Fed interest rate hike!

Great Debates
21

I have children too. One has a degree in Economics from Chicago. She isn’t panicking. You shouldn’t be either.
As for the current administration, do you think the previous administration didn’t increase the deficit? How about Ronald Reagan? Or is only bad if a Democrat does it?

Yes, Mr. Jackson did not like it. And the economy went through periods of booms and busts, and often was near disaster to be bailed out by the Morgans et al. before the Federal Reserve was begun. Which saved our asses in 2008 - 2009. A disaster caused by the private banks you seem to admire.

Mine are doing pretty good. They’d do even better with less right wing economic policies - the kind that caused the Great Recession.

22

Actually it turns out the hike is good for banks. They are awash with money, and therefore don’t have to borrow and certainly don’t need to increase interest rates on deposits to attract more money. The interest rate hike lets them increase the rate they lend at. So it goes right to their bottom line.
I’m not saying the bank cartel caused the hike - Yellen was pretty clear on why it was time. Just that they ain’t crying about it.

23

Yes, but to convert this to the English system, you’d probably have to multiply by 25.4 .

Main Talking Points So Far:

  1. The economy is getting better by inches.

  2. The OP seems panicked and is in want of a new ruler.

24

thanks for the response!

Definitely don’t want to be the chicken little and as of now the rate hike is very minimal but as you stated there will be more hikes in 16’. Dennis Lockhart and J.P Morgan annalist are predicting four next year.

As long as someone is watching the dollar exchange value the economy will keep chugging along, especially with the 2.4% wage growth over last years 2.1%. If wages continue to increase the Fed will probably move more quickly to match that.

What are the obvious effects on the general public as the rates go up?

Credit card rates go up
Money markets and CD will go up will make folks happy
Bonds will suffer a little
Hopefully people will be able to pay down their debts

Not sure how all this will effect student loan debt, will that be the next bubble to bust?

I just hope Americans have learned from the 2008 debacle.

Voyager: I am not really in panic mode, I just have lost so much trust in those making these decisions. No I don’t believe prior administrations were any more irresponsible than this one. This administration has out spent all of them and when the current administration is so arrogant to suggest that raising the debt ceiling is something that is normal.
I was happy when Reagan was in office because I was in the military at the time and received huge raised during his term along with $500 ashtrays and toilet seats. I think that was when I started wanting to know where all the money was coming from. Never thought of it before then.

I agree the banks are going to love this. Come and get your money! :smiley:

Count Blucher: My cover is blown, No ruler would be fine by me but that’s another topic.

This economy runs on confidence I think we can all agree on that. My confidence has not been restored that’s why I started this thread. Obviously most are more forgiving than I.

25

Raising the debt ceiling is something that is normal. So normal that no congress had tried to turn it into a political issue before this (well, the last) one. In fact, it was raised twice in 2008 (under Bush) alone.

26

I was going for equally irresponsible, but I’ll take more irresponsible. :slight_smile: The big increase in the deficit was from the very standard method of fighting a recession through spending - and it worked, and could have worked better if the states hadn’t cut their budges so much. Bush kept a deficit even during prosperity, when raising taxes would have been good. Then we wouldn’t have started from such a low point. Bush also ran wars off the books, to make the deficit seem smaller. Remember, some of the deficit increase for Obama was from putting the wars back on the budget. And as mentioned raising the debt ceiling is very normal. Politicizing it is the thing that isn’t normal.

Yeah, during the Reagan years I was doing salary administration, and it was great to do with 10% average raises. But you have to credit the Fed for breaking us out of stagflation. Supply side economics did not work so well - but Reagan did raise taxes a bunch of times, so he wasn’t all bad.

27

About bloody time. I remember being able to get more than 4% on a savings account. It’s a lot harder for the average person to set aside savings when they can see it evaporate right in front of them.

Most of the radio heads that I’ve heard talking about raising the rate mention that it’s needed to make room for dropping the rate if the economy ever needs that. We’re kind of up against a wall currently. There’s really not much lower it can go.

28

Don’t get your hopes up. Banks are sitting on ridiculous cash reserves right now. They don’t need our money, and have no motivation to pay anything higher in savings account rates for the foreseeable future.

29

See post 22.

What am I, chopped liver?

30

Or, alternatively, what Voyager said.

:smiley:

31

this;)

32

Oh, I wasn’t going to hold my breath. It’s just nice so see some movement, no matter how small or unlikely to be passed on.

33

Hope everyone had a great Christmas!

Appreciate all the input on this thread, even to those who had minimal cerebral input. But it’s all good because the New Year is upon us and it’s an election year to boot!!!

Here is some information from some research I’ve been compiling since 2008. Wall street journal, financial meetings, mainstream media buffs and so on.

!0/19/14 Feds cease 3rd round of QE3 but promised to raise interest rates by end 2015 ( a sign the economy was still sucking)

Despite the $3.5 trillion worth of asset purchases since 2007 and the historic Federal Funds Rate of 0% the economy had yet to recover long enough to warrant a rate increase. Key words “long enough”.

Dec 16th as promised in 2014 the rate increase takes effect 0.25%. Main stream media blitz proclaims a new dawning and an end to easy money essentially saving the nation from another Great depression. This rate hike comes at a time despite the government reported a 2.0% inflation rate. Immediate response of the Dow Jones, a drop in 367 points in the days following the teeny tiny rate increase.

