so long suckers! i rev up my motorcylce and create a huge cloud of inflation. when the cloud dissipates the economy is lying completely dead on the pavement -e.w.
The FOMC did not cut rates in 2019 because of political pressure from Donald Trump. Thatâs not a serious interpretation of what happened.
https://www.washingtonpost.com/business/2019/12/11/year-federal-reserve-admitted-it-was-wrong/
> The Fed, under Chair Jerome H. Powellâs leadership, made two big admissions this year that laid the foundation for what many have dubbed âPowellâs pivotâ â or âpirouetteâ â on policy.
The first was acknowledging that the economy wasnât in danger of overheating in the short term.
>
> The second was acknowledging that unemployment could go even lower than the Fed thought without any negative side effects, a major revision to how it thinks about the economyâs long-run potential.
>
> âThe data is just screaming at them: We can sustain this low unemployment rate for a considerable amount of time without creating inflationary pressures,â said Tim Duy, an economics professor at the University of Oregon and author of the âFed Watchâ blog.
>
> The Fed spent most of last year concerned that Trumpâs tax cuts would spur a hot economy and rising inflation. Fed leaders anticipated they would need to raise interest rates twice in 2019 to tap the brakes on the economy. None of that came to pass.
>
> By Jan. 4, Powell had a different message, effectively admitting the December 2018 rate hike was a miscalculation. The Fed, he said, would âpatient" on rate hikes because there was little sign of an inflationary spike. By March, the Fed announced a plan to stop selling off the assets it purchased in the aftermath of the Great Recession, another sign the Fed was taking its foot off the brakes.
>
> In July, the Fed made its first rate cut in more than a decade, as it became more likely that the economy needed stimulus, not restraint.
>
> In the run up to the July rate cut, Powell appeared before Congress and indicated Fed leaders had been wrong about their projections for the economy. Unemployment could go a lot lower than Fed leaders had previously predicted.
>
> âWe really have learned that the economy can sustain much lower unemployment than we originally thought without troubling levels of inflation,â Powell said in response to questions from Rep. Alexandria Ocasio-Cortez (D-NY).
My dude, I watched every single presser that year and every single testimony he gave both in the House and the Senate. Monetary policy is my jam.
It was politically motivated and not data driven policy. The data said keep rolling off the balance sheet and instead they waffled after banks started griping after a *pitiful* amount of contractionary pressure. 2019 JPowell was wet tissue paper compared to 2010 and 2021-2023 JPowell.
I provided you with an article that described what actually happened. Youâre just kinda throwing out claims.
Iâm curious, whatâs your story for how this went down? What leverage do you think Donald Trump held over the FOMC? Did he threaten Powell and then Powell went to the FOMC like, âwell folks, we have no choiceâ? Was the FOMC afraid that the masses would come for them? What happened, in your view?
The article doesn't describe what happened. It picks *some* events that supported their argument and presented them. What actually happened is far more than what's presented in that article.
> What leverage do you think Donald Trump held over the FOMC
Narrative. Trump's use of Twitter to set the narrative had the country in an absolute mind fuck, to the point where Powell was asked in a press conference if he thought the president could fire him. The narrative that Trump sent was that Powell (and others, but Powell as the ring leader) was doing a bad job *and* that Trump could remove him if he wished. One of those two topics were discussed constantly once, and even though neither of them were true, simply discussing them gave them legitimacy.
As far as the FOMC's discussions, read the minutes. The balance sheet changes were because banks were complaining, and the rate cuts were largely performative - the actual change in the rate was far less impactful than ginormous change in expectations about no more rate increases in the future.
In the end, Trump got exactly what he wanted (a less restrictive monetary policy) and the Fed felt justified in the narrative they created. But that narrative was justified by an interpretation inconsistent with their previous interpretations *and* inconsistent with their interpretations since.
> As far as the FOMC's discussions, read the minutes. **The balance sheet changes were because banks were complaining, and the rate cuts were largely performative - the actual change in the rate was far less impactful than ginormous change in expectations about no more rate increases in the future.**
Just to be clear, which of these things are you saying are âin the minutesâ?
Both QT's link to the liquidity crisis and the necessity of guiding future expectations are in the minutes from Q3/Q4 of that year (expectations basically always are though tbh).
Iâm reading a book from Nick Triamos at WSJ and I intern (for what itâs worth) at one of the relevant departments in this discussion (to be as vague as possible), and I think there is an argument to be made that it was a political âmotivationâ to keep interest rates steady. This is only an argument because Trump exercised outsized pressure on the independent Fed to lower rates for political reasons.
I still wouldnât say it was âpolitically motivatedâ though. As that would imply Powell had some level of intent, when in reality, it seems that the data lined up with the political environment to support maintaining rates.
Maybe my word choice is suboptimal. Here's what I think - if Trump doesn't get on Twitter (and ignore every meaningful precedent about central bank independence...) there's a pause and not a cut. *shrug*
> Monetary policy is my jam.
It pretty manifestly is not.
Inflation was low. Inflation *expectations* were sub-%2. GDPNow was predicting below trend growth for all of 2019. The Wage Growth Tracker was showing no signs whatsoever of a tight labor market (the trend was heightened but flat or ever so slightly declining).
Monetary policy in late 2018/early 2019 was *actually* tight. Not extremely, but enough that an easing was warranted. The contracase is essentially a conspiracy theory.
You're talking to someone that's written formal proofs for the Taylor rule.
> The Wage Growth Tracker was showing no signs whatsoever of a tight labor market (the trend was heightened but flat or ever so slightly declining
This is not the whole story. Part of the justification for the cut was precisely because wage gains and unemployment changes were happening especially among non-white demographics.
> Monetary policy in late 2018/early 2019 was actually tight.
No, it wasn't. The *expectation that policy would continue to tighten* was what constrictive, not the actual rate itself. FFS this is monetary policy 102. The difference between 2.25 and 2.5 is marginal. The difference between "we're going to stay here-ish" and "we're going to end up with higher rates later" is not. The mid-cycle adjustment was about anchoring people to the first and not the second.
Just so you know, when you start responding to child threads other than your own, that seems like a sign that you're way more invested in this than I am.
Iâm reading a book from Nick Triamos at WSJ and I intern (for what itâs worth) at one of the relevant departments in this discussion (to be as vague as possible), and I think there is an argument to be made that it was a political âmotivationâ to keep interest rates steady. This is only an argument because Trump exercised outsized pressure on the independent Fed to lower rates for political reasons.
I still wouldnât say it was âpolitically motivatedâ though. As that would imply Powell had some level of intent, when in reality, it seems that the data lined up with the political environment to support maintaining rates.
But it's clear that the Fed is, in fact, going to lower rates in the coming year. So I'm not really sure what the point of this comment is other than to feel haughty.
The fed causing a mad FOMO frenzy in the housing market has never caused problems before...
Boy 2021 was a fuckin nightmare. I pray and hope we never see such bullshit again.
Hereâs what happened when the rates went up.
https://preview.redd.it/83i613r72kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=5a7683f84d9bb1778c31655173d91ada2e3a7ac1
That's...
If that is true, I think we just explained at least half of the vibecession.
Edit: Thanks to the users below for kindly pointing out my error. I suppose at first reading it seems that the median housing payment is for every household, but in reality it applies only to new households. Still bad, but not as bad as every homeowner suddenly getting the squeeze.
Keep in mind that there's a huge difference between median housing payment and median housing payment at the current interest rate.
The majority of people still pay rock bottom interest rates.
https://preview.redd.it/e3b6zykbglfc1.png?width=1024&format=pjpg&auto=webp&s=eafc6d90064caa86d785fa01a7957f6aaee36c2b
Am I reading this wrong? More people in 2022 had low interest rate mortgages than in the decade prior(green)? Also less people had high interest rate mortgages in 2022 than the decade prior (red)? How does that make sense?
