Ive been trying to learn more about interest rates and their affect on inflation and the overall economy.

Jut curious, what has to happen for the Fed to lower interest rates? I know theres different variables involved but from my understanding historically, one of the two scenario has to happen. Am I missing anything?

- Inflation hovers around 2% (currently at 2.3%)
- We go into a full blown recession

I think its basically whichever happens first, inflation at 2% so there's no need to to be restrictive and they lower rates a little more towards neutral


Or something breaks like employment lookimg bad and they need to stimulate to avoid recession / pull out of recession

The fed rate is pretty neutral and seems to be about right for the economy currently. If we lower rates some we should tighten up the money supply and sop up some of the QE garbage that occurred over the last fifteen years.

Why is Trump pressuring the Fed to lower rates right now, wouldn't that make inflation shoot up?

FobTies said:

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Petrino1 said:

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Why is Trump pressuring the Fed to lower rates right now, wouldn't that make inflation shoot up?

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Bc he wants cheap borrowing and economic growth. Same reason he wants to spend. He is no different than all the other can kicking POTUS before him in that regard.

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I believe he wants to negotiate a debt restructuring and he can't do that at current interest rates.

Maybe, but that wasn't at all his reasoning when he called for 0 or neg rates in Trump 1.0. Guess we will see....

Ragoo said:

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FobTies said:

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Petrino1 said:

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Why is Trump pressuring the Fed to lower rates right now, wouldn't that make inflation shoot up?

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Bc he wants cheap borrowing and economic growth. Same reason he wants to spend. He is no different than all the other can kicking POTUS before him in that regard.

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I believe he wants to negotiate a debt restructuring and he can't do that at current interest rates.

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Lol, guess what happens to 10 and 30 year interest rates if Trump even suggests that he wants to renegotiate outstanding US debt. Moon shot!

Changing the interest rate is becoming theater like a lot of what we do financially (ex: debt ceiling). Managing by monetary policy is a tool that is endangered and borderline extinct at this point.

FobTies said:

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Petrino1 said:

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Why is Trump pressuring the Fed to lower rates right now, wouldn't that make inflation shoot up?

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Bc he wants cheap borrowing and economic growth. Same reason he wants to spend. He is no different than all the other can kicking POTUS before him in that regard.

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Also even if inflation goes up, Trump can control the narrative better than Biden did... I.e. none of his supporters seemed to mind the 2 dolls vs 20 dolls remarks.

permabull said:

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FobTies said:

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Petrino1 said:

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Why is Trump pressuring the Fed to lower rates right now, wouldn't that make inflation shoot up?

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Bc he wants cheap borrowing and economic growth. Same reason he wants to spend. He is no different than all the other can kicking POTUS before him in that regard.

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Also even if inflation goes up, Trump can control the narrative better than Biden did... I.e. none of his supporters seemed to mind the 2 dolls vs 20 dolls remarks.

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I didn't mind it because blindly wasting money on cheap Chinese crap is pointless to me. And I've been saying that for a while regardless of Trump. The absolute reality is that if we want to remove our dependency on China then the quantity of worthless crap you will be able to buy will naturally get smaller.

The challenge is figuring out the balance between a no holds barred consumer market that does not factor strategic enemies also serving as your main producer of goods vs one that leads to scarcity on things that matter.

The interest rate will not materially change the long end of the curve (10 and 30 year yields) to any significant degree IMO. Bessent has explicitly come out and said they are focusing on GDP growth. Does he want to lower bond rates and refinance our debt? Of course. He talked poorly about Janet Yelin for only selling short term treasuries. But he is now in the same position

The problem is no one wants to buy them. China is out. They are buying gold.

This is a majorly complex problem and it all revolves around global debt. They will lower rates when unemployment rises but there will be other levers they can pull to raise QE too. Supplemental Leveraged Ratio….they need buyers of treasuries to keep up the charade.

Sure, I am anti consumerism too but if Biden has said the same thing there would have been riots.

Trump was able to convince everyone that inflation was bidenflation despite the fact the rest of the globe was dealing with inflation at higher levels than the US. So I think my point stands that Trump is better at messaging.

I predict if inflation goes up after a Fed rate cut Trump will be able to successfully point to the broader economic impact of the lower rates because he is better at messaging. Biden was not good at this.

Despite back to back 20+% stock market years he lost bc eggs were $6 a dozen. Trump would have been able to win if he had the same results because he is better at messaging. That is all my point was, Trump isn't afraid of inflation.

permabull said:

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Sure, I am anti consumerism too but if Biden has said the same thing there would have been riots.

Trump was able to convince everyone that inflation was bidenflation despite the fact the rest of the globe was dealing with inflation at higher levels than the US. So I think my point stands that Trump is better at messaging.

I predict if inflation goes up after a Fed rate cut Trump will be able to successfully point to the broader economic impact of the lower rates because he is better at messaging. Biden was not good at this.

Despite back to back 20+% stock market years he lost bc eggs were $6 a dozen. Trump would have been able to win if he had the same results because he is better at messaging. That is all my point was, Trump isn't afraid of inflation.

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I just don't get this whole anti-consumerist train of thought. If Biden had said "You can only get 2 cheap dolls instead of 20", he would have been roasted, as well. And rightfully so. The whole point of a free enterprise capitalistic system is for each individual to independently decide what they need and what they want, and what they are willing to pay for, and having a top government official opine on what citizens "should" have or do without is closer to a centralized command economy used in autocratic communism than anything else.

It's like we woke up in an alternate universe when this anti-consumer talk occurs from both current parties. Very strange.

What should the rate be?

