Just an interesting thing to note for the 2018 elections.
The so-called neutral U.S. interest rate fell in the final 3 months of 2016 https://t.co/GAiV7vqbuT pic.twitter.com/LqQP1Lq0NT
— Bloomberg (@business) April 24, 2017
The Federal Reserve is in a tightening cycle (for what reason, I’m not sure as the data does not support a need to tighten). If the short term interest rates are above neutral, that means the economy will be worse than it otherwise would have been. A bad economy is bad for incumbent parties that hold all responsibility (see 2010 for Democrats).
So
Barry
“The Federal Reserve is in a tightening cycle (for what reason, I’m not sure as the data does not support a need to tighten). ”
It means that wages for the bottom 75% are starting to increase.
Buskertype
As with healthcare, I’m torn between rooting for bad outcomes that will make the Nectarine Nero look bad, and good outcomes that will be, you know… good.
OzarkHillbilly
For life is quite absurd,
And death’s the final word.
You must always face the curtain with a bow!
Forget about your sin — give the audience a grin,
Enjoy it, it’s the last chance anyhow!
So always look on the bright side of death!
Just before you draw your terminal breath.
Life’s a piece of shit,
When you look at it.
Life’s a laugh and death’s a joke, it’s true,
You’ll see it’s all a show,
Keep ’em laughing as you go.
Just remember that the last laugh is on you!
trnc
Regarding the interest rate, add this to the list of things you will never hear Obama get credit for – job growth with no interest rate cuts. Each 1/4 percent of interest rate cuts typically led to tens of thousands of jobs. It dropped from 18% to 8% under Reagan, bounced around a bit during Bush I and Clinton, then dropped to 0 under Bush II. The interest rate was around zero during the unprecedented number of months of straight job growth during Obama’s administration, so he was at a disadvantage and still pulled it off.
trnc
@Barry:
I can’t look up any previous news articles right now, but I believe wages for the bottom started rising over a year ago. Won’t stop DT from taking credit, though.
Another Scott
The Fed is still very gently pushing on a string. That graph has been bouncing around zero for a while.
The rates that people care about – mortgages, credit cards, rates on savings, are either bouncing around 3.5-4% (and are impossible to get unless you have great credit), stuck at 20+% (because credit cards can charge huge rates and Congress doesn’t care), stuck at 0-2% (because people with money have too much and there’s a glut of savings because there’s still too little investment in the future (infrastructure, education, making life better for the masses)), etc. Little has really changed yet.
Yes, the Fed should not be raising interest rates now. I think Janet mainly did it to get people to stop yelling at her to raise rates – the pace has been nothing like what they claimed it would be (fortunately), so they are watching the economic numbers carefully. And, as Barry says, too many at the Fed want to raise rates whenever there’s any sign of increasing incomes for those who actually work for a living. Janet has been fighting that, pretty well so far.
I don’t think that small moves like those shown in the graph are going to affect the economy very much. Things like household formation collapsing because of Donnie’s Canada soft-wood tariff, or a tit-for-tat trade war with Canada over wood, dairy, and who knows what else, very might. And gas going to $5/gal because Mattis and Uday and Qusay and Tillerson want to throw a few munitions at Iran and wake a sleeping giant certainly would as well.
:-/
Cheers,
Scott.
evodevo
@Barry: Yes. This.
OzarkHillbilly
@Another Scott:
I think it has more to do with the low returns on investment than anything else (or so all the grousing I’ve heard has been) tho Barry’s larger point that anything not working to the benefit of the rich must be quashed, still holds.
satby
@Another Scott: if gas goes up more than it has recently, the Trumpsters will be p.o.ed at their hero. They got used to $2/gal gas over the last year or so, and it’s hovering at $2.45 now.
?BillinGlendaleCA
@Another Scott:
I’m sure that Donnie’s an expert on soft-wood.
?BillinGlendaleCA
@satby: It’s about $3 here in CA.
MomSense
@Another Scott:
I do wonder about what will happen with gas prices especially since Rexxon and Putin surely would like prices to go up.
It really is exhausting to have an incompetent president and administration with questionable loyalties.
