The Wall Street Journal has a good roundup of higher interest rates today:
The Federal Reserve’s federal-funds rate averaged 0.5% from 2009 through 2021. Today it is between 5.25% and 5.5% and markets think it will be around 3.5% for the next decade. As yet, this has caused little distress. Growth is chugging along, and even the interest-sensitive housing sector seems to have a second wind.
The effects will come; just wait.
The whole piece is worth a read. It goes through households, commercial borrowers, real estate, and other segments of the economy and explains how high interest rates are slowly but surely having an effect. It's a very ground level view of how and why interest rate hikes take a while to work their way through the economy.
They haven't yet, but they will. Just wait.
You mean housing costs are going to squeeze out everything else? It's not just the price of a home, but the mortgage payments that matter. At least now we don't seem to have to worry as much about ballooning payments--though it might feel like that is happening:
https://www.pbs.org/newshour/nation/monthly-mortgage-payments-remain-high-even-as-u-s-home-prices-ease
(no, did not read WSJ article)
It might be worth it but it isn’t worth subscribing to a Murdoch paper.
You don't need to. Read it here.
You know, Milton Friedman thought it dubious that there'd be a very long lag for rates to wind through the economy.
The WSJ warning -- "just you wait and see, it'll come true!" -- comes with a very important proviso: The Fed rate must remain elevated for years.
So, we've gone from Romer's "it'll take a year or so" to WSJ's "in a few more years".
Did I get that right?
I believe that the argument is that peak impact on prices is around 12 months (+/- several months) and peak impact on GDP and employment is around 18 months (+/- several months).
This is not inconsistent with the WSJ article which makes the point that additional impacts may be felt beyond 18 months. The article highlights the large volume of refinancing that occurred during 2020/21 which may also push the peak impacts back a bit.
Given the rapid change in inflation over the last several months and the fact that we are still approaching the average peak impact on GDP/employment.....the original estimates (averages) dont appear to be obviously wrong.
If it's costing Peter it's gotta be benefiting Paul, right? So who is Peter and who is Paul?
I was going to buy a car and it was a great deal. But the interest rate was 6.5%. So I didn't buy a car. I could have paid cash for it after trade in etc. But why? I don't really need a car and the government doesn't want me to spend money.
So yeah! I did my part.
The Proles haven't suffered. And they need to suffer. It is ordained.
*sigh* this old shit again.
"They haven't yet, but they will. Just wait."
They already have had most of their effect, and they had an effect starting immediately when rates when raised. It might take "a while" to fully work through, but the lion's share of the impact of each increase was felt within just a few months.
Please stop with this garbage about how they haven't done anything yet but there's a head-on collision with them on the horizon. Haven't you been saying that for 8 damn months now?