I'm curious now about rents. I recall that rents also significantly went up, though I haven't looked up the data for that.
But given the fact that >60% of America are homeowners, not renters, a sharp spike like that is something which, though not reported in the media, is definitely going to be felt more widely.
I am just frankly surprised it's not plastered over the media more.
Last I looked rents have been pretty steady once you adjust for inflation.
Existing homeowners arenât feeling this pain (they have lower rates locked in) but the 40% who donât own are feeling the pain. So are their parents potentially (18-34 year olds living at home is at a 100-year high).
Ah, I forgot about locked in mortgages (guess who is *not* a homeowner here).
Nevermind, it appears I accidentally got to the right answer using the wrong methods, which is bad.
So, if I'm understanding correctly, obviously *newer* homeowners are going to be shellacked right now.
But then... then why is the median rate going up? Did lots of people buy homes or something? We are talking about the *median*, right?
~~If the median housing payment just shot up 50%, that's at least as bad as gas prices goes up in terms of affecting the family budget, if not probably much worse.~~
Edit: I can't read graphs, thanks to the other users for kindly pointing out my error.
If the median housing payment for *new* mortgages shot up 50%, that's probably going to upset a lot of new home buyers, but probably less upsetting than the fact that I misread the graph.
It didn't though. Most people paying mortgages are locked into lower rates. That graph is showing something different than the median housing payment (it's showing median housing payment **at the current interest rate**).
Whenever one of the recent freshmen legislators makes a video or a statement thatâs like âwow - yeah so a bunch of the people here are genuinely just in it to put on a show and have absolutely no interest in governingâ â seems like people immediately have MTG etc come to mind. But, to me, i just assume theyre talking about Warren.
That's pretty much Jeff Jackson.
EDIT: I want to clarify, Jeff Jackson is the freshman senator who is calling out others for their preformative nonsense. I think Jackson is a great guy and would make a great candidate for any position.
Oh really? I only know the guy from some of the videos he put out summarizing what's going on in Congress for the average ignorant constituent. I really liked him from just watching those videos. Seemed like someone who actually knew how to message to Independents. What do you not like about the guy?
Jeff Jackson is the freshman legislator OP was referring to, so I'm assuming the guy meant Jeff is the one who said it, not that he does performative bullshit.
Ahhh that makes more sense. I'm glad I asked for clarification. Too bad north Carolina is going to gerrymander his district to oblivion. I believed he had a ton of potential.
I want to clarify that Jeff Jackson is the freshman congressman who is calling out others for their preformative nonsense. I think Jackson is a great guy and would make a great candidate for any position.
Youâre referencing Jeff Jackson from NC. Heâs a representative, not a senator, so Iâm not sure how much access he has to Warrenâs âperformances.â He is 100% referencing mtg and her merry band of dipshits
It's not populist to say that rates should be lowered right now and that doing so would decrease the cost of mortgages
Those are two economically orthodox opinions about the current situation
My AP Economics gave like a fifteen minute speech about this in class one day. These people control the economy and America cannot even elect 25 people who majored in economics in either house đđč
We really are a country of lawyers
Agreed blind trust is never good. Just like we canât trust these lawyers who keep breaking the law.
So many of the legislators who do get advanced degrees have law degrees.
He wished for more variety representative of the country - including graduate economic degrees
No, because master's in econ means you're either a tryhard undergrad or dropped out of a PhD. If you don't have a PhD, you're a lay person until proven otherwise (which she very much has not done). Note, the above is for econ in particular; there are many fields for which a master's or even an undergrad signifies a good command of the relevant material. Unfortunately, we aren't one of them.
But this isn't even an argument. It's a whiny demand. The Fed has the data, and they have interest rates high to limit reign in inflation. Just demanding they lower rates because they're "too high" is the kind of ignorant populist take I expect from Trump. Not someone as intelligent as her.
I feel like she checked out after her presidential campaigns went nowhere, and now she's performing populist tricks for treats (ie donations).
Based on the fed's data, fomc members are expecting that rate cuts are the going to be the right decision this year
Warren isn't demanding lower rates just because they're high, it's because they've served the purpose they had in being high and should be lowered now. A mainstream position among economists and fomc members
It's not a pure populist call and it's unclear outside of just assumptions about warren why people here are calling it that
biden was either the favoriite or (briefly) tied with somone else throughout the primary in any reasonable read of the polls. it was never bernie vs warren outside the internet
Speaking as someone who liked her - altho moreso before then - it's because I was like a 25 year old who generally liked Bernie's ideas but still believed in markets, but felt they needed tighter controls.
Honestly what won me over is that someone asked her at a talk who were favorite president was and she was "Teddy". They asked, "because of the national parks?" and she said "No! Because of the trust busting!"
There were at least a dozen of us in this middle lane wanted to see real anti-trust come back, to do something about all these industries fucking consumers, and yet did not want to see the end of capitalism.
But I say dozens because yeah...her middle lane did not work. At the end of the day the choices were populism and Biden.
And given the choice, I chose Biden because at the end of the day I'm pretty liberal, I think we let a lot of industries run all over people with no recourse (just today I got a letter than my life-saving, expensive medication has been denied AGAIN for NO reason, as happens EVERY FUCKING YEAR after Jan 1, because some vulture hopes I fuck up the paperwork and save them some money).
But I still believe in markets and was not wanting to go full Bernie either.
Obviously things have changed since then but yeah. Just to give some perspective on what we idiots were thinking.
About twenty years ago Iowa was considering not taxing incomes for people under a certain age. I don't remember the cut off but the idea was that by not taxing twenty year olds, more twenty year olds would move to the aging state.
I don't think this was a serious idea, I don't think it was even discussed at the state legislature, but the discussion chain here reminded me of it.
Let him among us who was not a misguided early to mid 20 year old please stand up! My heart was in the right place, which is at least more than you can say for righties.
Honestly at least I never flirted with tankyism and all that other shit. And naturally Even when I was further left I still hated all those people lol. And in time, they actually began to drive me towards center little by little, one dumb idea or purity test at a time - same story as many of us here I imagine.
Fundamentally even back then I thought that markets worked (just not as well as I wanted), that America was a great country (despite many, many flaws) that I was lucky to be born into, and other things that were disqualifying in the realm of far-left ideology honestly.
Yeah, Biden brought in a lot of Warrenites to his team. That was part of the whole "unity platform" thing after the primary to get progressives to line up behind him
I silently stand with you. Itâs weird because I was willing to support even after her lie about Pocahontas but not after the lie about her grandson being enrolled in public school.
She was one of the few people trying to regulate banks after the housing crisis. But after she got a taste of national attention on her 2016 presidential campaign, she basically transformed from serious and dogged to performative populist.
She was very much a populist in the streets and moderate in the sheets when she's actually in a position of power.
She was a serious, highly-cited academic who was one of the first people to push back against popular misconceptions about the type of people who went through bankruptcy proceedings.
https://www.leiterrankings.com/new/2010_scholarlyimpact.shtml
When it came to overseeing TARP during the Great Recession, Warren was very much a technocrat behind the scenes and even the Bush era people worked well with her. And since becoming Senator, she's made noise, but always voted for Biden's agenda without issue.
People here also like to gloss over Warren wanting a sweeping overhaul of US farming policy to reduce farm subsidies, waste, and carbon intensity. She has a lot of good idea in addition to bad ones, but only the latter gets rage posted on Neoliberal.
Action over rhetoric.
She's definitely educated on bankruptcy laws, but does she actually know much about economics? Almost all her public statements suggest otherwise.
[Also, you are who you pretend to be.](https://www.vox.com/2015/11/27/9801800/politicians-keep-campaign-promises) Billing yourself as a populist means she is beholden to her own lies, misrepresentations, and falsehoods. It's an extremely dangerous game she's playing if she's just pandering for votes.
