| ▲ | lenerdenator 7 days ago |
| And that's why there's a desire to make interest rates lower: cheap money is good for propping up bubbles. Now, it does that at the expense of the average person, but it will definitely prop up the bubble just long enough for the next election cycle to hit. |
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| ▲ | highfrequency 7 days ago | parent | next [-] |
| Careful not to automatically slip into a zero sum mindset - it is possible that low interest rates benefit everyone even if the benefits disproportionately go to one class over another. (Example: lowering interest rates after the Financial Crisis - certainly good for banks, but lowering unemployment is critical for normal people too). In the same way that UBI would disproportionately benefit poor people, but considered with its downstream effects could benefit rich people too. |
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| ▲ | bluecalm 7 days ago | parent | prev | next [-] |
| I am curious, why do you think lower interest rates are bad for an average person? |
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| ▲ | nr378 7 days ago | parent | next [-] | | Interest rates set the exchange rate between future cashflows (i.e. assets) and cash today. Lower interest rates mean higher asset values, higher interest rates mean lower asset values. Higher asset values generally disproportionately benefit those that own assets (wealthy people) over those that don't (average people). Of course, this is just one way that interest rates affect the economy, and it's important to bear in mind that lower interest rates can also stimulate investment which help to create jobs for average people as well. | | |
| ▲ | tharmas 7 days ago | parent [-] | | > it's important to bear in mind that lower interest rates can also stimulate investment which help to create jobs for average people as well. Precisely! Yet the big problem in the Anglosphere is that most of that money has been invested in asset accumulation, namely housing, causing a massive housing crisis in these countries. |
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| ▲ | mason_mpls 7 days ago | parent | prev | next [-] | | We want interest rates as close to zero as possible. However they’re also the only reliable tool available to stop inflation. Youre implying the country exerting financial responsibility to control inflation isn’t good. Not using interest rates to control inflation caused the stagflation crisis of the 70s, and ended when Volcker set rates to 20%. | |
| ▲ | lenerdenator 6 days ago | parent | prev | next [-] | | Generally speaking, the lower the prime interest rate, the lower the returns on "safer" investments like certificates of deposit, sometimes below the rate of inflation. As a bank, why would you borrow from local depositors when you could borrow from the central banking system and pay less in interest? People like my parents, who are both 65, could just park their money at a local bank and have an FDIC-insured savings instrument that roughly tracks inflation and helps invest in the local economy. They don't have to worry about cokeheads in lower Manhattan making bets that endanger their retirements like they have numerous times. If they do that with lower interest rates, they're more likely to lose money instead of preserving it or slightly increasing it. Which, of course, gives the cokeheads more money to gamble with. | |
| ▲ | verdverm 7 days ago | parent | prev | next [-] | | more money in the economy drives inflation, which largely affects those with less disposable income This is why in a hot economy we raise rates, and in a not economy we lower them (oversimplification, but it is a commonly provided explanation) | | |
| ▲ | 827a 7 days ago | parent | next [-] | | The issue with this theory post-internet economy is: its only true if that money is spent chasing a limited amount of scarce goods and services. But the majority of the US economy today is spent on goods and services that are no longer scarce (more accurately, whose unit costs are so low that they might as well be unlimited). We are in a very different world than the one Volker presided over, and this is the core axiom as to why: The economists who correctly invented this central bank interest rate lever could never have foreseen a world so supply-unconstrained. Another way to look at this: Low interest rates can induce demand and drive inflation. But they also control the rates when financing supply-side production; so they can also ramp up supply to meet increased demand. 1. Not all goods and services are like this, obviously. Real estate is the big one that low interest rates will continue to inflate. We need legislative-side solutions to this, ideally focused at the state and local levels. 2. None of this applies if you have an economy culturally resistant to consumerism, like Japan. Everything flips on its head and things get weird. But that's not the US. | |
