and gas are sold at low profit margins - I've heard as low as 1-2% for groceries. They are commodities, there's a lot of competition, and shoppers are very price conscious. If grocery stores can make a profit selling food cheaper they will. If grocery stores can pay less rent for their stores, pay less wages for their staff, pay less for all their expenses, those savings will get passed down to consumers as cheaper food.
I mean, when was the last time a company the size of a grocery store chain passed down savings to consumers? If anything, the pandemic has shown that companies will gladly continue to fleece customers despite lowering expenses. At the end of the day, they exist to extract as much profit as possible - if every one of their peers maintains high prices, consumers don't have any choice but to pay those prices.
It won't, because the current inflation is supplyside-driven, not expectations-driven. But if we transition to an expectations-driven inflation regime, that's really bad, because it would require much more severe action to bring under control. The Fed is doing this as a preventive measure to keep expectations-driven inflation from taking hold. It sucks, but it's being done to prevent more pain later.
I disagree. Supply constraints were a figment of unsustainable demand. There was simply too much money sloshing around to satisfy the hedonistic human treadmill of MORE!
But most measures of demand for durable goods show that it is up.
> It won't, because the current inflation is supplyside-driven, not expectations-driven. But if we transition to an expectations-driven inflation regime, that's really bad, because it would require much more severe action to bring under control. The Fed is doing this as a preventive measure to keep expectations-driven inflation from taking hold. It sucks, but it's being done to prevent more pain later.
We have differing definition of common sense.
We have differing definition of common sense.
It won't necessary reduce the price of food or gas much (some nominal decrease from "discretionary," or non-essential, spending on both).
It will bring down housing, which is 1/3 of the CPI by weight and helps get the Fed's inflation metrics down. (Just as an example, it won't make as much sense to leverage up and buy 5 Airbnb's at higher interest rates.)
It will bring down housing, which is 1/3 of the CPI by weight and helps get the Fed's inflation metrics down. (Just as an example, it won't make as much sense to leverage up and buy 5 Airbnb's at higher interest rates.)
By reducing demand. I guess.
This is it. You trigger a pull back in the economy, if you get lucky you don't trigger a recession. But, if you need to trigger a recession you do it rather than out of control inflation.
How exactly do rising interest rates reduce demand for food?
How does it reduce demand for gas?
This is what I mean.
How does it reduce demand for gas?
This is what I mean.
Per other commenters less money in the economy reduces aggregate demand. Per previous inflationary periods where interest rates were raised basically by putting people out of work.
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The idea is that people will cut spending somewhat to have more money stored in saving accounts where they produce more low-risk return. Cutting spending will dampen prices.
Increasing interest rates increases the temptation to lend money instead of spending.
Increasing interest rates increases the temptation to lend money instead of spending.
> is that people will cut spending somewhat
Why would people cut spending on food and gas? They need both to survive. That's what the CPI is made of.
Why would people cut spending on food and gas? They need both to survive. That's what the CPI is made of.
Because people will cut spending on going to theaters somewhat, and that takes some gas to get there. No, short term people don't need theaters to survive.
There is some non-critical spending to cut, Feds rely on that.
There is some non-critical spending to cut, Feds rely on that.
Interest rates make things requiring financing (cars, homes, stuff bought on credit) more expensive and out of reach. People either buy less, or buy the same but pay more interest, meaning they have less money for the next purchase.
> Interest rates make things requiring financing (cars, homes, stuff bought on credit) more expensive and out of reach.
This is complex.
Lower interest rates overall increase home prices, because people buy the biggest home they can afford on a monthly payment.
There are many kinds of cars. Some are cheap and some are expensive.
Anyway, how do interest rates make things like food and gas more expensive and out of reach? Those don't require financing. They're hugely impactful on inflation. You can be the Fed, and pretend there's a "core" CPI, but the people who make your clothes and cars need food and gas, your clothes are made with a lot of gasoline directly, via shipping and manufacturing, etc., so it is sort of a fiction that there is this non-food-and-gas CPI.