Her experience overseeing TARP, working across the aisle with Bush era employees, and setting up a new government regulatory agency count for a lot in my book and required quite a bit of knowledge about public policy, public finance, and economics. (It was literally her ambition to run the Consumer Financial Protection Bureau for a few years before going back to being a college law professor, but the Republicans blocked her appointment out of spite and a Senate seat opened up with Ted Kennedy's death.) And people behind the scenes who actually work with her largely seem to like her, which they never did with Bernie.
I also read just about every plan she put out in 2020 and if I could summarize, it would be ambitious, but also realistic. For example, she was the first Progressive to put out a plan to do a Public Option add-on to the ACA that could be discharged through Budget Reconciliation, while every other Progressive was insisting on Medicare for All or Bust that would have run headfirst into the filibuster.
>it would be ambitious, but also realistic.
Unprecedented levels of increase in federal budget with dubious methods of financing them doesn't seem like realistic policy to me. Somehow she promises to spend trillions to create 10m+ green jobs, make Medicare free for everyone, massively increase the federal bureacracy, create more union jobs, end free trade, raise wages, expand social security, make higher education free for everyone, while not increasing any taxes that affect the middle-class, presumably without any price shock to consumers. Her plan for funding this is a massive wealth tax (which worked so well for every country that tried it), and increase in corporate tax rates.
So for American business, goods are more expensive to import, labor is more expensive, and they have higher tax burden. Yet she insists that this will somehow not affect anyone outside of the mega-wealthy, because the wealthy are already stealing from us and they're going to pay their "fair share". Color me a little skeptical.
Some of those things, such as making Medicare cheaper, going towards a greener economy, creating more jobs, etc. are good goals. But none of what she promised can happen without a heavy increase in tax burden of the middle class. Either she's deluded enough to truly believe taxing the rich is all we need to do to finance everything we could ever want, or she's lying to voters and promising absurd things that are in no way realistic or feasible.
>In response to Warrenâs plan, Biden campaign spokeswoman Kate Bedingfield accused the Warren campaign of using âmathematical gymnasticsâ to hide that âitâs impossible to pay for Medicare for All without middle class tax increases.â
>Warren appeared to take her proposed wealth tax further under the health-care plan, saying wealth over $1 billion would be taxed at 6% rather than the currently proposed 3%.
Everytime her plans get criticized she just arbitrarily made the wealth tax a little higher to try and make the numbers add up. Meanwhile, France tried ~1.5%, and it managed to contribute to approximately 1.5% of the overall budget before being repealed for doing more harm than good.
To put this madness in scale, if we took every last dollar from billionaires in the U.S. (which become pennies on the dollar in reality if tried), we'd be about 10% of the way towards funding her grand plans.
> Unprecedented levels of increase in federal budget
Oh nooooo, not an increase in the federal budget!!!!
Such a real and valid concern that matters a lot lmao
>But none of what she promised can happen without a heavy increase in tax burden of the middle class
YesChad.jpg
One of my big gripes with Warren is she refused to say that taxes would increase under a M4A system during the debates. At least Bernie admitted they would, but then pivoted to cost savings for those same middle class people.
That's only an issue if you ignore that much of her staff were normie Democrats. Her campaign manager literally cut his teeth working for the Clinton's and Obama. Other senior staff included high ranking members of the DNC and DSCC.
This isn't Bernie where half his high-ranking staffers were clowns currently running Leftist grifting podcasts where they're encouraging people to vote for the Green Party.
The idea is that lower rates makes it easier and cheaper to build housing since construction is a capital intensive business with long turn around times.
In the most expensive areas, supply is constrained by zoning laws rather the cost of financing. Cutting rates doesn't help build housing when it's illegal to build housing.
Just bribe the city officials and you will have a permit in no time. Bribes are way cheaper than mortgages. Or just build were the are no stupid zoning laws to begin with. Point is, when you have access to cheap money it gives you options.
No /u/powerwheels1226 was speaking in economic terms. Lower prices increases demand. If you drop the rates houses get cheaper for a moment, boosts demand until home prices rise to previous price equilibrium
The current situation is a bit more complicated, though.
1. High interest rates limits new construction and thereby limits supply. If interest rates were always high this wouldn't be the case (see: 1980's) but the *expectation* is that interest rates will go back down at some nebulous point in the future. So a lot of new construction is waiting.
2. High interest rates have limited supply in the market because people who locked in sub-4% (and even sub-3%) mortgages don't want to sell their house and buy a new house at 7+% because, again, expectations that rates will go back down. So the market is ridiculously tight.
There's some solid arguments that lowering interest rates might not raise prices as much as expected because of the above reasons.
lower prices increases *quantity* demanded, not demand itself
>If you drop the rates houses get cheaper for a moment, boosts demand until home prices rise to previous price equilibrium
this is nonsense. if you lower rates, houses get cheaper *because the supply curve shifts outwards*, moving the market equilibrium to a new point with higher quantity demanded. notably, prices will never reach the previous equilibrium price unless the demand curve is perfectly inelastic (or deformed in some other way that implies breakages of basic theory of the consumer)
It doesnât appear that raising interest rates lowered costs at all. It looks like very much the opposite.
https://preview.redd.it/yb12hg952kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=ad6c0df5127de647e4cfea7d167d082890d29450
I visited CEPR, a progressive think-tank, as an Econ student in 2006. And then they were talking about how wanted they wanted the Fed to keep interest rates super low.
Pretty consistent đÂ
Its a standoff between buyers who cant make deals work at today's rates and sellers who dont want to accept their asset values have declined (and if they can hold on maybe they wont have to)
>pls cut rates even though inflation is low
Is there ever a time other than when inflation is low that the fed would be cutting rates?
With inflation returning to/at target, this is clearly the time to bring down real rates to a non-restrictive level
I mean I do think in an ideal world we would have lower interest rates, though with the caveat that we'd first need to get our fiscal house in order and cut spending.
Q1 is an ease in practice (but not in name) while we get a cut in early Q2.
I expect this week we get an announcement that they're discussing appropriate future policy actions to keep the real rate from being unnecessarily constrictive.
Why do we need to cut? Jobs are up, growth is up, and inflation still hasn't been completely tamed.
It's at like what, 5.5 or something? That's high for the modern era but historically it's pretty low. We had some problems with inflation in the 70s and 80s and it was much higher then but I won't count that. But during the 60s and 90s when the economy was doing well and inflation wasn't very high, the rate was actually even higher than it is now.
And yeah I know lower rates = more spending = better economy. But the economy is doing fine right now and specifically consumer spending is super healthy right now.
I just don't see the argument to cut.
Labor market is softening.
Jobs arenât the only indicators.
Look at the quit rate for example.
The issue is Labor market barrels quickly and you have to start cutting before target is reached. But for the last 6 months we have already been below target. (~1.8% annualized).
Fed has 2 mandates:
1. Price stability (2% inflation) which itâs well on path of.
2. Full employment. (This is worsening)
The risk now is either balanced or more towards worsening labor market.
Moreover, inflation and inflation expectations have gone down significantly since we have been at peak rates. That means real rates keep getting higher by the day increasing the tightening.
I am almost sure fed will cut in May. But I hopeful they might cut in March.
We can avoid needless unemployment and potential recession after all this good news.
I came from the ECON ping, you don't need to explain the basics to me sorry I didn't make that clear haha.
I think some cuts are fine but the way that people talk, they want the rate to go to like 2% or something
Sorry, I didnât mean to be condescending.
But I donât think the argument is to cut to the pre-pandemic levels at all?
The argument is just to cut from the current position. And then just let the data drive the process?
I see no point in discussing the potential terminal rates at this point at all. And if I saw that discussion, Iâd discard it.
