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Thread: Is there a causal relationship between Fed interest rates and recessions?

  1. #1

    Default Is there a causal relationship between Fed interest rates and recessions?

    I've always wondererd what impact the Feds monetary policy may have on economic outlooks. As this graph suggested there is a pattern.

    The pattern is as follows: Fed lowers interest rates too far. Has to increase rates within short time. Short quick increase of interest rates are followed by recessions. Pattern emerges everytime in recent history. Never it seems the Fed was able to choose the right interest rates for the economy.

    The question remains. Is this coincidence? Or is the Fed on purpose creating recessions of which it has forknowledge just as their business partners and network?
    Benny, the Rainmaker!

  2. #2

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    Read my mind.. Maybe it's time for a debt flush. But, the rate keeps going lower and staying lower. This seems to have a correlation with servicing the debt, all debts for that matter, or rolling over bonds, making them look good so the show can go on.

    This go around, corporate debt seems to have stopped them from hitting their target, even so much as to create rumors they went to far to fast, and that debt needs to be serviced later, thus rate cuts coming.

    They would prefer a softer landing, but don't want the economy to overheat and/or cause to much inflation, it seems fed policy revolves around inflation fear, because it's a consumption based economy.

  3. #3

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    Quote Originally Posted by everything1 View Post
    Read my mind.. Maybe it's time for a debt flush. But, the rate keeps going lower and staying lower. This seems to have a correlation with servicing the debt, all debts for that matter, or rolling over bonds, making them look good so the show can go on.

    This go around, corporate debt seems to have stopped them from hitting their target, even so much as to create rumors they went to far to fast, and that debt needs to be serviced later, thus rate cuts coming.

    They would prefer a softer landing, but don't want the economy to overheat and/or cause to much inflation, it seems fed policy revolves around inflation fear, because it's a consumption based economy.
    The Fed should be worried about excessive credit creation. That is caused by monetary and fiscal conditions being too accommodative. Interest rates are not primarily to effect the cost of living ( CPI) but mainly to effect
    the level of financial assets. Globalization, automation and the fall of labour unions has made it extremely hard for any but the most skilled to obtain wage increases over the inflation rate, even though money (credit) is being poured into the system
    How is this possible, easy - 90% of the credit is going to the 10% that own 90% of the wealth. This makes sense. They are not going to buy more bags of potatoes, they are likely going to put most of it into financial assets.
    Meanwhile the wage earner that in the past 10 years has gained the same as the price of what he/she consumes, is actually further and further behind as he/she needs to pay taxes on the wage increases, and payroll taxes etc.
    Excessive consumer price inflation will only happen if money is put directly into the hands of wage earners. That is not in the interest of the money class or government as they would then have a real problem.
    The final result will be that financial asset prices will fall to an equilibrium price that is much lower than it is now. Financial assets always revert to what they are really worth in a free market.

  4. #4
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    Quote Originally Posted by brutus2 View Post
    The Fed should be worried about excessive credit creation. That is caused by monetary and fiscal conditions being too accommodative. Interest rates are not primarily to effect the cost of living ( CPI) but mainly to effect
    the level of financial assets. Globalization, automation and the fall of labour unions has made it extremely hard for any but the most skilled to obtain wage increases over the inflation rate, even though money (credit) is being poured into the system
    How is this possible, easy - 90% of the credit is going to the 10% that own 90% of the wealth. This makes sense. They are not going to buy more bags of potatoes, they are likely going to put most of it into financial assets.
    Meanwhile the wage earner that in the past 10 years has gained the same as the price of what he/she consumes, is actually further and further behind as he/she needs to pay taxes on the wage increases, and payroll taxes etc.
    Excessive consumer price inflation will only happen if money is put directly into the hands of wage earners. That is not in the interest of the money class or government as they would then have a real problem.
    The final result will be that financial asset prices will fall to an equilibrium price that is much lower than it is now. Financial assets always revert to what they are really worth in a free market.
    Nixon's cut from gold launched massive credit for world governments and ultimately consumers. Credit is money. It's tomorrow's money spent today. It is, IMO, the biggest contributor to inflation (monetary increase) and devaluation of purchasing power. It is also, the greatest contributor to all the advancements we made in technologies and improvement in life/health style, but all that (even) will be forgotten if and as we lose control of the globes ability to sustain growth levels necessary. Having said that, I don't know schitt and this burst of emotion could be all wet.
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  5. #5

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    Quote Originally Posted by Markpti View Post
    Nixon's cut from gold launched massive credit for world governments and ultimately consumers. Credit is money. It's tomorrow's money spent today. It is, IMO, the biggest contributor to inflation (monetary increase) and devaluation of purchasing power. It is also, the greatest contributor to all the advancements we made in technologies and improvement in life/health style, but all that (even) will be forgotten if and as we lose control of the globes ability to sustain growth levels necessary. Having said that, I don't know schitt and this burst of emotion could be all wet.
    Credit (money) is like food. You need it, but in the right amount. Too much(little) for too long is not good.

