Soft Landing

[Van]

One reason given by the media pundits for the slow interest rate increases (3/4 percent several times a year) is they do not want to "over-correct" and cause an unnecessarily deep recession. There is probably no way to avoid the consequence of run-a-way inflation, where the buy and borrow now to minimize future loss runs rampant.

The way to create a soft landing would be for the powers that be to raise Certificates of Deposit Interest rates to match or nearly match the inflation rate, so rather than the 2-4 % rates now available, if they were 7-8%, excess money would flow into savings.

Bottom line, Mortgage rates need to be above the inflation rate, and CD rates close to the inflation rate to end the spiral.

 

[canadyjd]

One reason given by the media pundits for the slow interest rate increases (3/4 percent several times a year) is they do not want to "over-correct" and cause an unnecessarily deep recession. There is probably no way to avoid the consequence of run-a-way inflation, where the buy and borrow now to minimize future loss runs rampant.

The way to create a soft landing would be for the powers that be to raise Certificates of Deposit Interest rates to match or nearly match the inflation rate, so rather than the 2-4 % rates now available, if they were 7-8%, excess money would flow into savings.

Bottom line, Mortgage rates need to be above the inflation rate, and CD rates close to the inflation rate to end the spiral.

The national debt is 31 trillion. The taxpayers are charged 100’s of billions of interest every year on that debt. Raise the interest rates and that amount explodes, sort of like an adjustable rate mortgage.

There will be no “soft landing”. It will be a miracle if all that happens is a deep recession but more likely a currency collapse and a long depression.

The technical term for this situation is we are in deep dodo.

peace to you

 

[Van]

The national debt is 31 trillion. The taxpayers are charged 100’s of billions of interest every year on that debt. Raise the interest rates and that amount explodes, sort of like an adjustable rate mortgage.

There will be no “soft landing”. It will be a miracle if all that happens is a deep recession but more likely a currency collapse and a long depression.

The technical term for this situation is we are in deep dodo.

peace to you

It seems to me you did not study the Reagan recovery for Carter's inflation. Your claims seem baseless to me.

 

[Van]

Fed Hikes, using the "Stick" which is too little too late and no one using the "Carrot" of robust CD rates, which should be above 6% by now.

Nov 2, 2022 +.75
Sept 21, 2022 + .75
July 27, 2022 + .75
June 16, 2022 + .75
May 5, 2022 + .50
March 17, 2022 + .25

 

[canadyjd]

It seems to me you did not study the Reagan recovery for Carter's inflation. Your claims seem baseless to me.

When Reagan was elected the total national debt was less than 1 trillion. The tax cuts and deregulation generated more income into the US treasury by several hundred billion a year. The Dems controlled congress and spent it all plus more.

The republicrats (Dems and repubs) operate on a “baseline budget”. That means they will always spend more each year than the year before. It cannot be less and with many programs tied to inflation it will always be more.

It is unsustainable. Eventually, the economy will collapse under this system.

BTW, no economist I’ve heard thinks the fed is raising rates slowly. 3/4 of a % every quarter is a steep increase.

And again, when the rates go up, the service on 31 trillion in debt goes up.

peace to you

 

[Salty]

The national debt is 31 trillion. The taxpayers are charged 100’s of billions of interest every year on that debt. ...

The interest on the public debt for fiscal year 2021 is estimated to be $413 billion, according to the Congressional Budget Office (CBO).4

Info for this link found here

That makes the amount due per person - about $1500 dollars

 

[canadyjd]

The interest on the public debt for fiscal year 2021 is estimated to be $413 billion, according to the Congressional Budget Office (CBO).4

Info for this link found here

That makes the amount due per person - about $1500 dollars

Thanks for the info. 400+ billion in interest alone added to the debt. That amount will only go up as interest rates rise and additional deficit spending continue unabated.

Peace to you

 

[Salty]

Exactly - paying interest on interest

 

[Van]

When Reagan was elected the total national debt was less than 1 trillion. The tax cuts and deregulation generated more income into the US treasury by several hundred billion a year. The Dems controlled congress and spent it all plus more.

The republicrats (Dems and repubs) operate on a “baseline budget”. That means they will always spend more each year than the year before. It cannot be less and with many programs tied to inflation it will always be more.

It is unsustainable. Eventually, the economy will collapse under this system.

BTW, no economist I’ve heard thinks the fed is raising rates slowly. 3/4 of a % every quarter is a steep increase.

And again, when the rates go up, the service on 31 trillion in debt goes up.

peace to you

A lot of non-germane verbiage. The idea is the CD rates should be increased to the inflation rate to help soften the landing. All this "the Republicans are also to blame" obfuscation is beside the point.