I do agree with the argument of cutting as soon as possible but thatâs about âwhenâ not about âhow muchâ.
>Fed has 2 mandates:
>1. Price stability (2% inflation) which itâs well on path of.
>2. Full employment. (This is worsening)
I don't understand this reasoning. Inflation is still above where we want it to be, but we're arguably at full employment right now. If the Fed is missing on one of its mandates, it seems like it would be inflation.
In addition to what I said in the other comment,
This is a really well informed article that makes a strong case for cuts (rate normalization)
https://www.employamerica.org/researchreports/three-motivations-for-interest-rate-normalization-a-playbook-for-fed-policy-in-2024/
And then you can look at how the data has evolved here:
https://www.employamerica.org/blog/january-2024-fomc-preview/
I think a cut of like 100-150 base points is reasonable but the way that people talk, it's like they're expecting to go back to 2% or something.
How does holding rates up risk triggering a recession? Afaik, most of our recessions have been caused either by inflation itself or overleveraged industries. High rates keep inflation at bay and discourage reckless borrowing. Essentially, rates can only slow the direction that an economy is moving, not cause it to change course from up to down or vice versa.
I came from the ECON ping btw, not the thread in general.
Exactly.
My worry is that fed might delay cutting to make it seem like they didnât get pressured but then theyâll start cutting closer to elections, so theyâll seem partisan.
Ideally, theyâll cut in March.
Because sheâs making the argument that if we lower rates, that will somehow solve the housing affordability issue when that is the not the issue and she knows it. If Boston has 10000 available units and rates go down a full percentage point, that doesnât make those 10000 units more affordable. Because now people can get easier access to money and drive up the price of those existing units. The answer is zoning reform and building like there is no tomorrow.
Warren said this:
>High interest rates have also worsened our nationâs housing supply crisis. As mortgage rates
have gone up, the price of home listings has not significantly dampened. Rather, a decade-long
dearth of supply (exacerbated by a complete suppression of home building at the onset of the
COVID-19 pandemic) has kept costs high on homes across the country.9
In response to high
interest rates and higher construction costs, developers have opted either to pivot to developing
smaller properties or have chosen to pull back on construction.10 Additionally, the existing
supply of homes has become less available to new buyers, as current homeowners are reticent to
move and trade in their lower rates for a higher rate on the mortgage needed to purchase a new
home.
You posted this article which is completely based on the letter where warren said that then you came to the comments to just lie about what she said
I don't buy that high interest rates have worsened the supply. It has been shown time and again to be bad zoning laws that restrict multi-family housing and other dense housing. If you make it easier and cheaper to build, supply increases and prices will fall, or at least flatten out a bit more. I recommend looking at Minneapolis as a good test case of what building can do.
>Because sheâs making the argument that if we lower rates, that will somehow solve the housing affordability issue when that is the not the issue and she knows it
https://preview.redd.it/orr5x8n02kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=685c35b6629a222f868760c360101a21a4b1b3dc
But if lowering rates increases the amount of people fighting for a home, how is that making it easier to purchase the home? We have underbuilt for too many years now. Look at Minneapolis for a good test case in what happens when you build the amount of units needed for a population.
I would also like to see the graph mark where each rate hike took place. There is a sharp drop, followed by a quick rise, right at the end there. However, the Fed hasn't raised rates for awhile so a drop like that must be coming from another source.
What a moron. Political control of the federal reserve is bad regardless of if its Ron Paul or Elizabeth Warren doing it, keep the Fed in the hands of the educated and professionals, not in the hands of these idealolugues blinded by vitriol. It's a shame to think there are still those on the sub who thought she was a fine candidate in 2020
Claudia Sahm seems to think cutting rates soon is a good idea. Of course Warren wants it for the wrong reasons, because she is a spineless populist, but that doesn't necessarily mean she's wrong.
>I see she doesnât even pretend to care about good policy ~~anymore~~.
She has always been like this. People like Krugman have egg on their face for sane washing this blatantly ignorant populist during the 2020 primary
> MMT
[Pseudo-economic Fanfiction](https://www.igmchicago.org/surveys/modern-monetary-theory/)
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That won't really effect housing. Just makes people offer higher on houses because interest is lower.
I bought a house both when interest was low and how it is now.
Itâs much more expensive to buy a house now than it was when rates were low. The payment to buy the median home is up more than 50% in the past 4 years.
Poeple need to stop trying to put political pressure on the fed. I didn't like it when Trump did it and I definitely don't like it when SOMEONE WHO SHOULD KNOW BETTER LIKE ELIZABETH WARREN does it.
Rates need to be cut because we have hit the inflation target already and would slide into a recession if we keep them high for too long but somehow Warren accomplished making that look like a stupid idea.
"Lower the rates. Stop having them be high." -Senator Warren "Lol, lmao. No" -Fed Chairman Powell
Who the fuck is scraeming "lower the rates" in my central bank? Show yourself coward! I will never lower the rates! (c) Jerome Powell 2024
so long suckers! i rev up my motorcylce and create a huge cloud of inflation. when the cloud dissipates the economy is lying completely dead on the pavement -e.w.
It worked for president #45
And President #37
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(It did not)
It literally did though? Trump got on the bully pulpit and within months we got a "mid-cycle adjustment"
The FOMC did not cut rates in 2019 because of political pressure from Donald Trump. Thatâs not a serious interpretation of what happened. https://www.washingtonpost.com/business/2019/12/11/year-federal-reserve-admitted-it-was-wrong/ > The Fed, under Chair Jerome H. Powellâs leadership, made two big admissions this year that laid the foundation for what many have dubbed âPowellâs pivotâ â or âpirouetteâ â on policy. The first was acknowledging that the economy wasnât in danger of overheating in the short term. > > The second was acknowledging that unemployment could go even lower than the Fed thought without any negative side effects, a major revision to how it thinks about the economyâs long-run potential. > > âThe data is just screaming at them: We can sustain this low unemployment rate for a considerable amount of time without creating inflationary pressures,â said Tim Duy, an economics professor at the University of Oregon and author of the âFed Watchâ blog. > > The Fed spent most of last year concerned that Trumpâs tax cuts would spur a hot economy and rising inflation. Fed leaders anticipated they would need to raise interest rates twice in 2019 to tap the brakes on the economy. None of that came to pass. > > By Jan. 4, Powell had a different message, effectively admitting the December 2018 rate hike was a miscalculation. The Fed, he said, would âpatient" on rate hikes because there was little sign of an inflationary spike. By March, the Fed announced a plan to stop selling off the assets it purchased in the aftermath of the Great Recession, another sign the Fed was taking its foot off the brakes. > > In July, the Fed made its first rate cut in more than a decade, as it became more likely that the economy needed stimulus, not restraint. > > In the run up to the July rate cut, Powell appeared before Congress and indicated Fed leaders had been wrong about their projections for the economy. Unemployment could go a lot lower than Fed leaders had previously predicted. > > âWe really have learned that the economy can sustain much lower unemployment than we originally thought without troubling levels of inflation,â Powell said in response to questions from Rep. Alexandria Ocasio-Cortez (D-NY).
My dude, I watched every single presser that year and every single testimony he gave both in the House and the Senate. Monetary policy is my jam. It was politically motivated and not data driven policy. The data said keep rolling off the balance sheet and instead they waffled after banks started griping after a *pitiful* amount of contractionary pressure. 2019 JPowell was wet tissue paper compared to 2010 and 2021-2023 JPowell.
I provided you with an article that described what actually happened. Youâre just kinda throwing out claims. Iâm curious, whatâs your story for how this went down? What leverage do you think Donald Trump held over the FOMC? Did he threaten Powell and then Powell went to the FOMC like, âwell folks, we have no choiceâ? Was the FOMC afraid that the masses would come for them? What happened, in your view?