Ian
@satby:
Evidence not seen for said theory.
These people were pissed, PISSED, that bamz mcBamz bamz golfed occasionally, used a teleprompter, vacationed while presidenting (with his family, nonetheless) and went to that crazy foreign Hawaii place. The price of gas was his and no one else fault.
Have we seen a single shred of evidence (other than the 2% of his voters that would not vote for him again) that his supporters now give a F*** about any of this anymore?
satby
@Ian: That bunch will always blame someone else, extra hard if it’s a member of a minority they can hate on. But, after enough hurt hits them in the face, I bet a lot of them turn on Cheeto Benito too. They’ll make up reasons why he wasn’t the pure conservatard they thought he was, but in the end if they’re hurting, they will blame everyone not them and that will include orange minorities too.
efgoldman
@Ian:
Only been 3-1/2 months. It takes a LONG time (and a real push) for people with a strong tribal connection to move off of it. A good number of them won’t, but some number of THOSE will stay home next year, which is to our advantage.
sherparick
@trnc: Actually, it is amazing how good the economy became on January 20, 2016. I go to Calculated Risk and Economist View, and the links there from, for my economic news and Obama has the third best job growth, and the second best private sector job growth (Bill Clinton had the best), since WWII. St. Reagan had better overall growth, but that was because the Government sector grew very fast under St. Reagan (who would have known). The Right-Wing, including he I will not name, and the banking industry have been crying for years that interest rates have been to low and working the ref (e.g. the Fed) to raise them. So now they will get what they wanted. Hopefully, good and hard.
Doug R
Enjoy your more expensive homes! The one thing Trump and the Berner agree on, tariffs can never be too high.
Major Major Major Major
Capital gets all scaredsy-waredsy over the slightest hint of inflation. There ya go.
Paul W.
@Another Scott: Well said Scott. The fact of the matter is that we live in a near deflationary world but that “hawks” are defending the interests of the banks and loan holders (rather than those seeking loans) so are constantly pushing for higher rates that they believe drive profitability. However, in the real world prices have only crept up because incomes have stagnated so dramatically in the past 10 years.
Chopper
@Another Scott:
there’s another reason the fed is itching to get rates back up, and that’s making sure there’s something to do the next time we go into recession.
artem1s
@Buskertype:
I’m not at all torn. I know the bad outcomes are coming. It took W’s administration 6 years to really fuck up the economy but he had a lot more cash flow to keep the stock market artificially inflated. And they were running all their wars off the books. I don’t think Ryan and McConnell are going to let Benito shit all over their austerity wet dream with another 3 trillion dollar war. There isn’t any wiggle room for a massive bailout this go round and this crowd is far and away less inclined than W to be moderate in their fuck ups.
I’m hardly even torn about rooting for the timing. Right now I have every reason to believe the sooner the better so we will have a better chance at retaking the house in 2018 and undoing some of the massive damage before the effects tsunami drown the most vulnerable. Also, I want everything that asshole touches to turn to dust and everyone who aids and abets him to choke on his piss. We’re gonna get hit no matter what. This time I want Madame DeFarge knitting on the Mall in front of the Lincoln Memorial. And I want it by 2018.
Another Scott
@Chopper: Yeahbut, that’s kinda like the “We have to cut Social Security now, now, now because otherwise we’ll have to cut it later!!11” argument, IMO.
There’s no sign that the economy (as a whole) is overheating, and if a recession happens under these circumstances, it won’t be due to high interest rates, so cutting rates doesn’t make much sense as a solution then.
Yes, if there are no other knobs to turn to get the economy moving faster, then starting with already low interest rates gives the Fed less traction. But we saw that the Fed has little in the way of accelerants if the federal government refuses fiscal stimulus. But even without interest rate cuts, the Fed can do other things (like buy up bonds and other assets) to dump money into the economy.
The best thing for the economy now is to continue to build demand so that wages rise and we get back to a point where normal people aren’t so stressed and they have the ability to save some. When we’re there, then we can talk about getting interest rates for savings back up to the 3-5% range. Raising rates now doesn’t help.
My $0.02.
Cheers,
Scott.