This is complex.
Lower interest rates overall increase home prices, because people buy the biggest home they can afford on a monthly payment.
There are many kinds of cars. Some are cheap and some are expensive.
Anyway, how do interest rates make things like food and gas more expensive and out of reach? Those don't require financing. They're hugely impactful on inflation. You can be the Fed, and pretend there's a "core" CPI, but the people who make your clothes and cars need food and gas, your clothes are made with a lot of gasoline directly, via shipping and manufacturing, etc., so it is sort of a fiction that there is this non-food-and-gas CPI.
By sucking the money out of the system.
It reduces demand - in the modern world the prices are disconnected from cost of production - instead reflect the demand for that product - how much can it be sold for
It reduces demand - in the modern world the prices are disconnected from cost of production - instead reflect the demand for that product - how much can it be sold for
> By sucking the money out of the system.
Does it suck money out of the system? Here's a common sense example: Raising interest rates caused assets like stocks and bonds to decline in price. People sell these equities and now have cash they are willing to spend on more shit, specifically what is in the CPI. So the opposite can also happen.
Does it suck money out of the system? Here's a common sense example: Raising interest rates caused assets like stocks and bonds to decline in price. People sell these equities and now have cash they are willing to spend on more shit, specifically what is in the CPI. So the opposite can also happen.
No it doesn't suck money out, but it reduces the rate at which new money is created through borrowing.
Every time a loan is agreed, the value of the ${NATIONAL_CURRENCY} is diluted by a tiny amount. And that tiny dilution is amplified through the economy and has a proportionally larger effect on the price of end-user items which inflate to compensate.
Increasing interest rates is not a lever that directly affects things measured by the CPI, but the idea is that the effects will ripple through the economy and reduce the delta-v of their prices at the end of a very complicated series of gears and pulleys.
It's a bit like trying to refloat a grounded ship by subtly nudging the Moon's orbit to modify the tides.
Every time a loan is agreed, the value of the ${NATIONAL_CURRENCY} is diluted by a tiny amount. And that tiny dilution is amplified through the economy and has a proportionally larger effect on the price of end-user items which inflate to compensate.
Increasing interest rates is not a lever that directly affects things measured by the CPI, but the idea is that the effects will ripple through the economy and reduce the delta-v of their prices at the end of a very complicated series of gears and pulleys.
It's a bit like trying to refloat a grounded ship by subtly nudging the Moon's orbit to modify the tides.
> No it doesn't suck money out, but it reduces the rate at which new money is created through borrowing.
This is true. It does not tell me how the money created through borrowing between 0.75% rates and 4.00% rates was used to buy food and gas though.
That borrowed money was overwhelming actually used to buy equities, which the fed is obviously impacting very effectively, and not food and gas, even indirectly.
This is true. It does not tell me how the money created through borrowing between 0.75% rates and 4.00% rates was used to buy food and gas though.
That borrowed money was overwhelming actually used to buy equities, which the fed is obviously impacting very effectively, and not food and gas, even indirectly.
They are not targeting retail food and gas specifically. The hope is that removing money from the economy will cause spending to slow down everywhere and that eventually will hit food.
> They are not targeting retail food and gas specifically.
Then it should be obvious why the Fed is doing a terrible job.
Then it should be obvious why the Fed is doing a terrible job.
It won't reduce the prices. It will merely reduce the rate of increase of those prices.
If done enough, it may reduce prices; we may not want that though.
Well, I don't see a common sense explanation as to why the rate of increase should decrease either. We could also say, "Eventually, the rate of increase will go down anyway, in the absence of any action from the fed."
I don't understand the entire system either, but one obvious effect is that there will be much less cash-out refinancing or flipping, which means at least that source of cash and the associated demand will get smaller. And judging how many people I know around town who have been treating their houses like ATMs, it's not a small effect.
