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Thread: Wall Street's Rate Obsession

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    IMPress Polly's Avatar Senior Member
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    Wall Street's Rate Obsession

    Consumer confidence in the economy has been improving for a couple months now, rising this month (September 2022 for the historical record) by more than economists were expecting at that. You wouldn't know it though to look at the stock market, which is acting like the country is back on full lockdown. The disconnect here between Wall Street's perception of economic conditions and that of the actual public reminds me of last year, which was a banner year for stocks but one wherein most Americans lost money, only in reverse. Today, the financial aristocracy is panicking over good news for Main Street: wage growth is now tragically outpacing the rate of price hikes. Booooo!

    Seriously, month-on-month inflation has been flat since the early does of summer while wage growth has been less flat. The culprit the experts blame? The Federal Reserve and their dreaded interest rate hikes! Of course, about 5% has been the average historical rate of interest the Fed has charged the nation's banks, but the fact that it appears to headed back toward a similar rate -- back toward normal -- after 14 years of roughly zero appears to be cause for a full meltdown in their eyes. We keep hearing about a new recession. The inflation recession hit in the first half of the year, folks. (Remember those two back-to-back quarters of negative growth that happened to align with a marked dwindling of people's savings rates and increased bankruptcies and poverty?) The American consumer appears now on the rebound from it, in no small part owing to the Fed's actions to control inflation by limiting the money supply. It makes sense that a gradual return to a normal interest rate would tend to gradually return us to a more normal rate of inflation, does it not? I dunno, it seems to me like Wall Street is rooting for unusually high inflation these days. Maybe it's just me but that's how it strikes me.

    One of the lessons I've learned from the whole experience of the last two years is just how much inflation sucks and that, ya know what, sometimes you actually do have to just simply force people to quit draining their savings on $#@! they don't need out of fear that the price will be higher tomorrow when they need it. Being just an ordinary working person who doesn't own any stocks, I'm pretty happy to be paying substantially lower prices at the pump than I was a few months ago and view recent drops in both average home prices and rents very positively.

    Guess I'm just trying to say one more time, in one more way, that the interests of working class people aren't indeed always aligned with those of multinational business corporations. Most people view a more affordable cost of living at a 3.7% rate of unemployment as a good thing, ya know?
    Last edited by IMPress Polly; 09-28-2022 at 06:58 AM.

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    There's an odd switch in your narrative. You look at consumer confidence as a measure of what people feel. OK. But then you see Wall Street as some aristocracy when in fact all it is is people like you and me buying and selling stocks and bonds etc, iow, people again. The only elite agency in the bunch is the Fed whose only tool is a hammer, so to speak, trying to ease or restrict the flow of money through borrowing rates. There's no oppressor, no oppressed to be found. There are no culprits. Marx is dead. There are only those who participate and those who do not.

    Inflation flat sounds like Biden and misunderstand even flat the cost of things is rising, hence inflation, only the rate of rise is flat.
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    Quote Originally Posted by IMPress Polly View Post
    Consumer confidence in the economy has been improving for a couple months now, rising this month (September 2022 for the historical record) by more than economists were expecting at that. You wouldn't know it though to look at the stock market, which is acting like the country is back on full lockdown. The disconnect here between Wall Street's perception of economic conditions and that of the actual public reminds me of last year, which was a banner year for stocks but one wherein most Americans lost money, only in reverse. Today, the financial aristocracy is panicking over good news for Main Street: wage growth is now tragically outpacing the rate of price hikes. Booooo!

    Seriously, month-on-month inflation has been flat since the early does of summer while wage growth has been less flat. The culprit the experts blame? The Federal Reserve and their dreaded interest rate hikes! Of course, about 5% has been the average historical rate of interest the Fed has charged the nation's banks, but the fact that it appears to headed back toward a similar rate -- back toward normal -- after 14 years of roughly zero appears to be cause for a full meltdown in their eyes. We keep hearing about a new recession. The inflation recession hit in the first half of the year, folks. (Remember those two back-to-back quarters of negative growth that happened to align with a marked dwindling of people's savings rates and increased bankruptcies and poverty?) The American consumer appears now on the rebound from it, in no small part owing to the Fed's actions to control inflation by limiting the money supply. It makes sense that a gradual return to a normal interest rate would tend to gradually return us to a more normal rate of inflation, does it not? I dunno, it seems to me like Wall Street is rooting for unusually high inflation these days. Maybe it's just me but that's how it strikes me.

    One of the lessons I've learned from the whole experience of the last two years is just how much inflation sucks and that, ya know what, sometimes you actually do have to just simply force people to quit draining their savings on $#@! they don't need out of fear that the price will be higher tomorrow when they need it. Being just an ordinary working person who doesn't own any stocks, I'm pretty happy to be paying substantially lower prices at the pump than I was a few months ago and view recent drops in both average home prices and rents very positively.

    Guess I'm just trying to say one more time, in one more way, that the interests of working class people aren't indeed always aligned with those of multinational business corporations. Most people view a more affordable cost of living at a 3.7% rate of unemployment as a good thing, ya know?
    Or put it this way. Since the IRA became popular and pushed everyman into the market the percentage of wealth held at the top has grown. That has also happened during COVID and it can happen during "adjustments".
    In fact the rich fare better in hard times than the rest of us

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    Sadly people think short term like this.