| ▲ | tharmas 7 days ago | parent | prev [-] | | >more money in the economy drives inflation Not necessarily. Sure, it that money is chasing fixed assets like housing but if that money was invested into production of things to consume its not necessarily inflation inducing is it? For example, if that money went into expanding the electricity grid and production of electric cars, the pool of goods to be consumed is expanding so there is less likelihood of inflation. | | |
| ▲ | verdverm 7 days ago | parent [-] | | > if that money was invested into production of things to consume its not necessarily inflation inducing is it People are paid salaries to work at these production facilities, which means they have more money to spend, and the competition drives people to be willing to spend more to get the outputs. Not all outputs will be scaled, those that aren't experience inflation, like food and housing today |
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| ▲ | micromacrofoot 7 days ago | parent | prev [-] | | Low interest rates make borrowing cheap, so companies flood money into real estate and stocks, inflating prices. This also drives up costs for regular people, fuels risky lending (remember subprime mortgages?), and when the bubble bursts... guess who gets hit the hardest when companies start scaling back and lenders come calling? | | |
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| ▲ | thrance 7 days ago | parent | prev | next [-] |
| Trump and his administration harassing the Fed and Powell over interest rates is like a swarm of locust salivating at ripened wheat fields. They want a quick feast at the expense of everything and everyone else, including themselves over the long term. |
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| ▲ | dylan604 7 days ago | parent | next [-] | | Trump knows that the next POTUS can just reverse his decisions much like he's done in both of his at bats. Only thing is there is no next at bat for Trump (without major changes that would be quite devastating), so he's got to get them in now. The sooner the better to take as much advantage of being in control. | |
| ▲ | pessimizer 7 days ago | parent | prev [-] | | The left is almost completely unanimous in their support for lowering interest rates, and have been screaming about it for years, since the first moment they started being raised again. And for the same reasons that Trump wants it, except without the negative connotations for some reason. Recently, I've heard many left wingers, as a response to Trump's tariffs, start 1) railing about taxes being too high, and that tariffs are taxes so they're bad, and 2) saying that the US trade deficit is actually wonderful because it gives us all this free money for nothing. I know all of these are opposite positions to every one of the central views of the left of 30 years ago, but politics is a video game now. Lefties are going out of their way to repeat the old progressive refrain: > "The way that Trump is doing it is all wrong, is a sign of mental instability, is cunning psychopathic genius and will resurrect Russia's Third Reich, but in a twisted way he has blundered into something resembling a point..." "...the Fed shouldn't be independent and they should lower interest rates now." | | |
| ▲ | thrance 7 days ago | parent | next [-] | | Who cares? Even if it were true, why is your first reflex to point the finger at progressives when they're absolutely irrelevant to the current government? | |
| ▲ | skinnymuch 7 days ago | parent | prev | next [-] | | People are upset at the tariffs as taxes because they hurt poorer people more. That’s how it works when everyone pays the same amt of taxes | |
| ▲ | mason_mpls 7 days ago | parent | prev [-] | | I have not heard a single left wing pundit demand interest rates go down | | |
| ▲ | 7 days ago | parent | next [-] | | [deleted] | |
| ▲ | rockemsockem 7 days ago | parent | prev [-] | | Elizabeth Warren has gone on several talk shows insisting interest rates should be lowered. If you look at video from the last time Powell was being questioned by Congress there were many other Democratic congress-people asking him why he wouldn't lower rates. Personally I trust Jerome Powell more than any other part of the government at the moment. The man is made of steel. | | |
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| ▲ | decimalenough 7 days ago | parent | prev [-] |
| You really think the AI bubble can be sustained for another three years? |
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| ▲ | dylan604 7 days ago | parent | next [-] | | 15 months. Mid-terms are next November. After that, legacy cannot be changed by election. If POTUS loses control of either/both chambers, he might have some 'splanin to do. If POTUS keeps control and/or makes further gains, there might not be an election in 3 years. | | |
| ▲ | tick_tock_tick 7 days ago | parent | next [-] | | > he might have some 'splanin to do About what? Like seriously what would they even do other then try and lame duck him? The big issue is Dem approval ratings are even lower then Trumps so how the hell are they going to gain any seats? | | | |
| ▲ | Hikikomori 7 days ago | parent | prev [-] | | Gerrymandering in Texas and elsewhere they might stay in power, if they do it's unlikely to change. Basically speed running a fascist takeover. | | |