 

[canadyjd]

A lot of non-germane verbiage. The idea is the CD rates should be increased to the inflation rate to help soften the landing. All this "the Republicans are also to blame" obfuscation is beside the point.

Raising interest rates on CD’s (certificate of deposits not songs) will encourage savings for those with disposable income (income you don’t necessarily need to survive month to month. Inflation makes such income rare.

That will take money out of the economy, in theory less money spent in the economy lowers demands, which cuts manufacturing, which causes layoffs, which leads to higher unemployment, which leads to fewer people with deposable income.

Having lived at a time with interest rates above 10% for an extended period, I can say it didn’t result in a soft landing.

Additionally, you cannot divorce federal monetary policies with ever increasing debt and spending from this reality.

The federal fiscal policy has been corrupted over the last 30 years with both parties seeking nothing more than delay the inevitable economic carnage which is coming in order to maintain power for another election cycle. The bill is coming due. The economy will collapse if fiscal sanity isn’t restored.

Hoping for a “soft landing” with 8% CD rates will not help.

peace to you

 

[Van]

Raising interest rates on CD’s (certificate of deposits not songs) will encourage savings for those with disposable income (income you don’t necessarily need to survive month to month. Inflation makes such income rare.

That will take money out of the economy, in theory less money spent in the economy lowers demands, which cuts manufacturing, which causes layoffs, which leads to higher unemployment, which leads to fewer people with disposable income.

Having lived at a time with interest rates above 10% for an extended period, I can say it didn’t result in a soft landing.

Additionally, you cannot divorce federal monetary policies with ever increasing debt and spending from this reality.

The federal fiscal policy has been corrupted over the last 30 years with both parties seeking nothing more than delay the inevitable economic carnage which is coming in order to maintain power for another election cycle. The bill is coming due. The economy will collapse if fiscal sanity isn’t restored.

Hoping for a “soft landing” with 8% CD rates will not help.

peace to you

LOL, your reasoning is unsound.

When people put money into savings rather than spending, it cools the economy by reducing demand. Those that have money during inflation must either spend it or lose it as it will be worth less over time. Thus inflation fuels inflation.

Discretionary spending is what is curtailed by high CD rates, thus a softer landing by reducing that source of spending.

 

[canadyjd]

LOL, your reasoning is unsound.

When people put money into savings rather than spending, it cools the economy by reducing demand. Those that have money during inflation must either spend it or lose it as it will be worth less over time. Thus inflation fuels inflation.

Discretionary spending is what is curtailed by high CD rates, thus a softer landing by reducing that source of spending.

So, exactly what are you looking for the fed to do? Raise rates to 10% immediately?

peace to you

 

[Van]

So, exactly what are you looking for the fed to do? Raise rates to 10% immediately?

peace to you

I think we should define what interest rates need to be raised, mortgage rates or CD rates. I am talking about CD rates to incentivize saving versus spending in the private sector.

Of course the Federal Government needs to stop fueling the inflation fire by discretionary spending. Fat chance with the fire-starters still in power. A better name would be the inflation production act, to name one.

 

[canadyjd]

I think we should define what interest rates need to be raised, mortgage rates or CD rates. I am talking about CD rates to incentivize saving versus spending in the private sector.

Of course the Federal Government needs to stop fueling the inflation fire by discretionary spending. Fat chance with the fire-starters still in power. A better name would be the inflation production act, to name one.

Well, my understanding is all interest rates are based on the Fed reserve interest rate, currently 3.75% to 4.25%. That is what it costs banks to borrow money from the fed.

So, banks, financial institutions borrow money from the fed at that rate and loan that money to businesses or consumers at a higher rate.

It makes no sense for banks to give CD rates above what they they have to pay to borrow the money.

peace to you

 

[Van]

Well, my understanding is all interest rates are based on the Fed reserve interest rate, currently 3.75% to 4.25%. That is what it costs banks to borrow money from the fed.

So, banks, financial institutions borrow money from the fed at that rate and loan that money to businesses or consumers at a higher rate.

It makes no sense for banks to give CD rates above what they they have to pay to borrow the money.

peace to you

Sorry, but economics 101 does not seem to be your strength. If I get "A" to put money in my bank at 8% saving rate, and then loan that money to "B" at 10% it makes cents and dollars too.

 

[canadyjd]

Sorry, but economics 101 does not seem to be your strength. If I get "A" to put money in my bank at 8% saving rate, and then loan that money to "B" at 10% it makes cents and dollars too.

I got straight “A’” in eco 101 and 201.

Thanks for the conversation

peace to you