  6. #6
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    Quote Originally Posted by brutus2 View Post
    Credit (money) is like food. You need it, but in the right amount. Too much(little) for too long is not good.
    I'm not sure about the "need" part. The "want" part is, for most consumers, the allure of the Greek siren. I remember "lay-away" and very targeted "store credit". Diner's Club was limited to only the more select business person and Mastercard and Visa did not yet exist. All this was engineered for the same imprudence that sugary and high fat content foods were developed without care how obese the risk. And the allure continued into a "way-of-life".

    There was a time when people wanted "stuff" and life-style but "prudence" and lack of means checked impulse. And people were taught prudence.

    Today, prudence in a forgotten female name only. Without prudence (forethought) human development would never have evolved the age of agriculture. We'd all still be hunting for game.

    Want can be stimulated by drugs and brain washing. It became to be. And so it is. And hard to withdraw from without destruction.
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  7. #7

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    Quote Originally Posted by Markpti View Post
    I'm not sure about the "need" part. The "want" part is, for most consumers, the allure of the Greek siren. I remember "lay-away" and very targeted "store credit". Diner's Club was limited to only the more select business person and Mastercard and Visa did not yet exist. All this was engineered for the same imprudence that sugary and high fat content foods were developed without care how obese the risk. And the allure continued into a "way-of-life".

    There was a time when people wanted "stuff" and life-style but "prudence" and lack of means checked impulse. And people were taught prudence.

    Today, prudence in a forgotten female name only. Without prudence (forethought) human development would never have evolved the age of agriculture. We'd all still be hunting for game.

    Want can be stimulated by drugs and brain washing. It became to be. And so it is. And hard to withdraw from without destruction.
    Credit, is necessary in the type of economy the West has had for a long time. If you have a great idea, and some collateral, but no money, or if you want to buy a house or a factory etc etc. It is not good if used for non investment purposes.

    It is the Central Banks job to use their various tools ( interest rate level being the main one, to ensure the this is mainly taking place. They have sadly abrogated this duty along with their other prime function ( sound money)

  8. #8
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    Quote Originally Posted by brutus2 View Post
    Credit, is necessary in the type of economy the West has had for a long time. If you have a great idea, and some collateral, but no money, or if you want to buy a house or a factory etc etc. It is not good if used for non investment purposes.

    It is the Central Banks job to use their various tools ( interest rate level being the main one, to ensure the this is mainly taking place. They have sadly abrogated this duty along with their other prime function ( sound money)
    That's the process. In the 1960s and more-so in the 1980s, high yield junk bonds pumped up to fuel acquisitions and mergers worked well (as a process) until it didn't. You are correct. But that does not mean the process is good for the mass of people. Eventually, "tools" might work to keep explicitly only member of a very connected and wealthy few with access and capital - regardless of interest rates - regardless of inflation values. What then?

    I'm not saying this will be an absolute end result of all this. I'm just saying saying we've duplicated (almost) the wealth heights of the late 1800s and early 1900s. OK, then it may have been a 1000 connected oligarchs. Today, it may be 10,000 oligarchs and associates. It matters less how many but more what those who gain political power do.

    The early yields for the powerful and capable/connected and what was conceived as ill-distribution of wealth bred the socialist movement. All our processes and tools bred new expectations for many and a new movement in socialistic politics.

    Yes, you are correct. But nothing is in isolation.
    Who are the righteous? ....Markpti

    What value did Burisma think to gain by hiring Hunter Biden as a Board member vs ALL other choices?

    Those who cannot articulate the other argument do not fully understand their own argument.

    "Much can be done by wise legislation and by resolute enforcement of the law. But still much more must be done
    by steady training of the individual - in conscience and character...." .......T. Roosevelt

  9. #9

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    This is the pattern.
    Benny, the Rainmaker!

  10. #10
    Join Date
    Dec 2007
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    Quote Originally Posted by Medina View Post
    I've always wondererd what impact the Feds monetary policy may have on economic outlooks. As this graph suggested there is a pattern.

    The pattern is as follows: Fed lowers interest rates too far. Has to increase rates within short time. Short quick increase of interest rates are followed by recessions. Pattern emerges everytime in recent history. Never it seems the Fed was able to choose the right interest rates for the economy.

    The question remains. Is this coincidence? Or is the Fed on purpose creating recessions of which it has forknowledge just as their business partners and network?
    It is clear that the FED does this on purpose. They should be expanding now that the economy is expanding but they want to make Trump look bad so have been raising rates and removing capital from the SM. It is time to END THE FED scam that creates electronic $. It is a private Corrupt Satanic Cabal Corporation that Un-Constitutionally lends debt based $ to the Gov and rest of us. Metal coins should be issued directly from the Treasury.

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