| ▲ | smackeyacky 7 days ago | parent | next [-] | | It's not really a speed run. The seeds were planted after Nixon resigned and it was decided to re-shape the media landscape and move the overton window rightwards in the 1970s, dismantling social democracy across the west and leading to a gradual reversal of the norms of governance in the US (see Newt Gingrich). It's been gradual, slow and methodical. It has definitely accelerated but in retrospect the intent was there from the very beginning. | | |
| ▲ | tharmas 7 days ago | parent | next [-] | | Excellent post. You could say that was when things reverted back to "normal". The FDR social reconstruction and post WW2 economic boom were the exception, anomaly. But the Scandinavian countries seem to be doing alright. Sure, they have some big size problems (Sweden in particular) but daily life for the majority in those countries appears to be better than a lot of people in the Anglosphere. | | |
| ▲ | skinnymuch 7 days ago | parent [-] | | A difference also is neoliberalism ramping up in that time period of the 80s. The concept of privatizing anything and everything and bullshit like “private public partnership” are fairly recent. |
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| ▲ | mathiaspoint 7 days ago | parent | prev [-] | | The way most of you define "fascism" America has always been fascist with a brief perturbation where we tried Democracy and some Communism. If you see it that way this is just a reversion to the mean. | | |
| ▲ | smackeyacky 7 days ago | parent [-] | | True. We have collectively forgotten segregation was a thing in the US. Perhaps it has always been a right wing country that flirts with fascism. | | |
| ▲ | fzeroracer 7 days ago | parent | next [-] | | It's been an unfortunate truth that the US has long been a country that's flirted with fascism. Ultimately, Thaddeus Stevens was right in his conviction that after the civil war the southern states should've been completely crushed and the land given to the freedmen. | |
| ▲ | dylan604 7 days ago | parent | prev [-] | | The Constitution was clearly written for rich land owning white men first of thought, and everything else being left out or only in fractions. They added some checks and balances as a hand wavy idea of trying to stay away from autocracy, but they kind of made them toothless. I'd guess they just didn't have the imagination that people would willingly allow someone to go back towards autocracy since they were fighting so hard to leave it. | | |
| ▲ | mathiaspoint 7 days ago | parent [-] | | Every time you claim to go after the "rich" you just go after normal people. I think everyone has figured that out. |
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| ▲ | dylan604 7 days ago | parent | prev [-] | | Interesting to see if California follows suit. Governor Newsom has his eye on the 2028 prize it seems. If the Dems do not wake up and start playing the same game the GOP is playing, they will never win. Taking the higher ground is such a nice concept, but it's also what losers say to feel good about not winning. Meanwhile, those willing to break/bend/change rules to ensure they continue to win will, well, continue to win. | | |
| ▲ | SpicyLemonZest 7 days ago | parent | next [-] | | I think it's important to remember how California got here. In the 2000 redistricting, the state legislature agreed to conduct an extreme bipartisan gerrymander, drawing every seat to be as safe as possible so that no incumbent could get voted out without losing a primary. This was widely understood to be a conspiracy of politicians against democratic accountability, and thus voters decided (with the support of many advocacy orgs and every major newspaper in the state) to put an end to it. That's not the redistricting Newsom wants for 2028, and I tend to agree that Dems have to play the game right now, but I'd really like to see them present some sort of story for why it's not going to happen again. | |
| ▲ | lenerdenator 6 days ago | parent | prev [-] | | > Governor Newsom has his eye on the 2028 prize it seems This makes me feel dread. I just don't see him dragging moderates in the middle of the country to the polls, or getting people in the leftist part of the Democratic Party to not "but but but" their way out of voting against fascism again. Oh well. |
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| ▲ | tick_tock_tick 7 days ago | parent | prev | next [-] | | Honestly it's not really bubbling like we expected revenues are growing way too fast income from AI investment is coming back to these companies way sooner then anyone thought possible. At this rate we have another couple of 20+% years in the stock market for there to be anything left of a "bubble". Nvidia the poster-child of this "bubble" has been getting effectively cheaper every day. | |
| ▲ | icedchai 7 days ago | parent | prev [-] | | Possibly. For comparison, how long did the dot-com bubble last? From roughly 1995 to early 2000. |
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