> And judging how many people I know around town who have been treating their houses like ATMs, it's not a small effect.
This is true, this is at least appealing to common sense. But I don't see how that excess cash was going into spending more on food and gas.
If I run a supermarket and raise prices, and people like lettuce, if they keep buying the lettuce, because $3.75 lettuce is still worth it compared to $2.00 lettuce, well, CPI can increase a lot, and demand appears to be inelastic, and interest rate increases did nothing to reverse CPI.
This is true, this is at least appealing to common sense. But I don't see how that excess cash was going into spending more on food and gas.
If I run a supermarket and raise prices, and people like lettuce, if they keep buying the lettuce, because $3.75 lettuce is still worth it compared to $2.00 lettuce, well, CPI can increase a lot, and demand appears to be inelastic, and interest rate increases did nothing to reverse CPI.
TL;DR It puts people out of work so there's less demand and we move back down the demand/supply curve towards lower prices/slower increase in prices.
The simplistic version is one idea of the cause of inflation is there's too much demand for all goods as a whole in the economy because there's too much money floating around causing demand to push higher on the demand/supply curve because it's more expensive to produce more of something past a certain point. Making it harder to get loans decreases the money flowing in for some expenditures so there's less expansion in areas like hiring (which when we're near full employment like now usually means having to raise wages pushing costs up and injecting money into the more general market). Thus by increasing the cost of expansion you slow it down and cool the labor market and maybe even cause it to contract.
In the end it boils down to getting more people out of work so they can't buy as much and are willing to accept lower wages meaning it costs less to produce so you might meet the increased demand curve in the middle. It's an incredibly shaky way to try to run the economy but the government has limited knobs to turn and ideally it's easier to target relief at people put out of work because of this than it is to aid the entire population generally.
That's one theory I've heard explained at least. It's incredibly callous to me though because it depends on just putting people out of work and our safety nets in the US are extremely weak meaning you wind up with the fact that a 1 percentage point increase in the unemployment number is associated with a 1-1.6& increase in suicide rates. [0]
[0] https://www.healthaffairs.org/do/10.1377/hpb20220302.274862/....
The simplistic version is one idea of the cause of inflation is there's too much demand for all goods as a whole in the economy because there's too much money floating around causing demand to push higher on the demand/supply curve because it's more expensive to produce more of something past a certain point. Making it harder to get loans decreases the money flowing in for some expenditures so there's less expansion in areas like hiring (which when we're near full employment like now usually means having to raise wages pushing costs up and injecting money into the more general market). Thus by increasing the cost of expansion you slow it down and cool the labor market and maybe even cause it to contract.
In the end it boils down to getting more people out of work so they can't buy as much and are willing to accept lower wages meaning it costs less to produce so you might meet the increased demand curve in the middle. It's an incredibly shaky way to try to run the economy but the government has limited knobs to turn and ideally it's easier to target relief at people put out of work because of this than it is to aid the entire population generally.
That's one theory I've heard explained at least. It's incredibly callous to me though because it depends on just putting people out of work and our safety nets in the US are extremely weak meaning you wind up with the fact that a 1 percentage point increase in the unemployment number is associated with a 1-1.6& increase in suicide rates. [0]
[0] https://www.healthaffairs.org/do/10.1377/hpb20220302.274862/....
Jerome Powell had no answers to the Senate Oversight committee when asked how increasing rates would actually reduce that kind of inflation because his goal is to crash the economy for his buddies on Wall Street - they have lobbyists at the Fed too. [4]
[0] https://www.theguardian.com/commentisfree/2022/sep/25/inflat...
[1] https://newrepublic.com/article/166752/opec-cartel-gas-price...
[2] https://www.propublica.org/article/yieldstar-rent-increase-r...
[3] https://wjno.iheart.com/featured/brian-mudd/content/2022-02-....
[4] https://theintercept.com/2022/10/26/federal-reserve-bank-lob...