As great as the economy looks today, we're going to need for it to grow for awhile longer out of necessity if we want to be able to weather the next recession without there being a highly painful adjustment. Assuming we would need to use monetary policy to help minimize the effects of a recession, we don't have enough basis points in short term interest rates to help as of today.
https://www.wsj.com/articles/states-face...1536609565
Quote:BOSTON—When the next recession comes, some states are likely to suffer much more than others if the Federal Reserve lacks ammunition to make economic downturns less severe, new research shows.
In recent downturns, the Fed has cut its short-term benchmark interest rate by about 5 percentage points to stimulate growth. But in the future, that might be impossible because rates are still historically low. The Fed’s benchmark rate is currently in a range between 1.75% and 2%.
“Monetary buffers have been depleted,” said Eric Rosengren, president of the Federal Reserve Bank of Boston, which sponsored the conference this weekend where the research was released. A decline in rates over the past decade means the Fed’s recent experience of running out of room to cut them after lowering them to zero will not be “a one-time event,” he said.
Mr. Rosengren and his co-authors, Boston Fed economists Joe Peek and Geoffrey Tootell, ran an experiment that shows how a recession might affect states assuming a traditional monetary-policy response, in which the Fed could cut its short-term benchmark rate by 5 percentage points.
Then they looked at two other alternatives. In both scenarios, monetary policy couldn’t fully respond because the Fed had raised rates to only 2% before the hypothetical downturn. But in the last scenario, regulatory, state and local, and federal fiscal buffers were also depleted because they weren’t built up before the recession.
The results show, unsurprisingly, that the last scenario is the grimmest. But they also show that the effects are distributed unevenly across states—some fare much worse than others when the Fed can’t cut rates as it traditionally has.
States with industries that are sensitive to both the economic cycle and interest rates—think of Michigan, with its heavy dependence on the auto industry—could face a much worse downturn than Midwestern states that are heavy in agriculture, which is less exposed to a cyclical downturn.
Rates are low and debt is growing exponentially due to the recent tax cuts... going to be tough to pull out of an economic downturn.
Well, duh.
I'm bracing for it now. Getting all of my past debt in order, not adding new debt and saving cash. The next recession is going to be a long one. I have friends that are making major investments in expanding their businesses because they were in school during the last recession and don't understand the pain.
Every seminar I've been to and most academic stuff I've read has said to expect a recession around 2020. None, however, have predicted anything like the financial crises, etc.
(09-11-2018 09:11 AM)Marc Mensa Wrote: [ -> ]Rates are low and debt is growing exponentially due to the recent tax cuts... going to be tough to pull out of an economic downturn.
Let people keep more of their money and libs worry about the debt. Throw money at stupidity and the debt is not an issue.
(09-11-2018 09:50 AM)bearcat65 Wrote: [ -> ] (09-11-2018 09:11 AM)Marc Mensa Wrote: [ -> ]Rates are low and debt is growing exponentially due to the recent tax cuts... going to be tough to pull out of an economic downturn.
Let people keep more of their money and libs worry about the debt. Throw money at stupidity and the debt is not an issue.
Funny how that works isn't it?
I get to keep more of my hard earned money and suddenly the leftists become fiscal hawks.
Spend billions by increasing the numbers on food stamps or medicaid and it's nothing to see here, move along.
A recession is one thing we never had to worry about under Obama.... The economy would ACTUALLY have to be growing before that could happen.
Lets be honest here, the markets and economy was predicted to crash almost 22 months ago. I guess "we got lucky" because there's tons of predictions that it would already happen. A yahoo search on this topic
https://search.yahoo.com/search?p=if+tru...s&ei=UTF-8
Below is just one of them...but its funny how they see the future on if we get very lucky. Wow that was dead on 100% correct.
How President Donald Trump will wreck the world economy
Quote:Wednesday 9 November 2016
Hope for the best but prepare for the worst is a good motto in economics, as in much of life. It comes readily to mind when I think of what Donald Trump will do to the world economy.
If we’re lucky, the financial markets will take a Trump victory more or less in their stride. The dollar, as has been indicated for these many past weeks, will take a tumble, but otherwise the world will, hopefully, wait to find out precisely what Trump has planned. If we’re very lucky, Trumponomics – tax cuts, deregulation and protectionism – will stimulate enterprise, investment and job creation, put trade relations with the rest of the world on a fairer, more sustainable, footing, and, as they say, make America great again.
Things might not turn out like that. Perfectly plausible is that Trump's victory will instead prove the catalyst for the next financial crisis.
Ban the Fed!
The Federal Reserve should not exist.
All the more reason to vote Republican.
(09-11-2018 09:11 AM)Marc Mensa Wrote: [ -> ]Rates are low and debt is growing exponentially due to the recent tax cuts... going to be tough to pull out of an economic downturn.
Rates are low and debt is growing exponentially due to 40 years of congressional malpractice. Both sides of the aisle
They kept rates low for Obama for 8 years straight.
