This is probably just a coincidence:
But then again, it does make you scratch your chin and go "hmmm," doesn't it?
21 thoughts on “When does the Fed hike interest rates?”
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Cats, charts, and politics
Cats, charts, and politics
This is probably just a coincidence:
But then again, it does make you scratch your chin and go "hmmm," doesn't it?
Comments are closed.
It’s partially because republicans fuck everything up so badly that their presidencies usually end with recessions, and partially because democrats fix everything again so the economy overheats again.
But also economists really hate poor and middle class people having “too much” money. Endless spigots of cash are only worry-free for the rich.
Yeah, this. When Republicans blow up the economy, the fed has to lower rates.
Right. To some degree it's a measure of who's running a good economy which needs to be reigned in, and who is sinking the Titanic and needs to be saved with lower rates.
Why the Dems don't run on "want prosperity? Vote Dem" I'll never know...
Right. And one can be a little more specific. Republican presidents (certainly the ones on Kevin's graph) gave irresponsible tax cuts, and the Fed had to clean up after with tighter monetary policy.
Interest rates soared in Reagan's first term
Actually, they were high, but they were coming down from the Fed's f--k Carter blast. Interest rates really soared in late 1979 and into 1980. I managed to snare a 12.25% mortgage, but a friend of mine got stuck with one at 19%. The recession this induced got Reagan elected.
The Fed has made it hard to run on a prosperity platform. Any sign of broad range prosperity is something that has to be squelched and damn the consequences. Each time the economy grows there is a bigger backlog of economic forces, so even very modest rises in living standards cause a surprising level of inflation that has to be eliminated ruthlessly.
It was clear after Carter for heaven's sakes. Sure they wish they could have gotten away with more for Clinton and Obama. Looks like they'll try to make up for lost time with Biden now. Capitalism. You can't shake a stick at it.
The chart, while accurate, perhaps obscure context: I believe looking at inflation, by year, to be an interesting addition by commenting on Fed policy.
https://www.macrotrends.net/countries/USA/united-states/inflation-rate-cpi
When you examine the data, including inflation, the only period (to my eyes) that seems questionable is the George W Bush presidency. Stated differently, the Fed changes under the other Presidents, show above, seem kind of reasonable...
That's because the Fed dropped notably rates despite credit markets still expansion with collapsing lending standards. It was a bust in nonres investment after Y2k and corporate balance sheet tidying, created a very mild recession.
Sometimes, higher mortgage rates can lead to future bubbles if banks kill standards like in 2001. It's effect on investment is secondary. Most people still don't get it.
As others have observed, Democrats usually oversee periods of robust economic expansion, requiring rate hikes. Republicans generally trigger economic crises, usually with idiotic tax cuts and deregulation, requiring the fed to step in and save our asses.
The public remembers none of this, of course, which is why Republicans are still the party of fiscal responsibility, for some reason.
The public -- as advised by the news industry, which seems to be in the can for the Republican Party. Note how all we're hearing about is "inflation!", "gasoline prices", the DJI S&P and NASDAQ and -- what happened to "baby formula"? Well, Biden solved that, so it's a non-story and shouldn't even be acknowledged, let alone covered. Ditto for the robust job market. Oh, and the miraculously successful evacuation of Afghanistan after a rough start.
No wonder Americans don't know anything.
Sigh. Yes, the so-called Eourth Estate fails often and vigorously, one might even say enthusiastically. But at some point our educational system has going to have to inculcate a more questioning public. As well as an attitude to find out the answers to those questions fo themselves.
I suspect it's because human nature is to click on the CRISIS and nobody likes bad news more than conservatives since it validates their world view that everything is going to hell in hand basket.
Trump famously bullied Powell into *not* raising rates when "his" economy was the best ever and now, of course, the bill must be paid.
These variances are all justified and explained by the fundamentals prevailing during the administrations in question. Carter presided over rising (sharply so in the second half of his term) inflation. You'd expect to see rates go up. Reagan presided over a blistering recession. You'd expect to see rates decline. The first Bush inherited a fairly strong economy that proceeded to weaken over the course of his tenure (slipping into recession at about the halfway mark). You'd thus expect rates to head downwards. And so on.
Yesterday, the headline was that the market loved the interest rate increase. Today, they hate it....
Fear and greed. That's what drives the market.
Lets also note the Fed fund rate should be 2.5-3.5% based on availability of capital. So much for high rates.
I do think there was some shenanigans by Greenspan, or just plain blinded by his own biases.
Governors of the Federal Reserve are presidential appointees no? For each of those rate changes tied to the different presidents, how many of the Governors were appointed by which presidents leading to that time?
There might be some elements of causation: Democratic policies lean toward giving the working class more benefits and freedom; Trumpublican policies lean toward taking benefits and freedom away from the working class.
And the former tends to increase consumption -- give a working man an extra buck, and he'll spend it -- while the former does the opposite.
Yes, the Trumpublicans like to give the wealthy more money and freedom, but probably the main purpose of that is to bankrupt the government so it can't afford to do anything for the working class. And the wealthy tend not to spend any additional money they get, at least not to the degree that the working class does.
Anyway, the upshot is that Democratic policies tend to increase demand, and therefore inflation, which generally causes the Fed to raise interest rates; Trumpublican policies don't have that effect.