Bonfire97 said:

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Trump is not a fiscal conservative. He runs his businesses like this too. Borrow to the hilt, file bankruptcy, etc. Let others absorb the blow. Like the above poster said, no different than the POS's before him. They all are just watering down people's wealth and destroying the standard of living for our kids and grandkids. Ever had a neighbor that had major debt and lived high on the hog with new cars and such every other year? That's the mindset.

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I'm a huge Trump guy. I hope rates hit 1970's level. Bad Trump.

Higher interest rates are the only thing that will kill inflation.

It also leads to the US defaulting on its debt obligations.

MRB10 said:

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It also leads to the US defaulting on its debt obligations.

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That's crazy when you really think about it.

Pacifico said:

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Higher interest rates are the only thing that will kill inflation.

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But you can't do higher interest rates anymore. Our debt is too high. This was what I was alluding to earlier about monetary policy being endangered. It's why you only ever see rate changes at quarter and half points. All they can do is make incremental changes because they no longer have any room to maneuver. This isn't 1980 anymore. Volcker would be stuck in this era as well and unable to do anything about it.

When he went to 20% our debt was a minuscule $1T with a much lower debt to GDP ratio.

On the other topic, I'm not anti-consumerism for the record. It would just be nice to figure out a way to recalibrate our economy to not be hyper consumers of cheap, foreign **** in order to not fail economically. Not sure if that's possible.

Maybe I should have been clearer. I am personally anti consumerism and spending like crazy on junk you don't need, but I am glad everyone else is because I profit of it. So any person telling me to spend less doesn't trigger me.

I was just defending my point that Trump is much better at the messaging and thus he isn't afraid of inflation because he will easily be able to sell the stock market gains and lower mortgage interest. So my opinion is Trump wants lower rates and doesn't care what it does to inflation because he will have no problems taking his way out of it.

YouBet said:

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Pacifico said:

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Higher interest rates are the only thing that will kill inflation.

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But you can't do higher interest rates anymore. Our debt is too high. This was what I was alluding to earlier about monetary policy being endangered. It's why you only ever see rate changes at quarter and half points. All they can do is make incremental changes because they no longer have any room to maneuver. This isn't 1980 anymore. Volcker would be stuck in this era as well and unable to do anything about it.

When he went to 20% our debt was a minuscule $1T with a much lower debt to GDP ratio.

On the other topic, I'm not anti-consumerism for the record. It would just be nice to figure out a way to recalibrate our economy to not be hyper consumers of cheap, foreign **** in order to not fail economically. Not sure if that's possible.

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Is that factually true or was that what your news feed told you?

Bonfire97 said:

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Trump is not a fiscal conservative. He runs his businesses like this too. Borrow to the hilt, file bankruptcy, etc. Let others absorb the blow. Like the above poster said, no different than the POS's before him. They all are just watering down people's wealth and destroying the standard of living for our kids and grandkids. Ever had a neighbor that had major debt and lived high on the hog with new cars and such every other year? That's the mindset.

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He never had to worry about things like budgets, risk, etc since he got hundreds of millions from his Father. He could take huge risks knowing he had a massive safety net and like you said would just declare bankruptcy when something didn't work.

I would like to know how a "restructuring" would work when 70% of the debt is held by domestic investors/institutions. Are we negotiating with ourselves?

The only solutions to the debt problem are systematic deflation which would crumble asset values and usher in a massive long-term bear market and depression, or default, which would do the same. But nobody would "let" us default since we can print base currency. So the only solution is eventual hyperinflation until systematic deflation takes of organically.

A restructuring is more or less just default, as the current holders of debt would be wiped out. That is.. unless they think they could set up a gold / BTC reserve that eventually grows large enough that they could cancel out the debt with the assets in reserve. I'll let yall do the math on how likely that is.

"on a long enough timeline, the survival rate for everyone drops to zero"

Pacifico said:

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YouBet said:

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Pacifico said:

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Higher interest rates are the only thing that will kill inflation.

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But you can't do higher interest rates anymore. Our debt is too high. This was what I was alluding to earlier about monetary policy being endangered. It's why you only ever see rate changes at quarter and half points. All they can do is make incremental changes because they no longer have any room to maneuver. This isn't 1980 anymore. Volcker would be stuck in this era as well and unable to do anything about it.

When he went to 20% our debt was a minuscule $1T with a much lower debt to GDP ratio.

On the other topic, I'm not anti-consumerism for the record. It would just be nice to figure out a way to recalibrate our economy to not be hyper consumers of cheap, foreign **** in order to not fail economically. Not sure if that's possible.

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Is that factually true or was that what your news feed told you?

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It's historical fact.

Heineken-Ashi said:

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The only solutions to the debt problem are systematic deflation which would crumble asset values and usher in a massive long-term bear market and depression, or default, which would do the same. But nobody would "let" us default since we can print base currency. So the only solution is eventual hyperinflation until systematic deflation takes of

A restructuring is more or less just default, as the current holders of debt would be wiped out. That is.. unless they think they could set up a gold / BTC reserve that eventually frows large enough that they could cancel out the debt with the assets in reserve. I'll let yall do the math on how likely that is.

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HA finally becomes a bitcoiner!!! Yay

Crazy to think that in 2010 we were just ~65% debt to GDP. 15 years later and we are 2x that. This country is a fiscal **** show. I can't stand people that think this is okay - and frankly, you get it on both sides of the isle. No one wants to give up their pork, while pumping up their fair leader, pride month, etc. None of that crap matters. There was always a consensus that **** starts going awry at ~160% and full on melt at ~180%.

AI probably going to make this interesting over the next 5 years too. Call me a skeptic, but I don't see the economic boom for non-AI plays over this quick of a horizon. I think income tax and payroll are like 70-75% of federal receipts. Wouldn't surprise me if the federal government has to consider taxing AI agents or something weird like that. That or AI is going to cause the mix of federal receipts to shift towards corporate income taxes.