(09-11-2018 09:58 AM)umbluegray Wrote: [ -> ]Ban the Fed!
The Federal Reserve should not exist.
Disagree. Without the Fed, the monetary policy goes straight to the hands of the Treasury - overseen by an elected official. One thing I would NEVER want to see is for Trump to have control over the money supply. Based on how he talks, he would be the type of guy to seek full employment at all costs. IMHO, that would be a replay of the Richard Nixon/Arthur Burns scenario that significantly affected inflation in the 70s.
(09-11-2018 10:51 AM)miko33 Wrote: [ -> ] (09-11-2018 09:58 AM)umbluegray Wrote: [ -> ]Ban the Fed!
The Federal Reserve should not exist.
Disagree. Without the Fed, the monetary policy goes straight to the hands of the Treasury - overseen by an elected official. One thing I would NEVER want to see is for Trump to have control over the money supply. Based on how he talks, he would be the type of guy to seek full employment at all costs. IMHO, that would be a replay of the Richard Nixon/Arthur Burns scenario that significantly affected inflation in the 70s.
When you look at the last 8 years, it looks like the Fed is already politically motivated.
(09-11-2018 10:21 AM)Oman Wrote: [ -> ] (09-11-2018 09:11 AM)Marc Mensa Wrote: [ -> ]Rates are low and debt is growing exponentially due to the recent tax cuts... going to be tough to pull out of an economic downturn.
Rates are low and debt is growing exponentially due to 40 years of congressional malpractice. Both sides of the aisle
This is correct.
Wait a minute, wasn't the justification for creating the fed to stop things like this?
Raise the bleeping interest rates. They should've been raised years ago.
(09-11-2018 11:01 AM)Claw Wrote: [ -> ] (09-11-2018 10:51 AM)miko33 Wrote: [ -> ] (09-11-2018 09:58 AM)umbluegray Wrote: [ -> ]Ban the Fed!
The Federal Reserve should not exist.
Disagree. Without the Fed, the monetary policy goes straight to the hands of the Treasury - overseen by an elected official. One thing I would NEVER want to see is for Trump to have control over the money supply. Based on how he talks, he would be the type of guy to seek full employment at all costs. IMHO, that would be a replay of the Richard Nixon/Arthur Burns scenario that significantly affected inflation in the 70s.
When you look at the last 8 years, it looks like the Fed is already politically motivated.
I don't think so. Inflation remained very low during that 8 year span, and the Fed did what it thought was best to avoid deflation. These low interest rates would be a clear cut indicator of political motivation if they were fixed at an extremely low rate despite higher levels of inflation. That's what Nixon did during his terms in office. I see nothing like that in the past 8 years.
(09-11-2018 11:05 AM)EigenEagle Wrote: [ -> ]Wait a minute, wasn't the justification for creating the fed to stop things like this?
Raise the bleeping interest rates. They should've been raised years ago.
In theory - sure. In practice, nothing will run perfectly because we have dickheads that will try to game the system and be motivated by selfishness - aka all politicians we have ever had in the history of our republic. The point is that the Fed has some level of autonomy to resist a sitting president despite calls to the contrary.
You don't think that Carter and Reagan would have welcomed some credit loosening when Paul Volcker clamped down the money supply to fight inflation in the late 70s to early 80s?
(09-11-2018 11:01 AM)Claw Wrote: [ -> ] (09-11-2018 10:51 AM)miko33 Wrote: [ -> ] (09-11-2018 09:58 AM)umbluegray Wrote: [ -> ]Ban the Fed!
The Federal Reserve should not exist.
Disagree. Without the Fed, the monetary policy goes straight to the hands of the Treasury - overseen by an elected official. One thing I would NEVER want to see is for Trump to have control over the money supply. Based on how he talks, he would be the type of guy to seek full employment at all costs. IMHO, that would be a replay of the Richard Nixon/Arthur Burns scenario that significantly affected inflation in the 70s.
When you look at the last 8 years, it looks like the Fed is already politically motivated.
That's not by the Fed's choosing.
(09-11-2018 11:14 AM)VA49er Wrote: [ -> ] (09-11-2018 11:01 AM)Claw Wrote: [ -> ] (09-11-2018 10:51 AM)miko33 Wrote: [ -> ] (09-11-2018 09:58 AM)umbluegray Wrote: [ -> ]Ban the Fed!
The Federal Reserve should not exist.
Disagree. Without the Fed, the monetary policy goes straight to the hands of the Treasury - overseen by an elected official. One thing I would NEVER want to see is for Trump to have control over the money supply. Based on how he talks, he would be the type of guy to seek full employment at all costs. IMHO, that would be a replay of the Richard Nixon/Arthur Burns scenario that significantly affected inflation in the 70s.
When you look at the last 8 years, it looks like the Fed is already politically motivated.
That's not by the Fed's choosing.
I think you guys are blind.