Effective funds rate since 1982 (rate at which banks trade funds)

1982 19%
1987 5.8%
1994 2.5%
2000 6.2%
2007 4.7%
2009 0%

I believe it was mentioned that not much would happen due to the stock pile of money the banks are sitting on as well as the general overall spending of Americans has slowed even with the interest rates at 0% (why keep money in the bank with no return). My thoughts are one of the reasons the interest rates were raised slightly is because the spending habits of Americans has slowed which coincides with the above numbers that I took off one of my graphs. Since the markets are no longer self regulating and next year is an election year, do you guys think that the money presses will be fired up again to keep up with all the hype of better times to come made by the candidates. What are your thoughts of this rate hike right before an election year?

I would guess more people now days are invested in stocks simply for a return or just because they really have no choice. Stocks are normally left to those who understand what’s going on in the market. So as a vehicle to avoid the tax man a person’s money is herded into pension plans and 401K and a variety of other mechanisms. I guess corporations benefit nicely from this because it drives up the price of their stock but generally much of the public has little to no clue what their money is doing and placing complete confidence in someone else and hoping for the best.

Shifting gears a little, I was just reading in money market magazine how much assets the federal Reserve has been buying up since the 2008 collapse.

2008 nearly 1 trillion QE1 begins
2011 2.4 trillion QE2 begins
2012 2.8 trillion QE3 begins
2015 4.5 trillion

I guess we can make our future market conclusions based on what the Feds are buying up and the correlations between the S&P, Dow and NASDAQ.

34

I gather the OP thinks bumping up interest rates is bad, but I’ve not yet been able to figure out his reasoning why. My Commerce degree from an accredited university is proving surprisingly useless.

35

No the OP does not believe that hiking interest rates as bad. The OP does not believe the economy is ready yet.

The OP is questioning why in 2014 the feds promised a rate hike at years end 2015. Election year? I posted some numbers to make correlations so that some folks may have opposing or similar views. You know, conversational view points.

Nice humble brag, I think most of us on here have some kind of useless degree.

If you have something to add using your “Commerce Degree” please feel free

36

Where does the money go that the Fed prints?

37

The Treasury Dept. actually prints the reserve notes (not currency…reserve notes). The Federal Reserve manages that process.

The printed reserve notes are credit.

Money can also be removed from circulation

38

jerry’smissingfinger : I wonder if you know how diffuse and confused your discussion sounds. I get a vague impression you think some group of bad guys are doing something bad to the American public – am I right so far? – but who they are and what you think they’re doing is unclear.

If you want an intelligent discussion, I suggest you shift the focus to your single most important point. I’ve no idea what it is.

[1] Why is the hike “rare”? Is that your way of saying that rates have been at record lows since the 2008 credit crisis?
[2] Are you saying you “agree” with the hike? Was it correct, but done for the wrong reason?
[3] So the FRB (or somebody else?) wants to raise the price of petroleum?? Do you think raising interest rates furthers that goal?
[4] Did you listen to the rhetoric of other administrations? Is there some particular reason you distrust this one? Does expressing your inchoate hatred of a particular politican further the debate here?
[5] Why did you put “man” in quotation marks? BTW, many of us will agree that private banks have too much power in today’s America but we’d prefer if you inform yourself before arguing on our side. :wink:
[6] Does watching the numbers spin further your understanding? Or just feed your inchoate rage?
[7] Do you have a cite for this claim? Either way, why do you confuse interest rates and debt? If a government wanted to increase its debt, which way do you think it would prefer interesdt rates to go?

It might be interesting to understand you viewpoint. Can you help with that?

[8] What specific “mess” are you referring to? The debt? The debt is mostly due to Bush-era tax cuts, e.g. reducing the “Death Tax.” Do you favor an increase in the estate tax?
[9] Are you referring to 19th century history? Do you want a return to the gold standard? Moneys like Bitcoin?

In another post, you mention that stocks fell slightly in response to the interest rate hike. Is there any reason why that should be a surprise?

You mention that the interest rate was hiked a mere 11 moinths before the general election. Do you think the Fed is trying to influence the election? Which way?

There’s more from you, but I’ll stop here.

Try writing a single coherent paragraph summarizing the most important point you’re trying to make.

39

Do I think someone is trying to do something bad to the American public?

Research the Federal Reserve and who they are and what they do. Follow the names of the group who provide loans and then get back to me and tell me what you found out.

If you can’ t follow the discussion then bow out. What’s your point? Do you follow how the money flows in this country or just blindly go along with whatever you are told without question?

The rate hike is rare. So says Bernanke, you do know who that is right?

Again, I am stating that it is belief that the economy is still to fragile to justify a rate hike yet there was a promise to raise rates prior to years end 2015. Here we are good or bad and it is an election year so there’s that.

Petroleum will respond to whatever the petro dollar is doing obviously. Research the petro dollar if that is a new term to you.

I don’t pay attention to rhetoric period

As for (5) I was not making an argument for anyone. I speak only for myself, however you used the word “we"as in” we’d prefer you educate yourself before arguing on our side." Who are you referring to? Did I offend a cliche or certain group?

(6) What rage do you refer to?

(7) If someone or some entity takes a loan with interest what does that mean to you?

(8) You can blame the debt on any party you want and to answer (9) FIAT does not work. Yes, wouldn’t you like to take your paper IOU and trade it in for something of value that’s durable and portable? That’s the definition of currency BTW.

And if you don’t think the elections are funded and steered by forces outside of our geopolitical standing then I don’t have anything else to add for you.

sorry you can’t keep up

40

I, and everyone engaging you here, knows far more about these matters than you do. I probably understand economics as well as most of them. Most of them obviously have far far more patience than I do.

[Oops: I’ve partly conflated you with another December 2015 goldbug