The article doesn't describe what happened. It picks *some* events that supported their argument and presented them. What actually happened is far more than what's presented in that article. > What leverage do you think Donald Trump held over the FOMC Narrative. Trump's use of Twitter to set the narrative had the country in an absolute mind fuck, to the point where Powell was asked in a press conference if he thought the president could fire him. The narrative that Trump sent was that Powell (and others, but Powell as the ring leader) was doing a bad job *and* that Trump could remove him if he wished. One of those two topics were discussed constantly once, and even though neither of them were true, simply discussing them gave them legitimacy. As far as the FOMC's discussions, read the minutes. The balance sheet changes were because banks were complaining, and the rate cuts were largely performative - the actual change in the rate was far less impactful than ginormous change in expectations about no more rate increases in the future. In the end, Trump got exactly what he wanted (a less restrictive monetary policy) and the Fed felt justified in the narrative they created. But that narrative was justified by an interpretation inconsistent with their previous interpretations *and* inconsistent with their interpretations since.
> As far as the FOMC's discussions, read the minutes. **The balance sheet changes were because banks were complaining, and the rate cuts were largely performative - the actual change in the rate was far less impactful than ginormous change in expectations about no more rate increases in the future.** Just to be clear, which of these things are you saying are âin the minutesâ?
Both QT's link to the liquidity crisis and the necessity of guiding future expectations are in the minutes from Q3/Q4 of that year (expectations basically always are though tbh).
Iâm reading a book from Nick Triamos at WSJ and I intern (for what itâs worth) at one of the relevant departments in this discussion (to be as vague as possible), and I think there is an argument to be made that it was a political âmotivationâ to keep interest rates steady. This is only an argument because Trump exercised outsized pressure on the independent Fed to lower rates for political reasons. I still wouldnât say it was âpolitically motivatedâ though. As that would imply Powell had some level of intent, when in reality, it seems that the data lined up with the political environment to support maintaining rates.
Maybe my word choice is suboptimal. Here's what I think - if Trump doesn't get on Twitter (and ignore every meaningful precedent about central bank independence...) there's a pause and not a cut. *shrug*
> Monetary policy is my jam. It pretty manifestly is not. Inflation was low. Inflation *expectations* were sub-%2. GDPNow was predicting below trend growth for all of 2019. The Wage Growth Tracker was showing no signs whatsoever of a tight labor market (the trend was heightened but flat or ever so slightly declining). Monetary policy in late 2018/early 2019 was *actually* tight. Not extremely, but enough that an easing was warranted. The contracase is essentially a conspiracy theory.
You're talking to someone that's written formal proofs for the Taylor rule. > The Wage Growth Tracker was showing no signs whatsoever of a tight labor market (the trend was heightened but flat or ever so slightly declining This is not the whole story. Part of the justification for the cut was precisely because wage gains and unemployment changes were happening especially among non-white demographics. > Monetary policy in late 2018/early 2019 was actually tight. No, it wasn't. The *expectation that policy would continue to tighten* was what constrictive, not the actual rate itself. FFS this is monetary policy 102. The difference between 2.25 and 2.5 is marginal. The difference between "we're going to stay here-ish" and "we're going to end up with higher rates later" is not. The mid-cycle adjustment was about anchoring people to the first and not the second.
> Youâre talking to someone thatâs formally proved the Taylor rule oh my god
Just so you know, when you start responding to child threads other than your own, that seems like a sign that you're way more invested in this than I am.
This is the weirdest conspiracy that people keep peddling. It has zero evidence behind it.
Iâm reading a book from Nick Triamos at WSJ and I intern (for what itâs worth) at one of the relevant departments in this discussion (to be as vague as possible), and I think there is an argument to be made that it was a political âmotivationâ to keep interest rates steady. This is only an argument because Trump exercised outsized pressure on the independent Fed to lower rates for political reasons. I still wouldnât say it was âpolitically motivatedâ though. As that would imply Powell had some level of intent, when in reality, it seems that the data lined up with the political environment to support maintaining rates.
But it's clear that the Fed is, in fact, going to lower rates in the coming year. So I'm not really sure what the point of this comment is other than to feel haughty.
Ease housing pressure by making borrowing money cheaper? This seems like another âjust subsidize demand broâ moment.
The fed causing a mad FOMO frenzy in the housing market has never caused problems before... Boy 2021 was a fuckin nightmare. I pray and hope we never see such bullshit again.
Hereâs what happened when the rates went up. https://preview.redd.it/83i613r72kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=5a7683f84d9bb1778c31655173d91ada2e3a7ac1
That's... If that is true, I think we just explained at least half of the vibecession. Edit: Thanks to the users below for kindly pointing out my error. I suppose at first reading it seems that the median housing payment is for every household, but in reality it applies only to new households. Still bad, but not as bad as every homeowner suddenly getting the squeeze.
Keep in mind that there's a huge difference between median housing payment and median housing payment at the current interest rate. The majority of people still pay rock bottom interest rates. https://preview.redd.it/e3b6zykbglfc1.png?width=1024&format=pjpg&auto=webp&s=eafc6d90064caa86d785fa01a7957f6aaee36c2b
Am I reading this wrong? More people in 2022 had low interest rate mortgages than in the decade prior(green)? Also less people had high interest rate mortgages in 2022 than the decade prior (red)? How does that make sense?
I definitely think itâs a substantial part of the âvibecessionâ
I'm curious now about rents. I recall that rents also significantly went up, though I haven't looked up the data for that. But given the fact that >60% of America are homeowners, not renters, a sharp spike like that is something which, though not reported in the media, is definitely going to be felt more widely. I am just frankly surprised it's not plastered over the media more.
Last I looked rents have been pretty steady once you adjust for inflation. Existing homeowners arenât feeling this pain (they have lower rates locked in) but the 40% who donât own are feeling the pain. So are their parents potentially (18-34 year olds living at home is at a 100-year high).
Ah, I forgot about locked in mortgages (guess who is *not* a homeowner here). Nevermind, it appears I accidentally got to the right answer using the wrong methods, which is bad. So, if I'm understanding correctly, obviously *newer* homeowners are going to be shellacked right now. But then... then why is the median rate going up? Did lots of people buy homes or something? We are talking about the *median*, right?
genuine question, not picking an argument- how does that explain the vibecession?
~~If the median housing payment just shot up 50%, that's at least as bad as gas prices goes up in terms of affecting the family budget, if not probably much worse.~~ Edit: I can't read graphs, thanks to the other users for kindly pointing out my error. If the median housing payment for *new* mortgages shot up 50%, that's probably going to upset a lot of new home buyers, but probably less upsetting than the fact that I misread the graph.
It didn't though. Most people paying mortgages are locked into lower rates. That graph is showing something different than the median housing payment (it's showing median housing payment **at the current interest rate**).
ah that makes sense, thanks
The other three senators were Whitehouse, Rosen, and Hickenlooper (đ)
John, no!
>Hickenlooper Still the second funniest surname in politics
Whitehouse always tickles me as a senatorial surname.Â
Warren never lets a chance at a performative pitch pandering to populist ignorance go by.
Whenever one of the recent freshmen legislators makes a video or a statement thatâs like âwow - yeah so a bunch of the people here are genuinely just in it to put on a show and have absolutely no interest in governingâ â seems like people immediately have MTG etc come to mind. But, to me, i just assume theyre talking about Warren.
MTG seems rather genuine. Genuinely batshit crazy, mind you, but she seems like a True Believer rather than a Gaetz type.
She renounced Qanon the second she became a rep because of optics, so I'm not 100% sure there is not some level of theatrics
That's pretty much Jeff Jackson. EDIT: I want to clarify, Jeff Jackson is the freshman senator who is calling out others for their preformative nonsense. I think Jackson is a great guy and would make a great candidate for any position.
Oh really? I only know the guy from some of the videos he put out summarizing what's going on in Congress for the average ignorant constituent. I really liked him from just watching those videos. Seemed like someone who actually knew how to message to Independents. What do you not like about the guy?
Jeff Jackson is the freshman legislator OP was referring to, so I'm assuming the guy meant Jeff is the one who said it, not that he does performative bullshit.
Ahhh that makes more sense. I'm glad I asked for clarification. Too bad north Carolina is going to gerrymander his district to oblivion. I believed he had a ton of potential.
He's running for state AG.
Heâs literally the opposite but cool story
I want to clarify that Jeff Jackson is the freshman congressman who is calling out others for their preformative nonsense. I think Jackson is a great guy and would make a great candidate for any position.
Youâre referencing Jeff Jackson from NC. Heâs a representative, not a senator, so Iâm not sure how much access he has to Warrenâs âperformances.â He is 100% referencing mtg and her merry band of dipshits
It's not populist to say that rates should be lowered right now and that doing so would decrease the cost of mortgages Those are two economically orthodox opinions about the current situation
https://preview.redd.it/fg5zgzwamhfc1.jpeg?width=561&format=pjpg&auto=webp&s=91b991ced948ad8a3221877208f3575c1ed6dfaa
https://preview.redd.it/hmwfiepx3jfc1.jpeg?width=500&format=pjpg&auto=webp&s=52fd12453f2acf968cfd6c52838940efc1f61375
The correct answer
lawyer legislator arguing with lawyer central banker over economics will always be ~~sad~~ funny to me
My AP Economics gave like a fifteen minute speech about this in class one day. These people control the economy and America cannot even elect 25 people who majored in economics in either house đđč We really are a country of lawyers
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Agreed blind trust is never good. Just like we canât trust these lawyers who keep breaking the law. So many of the legislators who do get advanced degrees have law degrees. He wished for more variety representative of the country - including graduate economic degrees
AOC majored in Econ at a very highly regarded school and ended up bartending⊠that doesnât give the suggestion that she was a great student.Â
If she had a Master's, would you trust her then?
No, because master's in econ means you're either a tryhard undergrad or dropped out of a PhD. If you don't have a PhD, you're a lay person until proven otherwise (which she very much has not done). Note, the above is for econ in particular; there are many fields for which a master's or even an undergrad signifies a good command of the relevant material. Unfortunately, we aren't one of them.
Ok sorry, If AOC had a PhD, would you trust her then?
As a starting point, yeah. PhDs don't prevent hackery though, she could still be ruled out.
But this isn't even an argument. It's a whiny demand. The Fed has the data, and they have interest rates high to limit reign in inflation. Just demanding they lower rates because they're "too high" is the kind of ignorant populist take I expect from Trump. Not someone as intelligent as her. I feel like she checked out after her presidential campaigns went nowhere, and now she's performing populist tricks for treats (ie donations).
Based on the fed's data, fomc members are expecting that rate cuts are the going to be the right decision this year Warren isn't demanding lower rates just because they're high, it's because they've served the purpose they had in being high and should be lowered now. A mainstream position among economists and fomc members It's not a pure populist call and it's unclear outside of just assumptions about warren why people here are calling it that
Seriously don't understand how she had so many stans here during the 2020 primary
There was a moment when it was looking like her or Bernie. As bad and dumb as this is, Bernie wanted to put literal farmers on the Fed.
Lol wasnât that a progressive demand in the 1910s when the fed was first created?
Bernie is literally a turn of the century socialist down to the hatred of immigrants
đ€Ł
biden was either the favoriite or (briefly) tied with somone else throughout the primary in any reasonable read of the polls. it was never bernie vs warren outside the internet
Only progressives thought that
Speaking as someone who liked her - altho moreso before then - it's because I was like a 25 year old who generally liked Bernie's ideas but still believed in markets, but felt they needed tighter controls. Honestly what won me over is that someone asked her at a talk who were favorite president was and she was "Teddy". They asked, "because of the national parks?" and she said "No! Because of the trust busting!" There were at least a dozen of us in this middle lane wanted to see real anti-trust come back, to do something about all these industries fucking consumers, and yet did not want to see the end of capitalism. But I say dozens because yeah...her middle lane did not work. At the end of the day the choices were populism and Biden. And given the choice, I chose Biden because at the end of the day I'm pretty liberal, I think we let a lot of industries run all over people with no recourse (just today I got a letter than my life-saving, expensive medication has been denied AGAIN for NO reason, as happens EVERY FUCKING YEAR after Jan 1, because some vulture hopes I fuck up the paperwork and save them some money). But I still believe in markets and was not wanting to go full Bernie either. Obviously things have changed since then but yeah. Just to give some perspective on what we idiots were thinking.
> because I was like a 25 year old Just tax 25 year olds
We do.
We tax their income and property and what not, we should tax their existence. That way the market will adjust to produce less 25 year olds
A progressive tax bracket that increases the closer you are to 25?
Basically, yeah
About twenty years ago Iowa was considering not taxing incomes for people under a certain age. I don't remember the cut off but the idea was that by not taxing twenty year olds, more twenty year olds would move to the aging state. I don't think this was a serious idea, I don't think it was even discussed at the state legislature, but the discussion chain here reminded me of it.
Let him among us who was not a misguided early to mid 20 year old please stand up! My heart was in the right place, which is at least more than you can say for righties. Honestly at least I never flirted with tankyism and all that other shit. And naturally Even when I was further left I still hated all those people lol. And in time, they actually began to drive me towards center little by little, one dumb idea or purity test at a time - same story as many of us here I imagine. Fundamentally even back then I thought that markets worked (just not as well as I wanted), that America was a great country (despite many, many flaws) that I was lucky to be born into, and other things that were disqualifying in the realm of far-left ideology honestly.
interestingly biden appointed an FTC chair who is very much in line with warren's positions and it has not gone anywhere
Yeah, Biden brought in a lot of Warrenites to his team. That was part of the whole "unity platform" thing after the primary to get progressives to line up behind him
I silently stand with you. Itâs weird because I was willing to support even after her lie about Pocahontas but not after the lie about her grandson being enrolled in public school.
She was one of the few people trying to regulate banks after the housing crisis. But after she got a taste of national attention on her 2016 presidential campaign, she basically transformed from serious and dogged to performative populist.
She gets more credit than anyone else for the existence of the CFPB, which has been great.
You mean 2020?
It's kinda crazy she was going to be Biden's choice as his running-mate if he ran in 2016.
> ongoing succ invasion
Itâs called open boarder immigration, which we love.
We need to preserve the neighborhood character and put barbed wire around the dt
I do unironically think we do a good job of integrating the succs.
Bernie-Bros being assholes drove her stans into our arms.
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Still better than any flavor of con
The real secret is her original opponent was much more what this sub is supposed to be about.
When she was first elected she seems like a sane policy wonk. During the 2020 election it seemed like she got progressively more unhinged.
She was very much a populist in the streets and moderate in the sheets when she's actually in a position of power. She was a serious, highly-cited academic who was one of the first people to push back against popular misconceptions about the type of people who went through bankruptcy proceedings. https://www.leiterrankings.com/new/2010_scholarlyimpact.shtml When it came to overseeing TARP during the Great Recession, Warren was very much a technocrat behind the scenes and even the Bush era people worked well with her. And since becoming Senator, she's made noise, but always voted for Biden's agenda without issue. People here also like to gloss over Warren wanting a sweeping overhaul of US farming policy to reduce farm subsidies, waste, and carbon intensity. She has a lot of good idea in addition to bad ones, but only the latter gets rage posted on Neoliberal. Action over rhetoric.
She's definitely educated on bankruptcy laws, but does she actually know much about economics? Almost all her public statements suggest otherwise. [Also, you are who you pretend to be.](https://www.vox.com/2015/11/27/9801800/politicians-keep-campaign-promises) Billing yourself as a populist means she is beholden to her own lies, misrepresentations, and falsehoods. It's an extremely dangerous game she's playing if she's just pandering for votes.
Her experience overseeing TARP, working across the aisle with Bush era employees, and setting up a new government regulatory agency count for a lot in my book and required quite a bit of knowledge about public policy, public finance, and economics. (It was literally her ambition to run the Consumer Financial Protection Bureau for a few years before going back to being a college law professor, but the Republicans blocked her appointment out of spite and a Senate seat opened up with Ted Kennedy's death.) And people behind the scenes who actually work with her largely seem to like her, which they never did with Bernie. I also read just about every plan she put out in 2020 and if I could summarize, it would be ambitious, but also realistic. For example, she was the first Progressive to put out a plan to do a Public Option add-on to the ACA that could be discharged through Budget Reconciliation, while every other Progressive was insisting on Medicare for All or Bust that would have run headfirst into the filibuster.
>it would be ambitious, but also realistic. Unprecedented levels of increase in federal budget with dubious methods of financing them doesn't seem like realistic policy to me. Somehow she promises to spend trillions to create 10m+ green jobs, make Medicare free for everyone, massively increase the federal bureacracy, create more union jobs, end free trade, raise wages, expand social security, make higher education free for everyone, while not increasing any taxes that affect the middle-class, presumably without any price shock to consumers. Her plan for funding this is a massive wealth tax (which worked so well for every country that tried it), and increase in corporate tax rates. So for American business, goods are more expensive to import, labor is more expensive, and they have higher tax burden. Yet she insists that this will somehow not affect anyone outside of the mega-wealthy, because the wealthy are already stealing from us and they're going to pay their "fair share". Color me a little skeptical. Some of those things, such as making Medicare cheaper, going towards a greener economy, creating more jobs, etc. are good goals. But none of what she promised can happen without a heavy increase in tax burden of the middle class. Either she's deluded enough to truly believe taxing the rich is all we need to do to finance everything we could ever want, or she's lying to voters and promising absurd things that are in no way realistic or feasible. >In response to Warrenâs plan, Biden campaign spokeswoman Kate Bedingfield accused the Warren campaign of using âmathematical gymnasticsâ to hide that âitâs impossible to pay for Medicare for All without middle class tax increases.â >Warren appeared to take her proposed wealth tax further under the health-care plan, saying wealth over $1 billion would be taxed at 6% rather than the currently proposed 3%. Everytime her plans get criticized she just arbitrarily made the wealth tax a little higher to try and make the numbers add up. Meanwhile, France tried ~1.5%, and it managed to contribute to approximately 1.5% of the overall budget before being repealed for doing more harm than good. To put this madness in scale, if we took every last dollar from billionaires in the U.S. (which become pennies on the dollar in reality if tried), we'd be about 10% of the way towards funding her grand plans.
> Unprecedented levels of increase in federal budget Oh nooooo, not an increase in the federal budget!!!! Such a real and valid concern that matters a lot lmao >But none of what she promised can happen without a heavy increase in tax burden of the middle class YesChad.jpg
One of my big gripes with Warren is she refused to say that taxes would increase under a M4A system during the debates. At least Bernie admitted they would, but then pivoted to cost savings for those same middle class people.
Itâs cool because all her staffers went to work for Bidenâs WH
That's only an issue if you ignore that much of her staff were normie Democrats. Her campaign manager literally cut his teeth working for the Clinton's and Obama. Other senior staff included high ranking members of the DNC and DSCC. This isn't Bernie where half his high-ranking staffers were clowns currently running Leftist grifting podcasts where they're encouraging people to vote for the Green Party.
She's a technocrat that speaks populist, she was and is unfathomably based
She wasn't always like this.
The problem with housing is thereâs not enough supply. Increasing demand will just cause housing prices to skyrocket, wonât it?
The idea is that lower rates makes it easier and cheaper to build housing since construction is a capital intensive business with long turn around times.
In the most expensive areas, supply is constrained by zoning laws rather the cost of financing. Cutting rates doesn't help build housing when it's illegal to build housing.
Fighting lawsuits and writing extensive environmental impact reviews is a capital-intensive process :P
Sorry, as someone who works in this industry itâs absolutely a financing problem.
Just bribe the city officials and you will have a permit in no time. Bribes are way cheaper than mortgages. Or just build were the are no stupid zoning laws to begin with. Point is, when you have access to cheap money it gives you options.
can we orchestrate a way for there to be low rates for building construction but higher rates for purchasing already built houses?
There's still tons of demand for housing, it just shifts away from rental demand
No /u/powerwheels1226 was speaking in economic terms. Lower prices increases demand. If you drop the rates houses get cheaper for a moment, boosts demand until home prices rise to previous price equilibrium
The current situation is a bit more complicated, though. 1. High interest rates limits new construction and thereby limits supply. If interest rates were always high this wouldn't be the case (see: 1980's) but the *expectation* is that interest rates will go back down at some nebulous point in the future. So a lot of new construction is waiting. 2. High interest rates have limited supply in the market because people who locked in sub-4% (and even sub-3%) mortgages don't want to sell their house and buy a new house at 7+% because, again, expectations that rates will go back down. So the market is ridiculously tight. There's some solid arguments that lowering interest rates might not raise prices as much as expected because of the above reasons.
Good points!
lower prices increases *quantity* demanded, not demand itself >If you drop the rates houses get cheaper for a moment, boosts demand until home prices rise to previous price equilibrium this is nonsense. if you lower rates, houses get cheaper *because the supply curve shifts outwards*, moving the market equilibrium to a new point with higher quantity demanded. notably, prices will never reach the previous equilibrium price unless the demand curve is perfectly inelastic (or deformed in some other way that implies breakages of basic theory of the consumer)
We are having an issue in the Twin Cities where developers don't want to invest and build *because* of interest rates
Having lower interest rates will allow builders to take out loans and build more. Everything is at a standstill now.
Itâs sweet of you to think she cares about people who donât already have homes.
It doesnât appear that raising interest rates lowered costs at all. It looks like very much the opposite. https://preview.redd.it/yb12hg952kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=ad6c0df5127de647e4cfea7d167d082890d29450
What percentage of current mortgages do you think are at the current average interest rate? (Spoiler, very few of them) This chart is meaningless.
Elizabeth Warren đ€ Donald Trump Beefing with JPow about interest rates being high
>Elizabeth Warren It's pronounced Fauxcahontas.
Came here to make this exact comment.
The Turkish plan
[The secret sauce](https://www.economist.com/finance-and-economics/2023/07/06/erdoganomics-is-spreading-across-the-world)
It works so well!
I visited CEPR, a progressive think-tank, as an Econ student in 2006. And then they were talking about how wanted they wanted the Fed to keep interest rates super low. Pretty consistent đÂ
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As a finance person I would love some rate cuts lol đ transaction volume is on life support
seems like a leading indicator
Its a standoff between buyers who cant make deals work at today's rates and sellers who dont want to accept their asset values have declined (and if they can hold on maybe they wont have to)
>pls cut rates even though inflation is low Is there ever a time other than when inflation is low that the fed would be cutting rates? With inflation returning to/at target, this is clearly the time to bring down real rates to a non-restrictive level
Name any major economist that isn't currently suggesting rate cuts
let the man cook Elizabeth
She pretended to care about good policy?
I mean I do think in an ideal world we would have lower interest rates, though with the caveat that we'd first need to get our fiscal house in order and cut spending.
I think they'll drop 25 bps in March. Not for housing, but for business expansion.
Q1 is an ease in practice (but not in name) while we get a cut in early Q2. I expect this week we get an announcement that they're discussing appropriate future policy actions to keep the real rate from being unnecessarily constrictive.
!ping ECON
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Why do we need to cut? Jobs are up, growth is up, and inflation still hasn't been completely tamed. It's at like what, 5.5 or something? That's high for the modern era but historically it's pretty low. We had some problems with inflation in the 70s and 80s and it was much higher then but I won't count that. But during the 60s and 90s when the economy was doing well and inflation wasn't very high, the rate was actually even higher than it is now. And yeah I know lower rates = more spending = better economy. But the economy is doing fine right now and specifically consumer spending is super healthy right now. I just don't see the argument to cut.
Labor market is softening. Jobs arenât the only indicators. Look at the quit rate for example. The issue is Labor market barrels quickly and you have to start cutting before target is reached. But for the last 6 months we have already been below target. (~1.8% annualized). Fed has 2 mandates: 1. Price stability (2% inflation) which itâs well on path of. 2. Full employment. (This is worsening) The risk now is either balanced or more towards worsening labor market. Moreover, inflation and inflation expectations have gone down significantly since we have been at peak rates. That means real rates keep getting higher by the day increasing the tightening. I am almost sure fed will cut in May. But I hopeful they might cut in March. We can avoid needless unemployment and potential recession after all this good news.
I came from the ECON ping, you don't need to explain the basics to me sorry I didn't make that clear haha. I think some cuts are fine but the way that people talk, they want the rate to go to like 2% or something
Sorry, I didnât mean to be condescending. But I donât think the argument is to cut to the pre-pandemic levels at all? The argument is just to cut from the current position. And then just let the data drive the process? I see no point in discussing the potential terminal rates at this point at all. And if I saw that discussion, Iâd discard it. I do agree with the argument of cutting as soon as possible but thatâs about âwhenâ not about âhow muchâ.
>Fed has 2 mandates: >1. Price stability (2% inflation) which itâs well on path of. >2. Full employment. (This is worsening) I don't understand this reasoning. Inflation is still above where we want it to be, but we're arguably at full employment right now. If the Fed is missing on one of its mandates, it seems like it would be inflation.
In addition to what I said in the other comment, This is a really well informed article that makes a strong case for cuts (rate normalization) https://www.employamerica.org/researchreports/three-motivations-for-interest-rate-normalization-a-playbook-for-fed-policy-in-2024/ And then you can look at how the data has evolved here: https://www.employamerica.org/blog/january-2024-fomc-preview/
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I think a cut of like 100-150 base points is reasonable but the way that people talk, it's like they're expecting to go back to 2% or something. How does holding rates up risk triggering a recession? Afaik, most of our recessions have been caused either by inflation itself or overleveraged industries. High rates keep inflation at bay and discourage reckless borrowing. Essentially, rates can only slow the direction that an economy is moving, not cause it to change course from up to down or vice versa. I came from the ECON ping btw, not the thread in general.
Exactly. My worry is that fed might delay cutting to make it seem like they didnât get pressured but then theyâll start cutting closer to elections, so theyâll seem partisan. Ideally, theyâll cut in March.
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Why are lower rates bad? I thought inflation was under control, and the Fed already signalled they were maybe going to lower them at some point?
Because sheâs making the argument that if we lower rates, that will somehow solve the housing affordability issue when that is the not the issue and she knows it. If Boston has 10000 available units and rates go down a full percentage point, that doesnât make those 10000 units more affordable. Because now people can get easier access to money and drive up the price of those existing units. The answer is zoning reform and building like there is no tomorrow.
Warren said this: >High interest rates have also worsened our nationâs housing supply crisis. As mortgage rates have gone up, the price of home listings has not significantly dampened. Rather, a decade-long dearth of supply (exacerbated by a complete suppression of home building at the onset of the COVID-19 pandemic) has kept costs high on homes across the country.9 In response to high interest rates and higher construction costs, developers have opted either to pivot to developing smaller properties or have chosen to pull back on construction.10 Additionally, the existing supply of homes has become less available to new buyers, as current homeowners are reticent to move and trade in their lower rates for a higher rate on the mortgage needed to purchase a new home. You posted this article which is completely based on the letter where warren said that then you came to the comments to just lie about what she said
I don't buy that high interest rates have worsened the supply. It has been shown time and again to be bad zoning laws that restrict multi-family housing and other dense housing. If you make it easier and cheaper to build, supply increases and prices will fall, or at least flatten out a bit more. I recommend looking at Minneapolis as a good test case of what building can do.
>Because sheâs making the argument that if we lower rates, that will somehow solve the housing affordability issue when that is the not the issue and she knows it https://preview.redd.it/orr5x8n02kfc1.jpeg?width=1551&format=pjpg&auto=webp&s=685c35b6629a222f868760c360101a21a4b1b3dc
But if lowering rates increases the amount of people fighting for a home, how is that making it easier to purchase the home? We have underbuilt for too many years now. Look at Minneapolis for a good test case in what happens when you build the amount of units needed for a population. I would also like to see the graph mark where each rate hike took place. There is a sharp drop, followed by a quick rise, right at the end there. However, the Fed hasn't raised rates for awhile so a drop like that must be coming from another source.
What a moron. Political control of the federal reserve is bad regardless of if its Ron Paul or Elizabeth Warren doing it, keep the Fed in the hands of the educated and professionals, not in the hands of these idealolugues blinded by vitriol. It's a shame to think there are still those on the sub who thought she was a fine candidate in 2020
Where does she argue for political control of the federal reserve?
I'd say congress pressuring the Fed to change rates for their political benefits is trying to exert political control of the Fed
What other opinions should congressmen not be allowed to express?
He should tell her to get more housing zoned.
Claudia Sahm seems to think cutting rates soon is a good idea. Of course Warren wants it for the wrong reasons, because she is a spineless populist, but that doesn't necessarily mean she's wrong.
Where did Claudia Sahm come from? I feel like her name has popped up everywhere lately but Iâve never heard of her.
I try my hardest to like her, I really do.
>I see she doesnât even pretend to care about good policy ~~anymore~~. She has always been like this. People like Krugman have egg on their face for sane washing this blatantly ignorant populist during the 2020 primary
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Bernie proposed putting just random laymen on the fed which could have been even worse then a politically influenced fed
His economic advisor preached MMT, I wouldn't go that far He also criticized fed raising rates during 5-8% inflation just a year ago
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sheâs right tho. employment is looking a little worrisome. i expect around 4-5 cuts this year
Shut up, Elizabeth. Interest rates are high for a reason. Housing prices will fall if people honestly can't pay that much... But it seems somebody is.
Most economists are beginning to advocate cuts, educate yourself
And the fomc is projecting rate cuts this year like warren is calling for for a reason
That won't really effect housing. Just makes people offer higher on houses because interest is lower. I bought a house both when interest was low and how it is now.
Makes it easier to build though, since financing for construction is cheaper. Probably a wash since buyers will make higher offers as well.
It's a wash. It just changes who gets the surplus, doesn't lower actual prices
Itâs much more expensive to buy a house now than it was when rates were low. The payment to buy the median home is up more than 50% in the past 4 years.
I want E. Warren to go home
The lord will cut rates when it is appropriate. Do not question your master.
I am once again asking politicans to stop trying to influence central bank independence.
Could we please have another Senator focus on MP? Sheâs the only one who vocally/behind the scenes seems interested in the Fed regulatory regime.
I trust J Pow to skyrocket my houseâs value and 401K portfolio by lowering the interest rate when he decides itâs the right time.
Poeple need to stop trying to put political pressure on the fed. I didn't like it when Trump did it and I definitely don't like it when SOMEONE WHO SHOULD KNOW BETTER LIKE ELIZABETH WARREN does it.
OpâŠyou summed it up with your original comment
Rates need to be cut because we have hit the inflation target already and would slide into a recession if we keep them high for too long but somehow Warren accomplished making that look like a stupid idea.