    If you are a flood victim and the water levels out at 10 ft over your house and then stays there, should you say everything is great? What if it drops 5 feet so it is only 5 ft over your house? Better yet!

    Don't be satisfied with inflation leveling out. This is almost all created by Biden's anti-Fossil Fuel agenda and can be reversed. The problem is that it will take longer to reverse than it took him to break it.

    Median US income is not up from 2019 at last check. This is just the Biden game of comparing everything to COVID where median income actually dropped.

    The media is providing an illusion. We were much better off in 2019 including the 4-1/2 more million people in the workforce.
    Last edited by carolina73; 09-28-2022 at 10:43 AM.
    Let's go Brandon !!!

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    Quote Originally Posted by IMPress Polly View Post
    Consumer confidence in the economy has been improving for a couple months now, rising this month (September 2022 for the historical record) by more than economists were expecting at that. You wouldn't know it though to look at the stock market, which is acting like the country is back on full lockdown. The disconnect here between Wall Street's perception of economic conditions and that of the actual public reminds me of last year, which was a banner year for stocks but one wherein most Americans lost money, only in reverse. Today, the financial aristocracy is panicking over good news for Main Street: wage growth is now tragically outpacing the rate of price hikes. Booooo!

    Seriously, month-on-month inflation has been flat since the early does of summer while wage growth has been less flat. The culprit the experts blame? The Federal Reserve and their dreaded interest rate hikes! Of course, about 5% has been the average historical rate of interest the Fed has charged the nation's banks, but the fact that it appears to headed back toward a similar rate -- back toward normal -- after 14 years of roughly zero appears to be cause for a full meltdown in their eyes. We keep hearing about a new recession. The inflation recession hit in the first half of the year, folks. (Remember those two back-to-back quarters of negative growth that happened to align with a marked dwindling of people's savings rates and increased bankruptcies and poverty?) The American consumer appears now on the rebound from it, in no small part owing to the Fed's actions to control inflation by limiting the money supply. It makes sense that a gradual return to a normal interest rate would tend to gradually return us to a more normal rate of inflation, does it not? I dunno, it seems to me like Wall Street is rooting for unusually high inflation these days. Maybe it's just me but that's how it strikes me.

    One of the lessons I've learned from the whole experience of the last two years is just how much inflation sucks and that, ya know what, sometimes you actually do have to just simply force people to quit draining their savings on $#@! they don't need out of fear that the price will be higher tomorrow when they need it. Being just an ordinary working person who doesn't own any stocks, I'm pretty happy to be paying substantially lower prices at the pump than I was a few months ago and view recent drops in both average home prices and rents very positively.

    Guess I'm just trying to say one more time, in one more way, that the interests of working class people aren't indeed always aligned with those of multinational business corporations. Most people view a more affordable cost of living at a 3.7% rate of unemployment as a good thing, ya know?
    Are you seriously trying to paint a rosy picture about our current state of inflation? Surely you can't be serious. I thought you worked at a grocery store, do you not pay attention to the prices? You think people don't know that they're paying double for groceries right now? Good grief Charlie Brown.
    Cutesy Time is OVER

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    Quote Originally Posted by carolina73 View Post
    Sadly people think short term like this.

    If you are a flood victim and the water levels out at 10 ft over your house and then stays there, should you say everything is great? What if it drops 5 feet so it is only 5 ft over your house? Better yet!

    Don't be satisfied with inflation leveling out. This is almost all created by Biden's anti-Fossil Fuel agenda and can be reversed. The problem is that it will take longer to reverse than t took him to break it.

    Median US income is not up from 2019 at last check. This is just the Biden game of comparing everything to COVID where median income actually dropped.

    The media is providing an illusion. We were much better off in 2019 including the 4-1/2 more million people in the workforce.
    Your flood analogy is excellent.
    Cutesy Time is OVER

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    Quote Originally Posted by countryboy View Post
    Are you seriously trying to paint a rosy picture about our current state of inflation? Surely you can't be serious. I thought you worked at a grocery store, do you not pay attention to the prices? You think people don't know that they're paying double for groceries right now? Good grief Charlie Brown.
    No, I think she's repeating, in her last, concluding paragraph, the old Marxian platitude that corporations are oppressing the workers.
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    Quote Originally Posted by Chris View Post
    No, I think she's repeating, in her last, concluding paragraph, the old Marxian platitude that corporations are oppressing the workers.
    You read to the end? I don't have that kind of free time on my hands.
    Cutesy Time is OVER

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    Quote Originally Posted by countryboy View Post
    You read to the end? I don't have that kind of free time on my hands.
    LOL. I'm retired with time to waste I guess.
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    Quote Originally Posted by IMPress Polly
    The disconnect here between Wall Street's perception of economic conditions and that of the actual public reminds me of last year, which was a banner year for stocks but one wherein most Americans lost money, only in reverse.
    The disconnect is because Biden stimulated an economy that was already doing well, effectively overheating it and causing both wage and price inflation.

    Quote Originally Posted by IMPress Polly
    Today, the financial aristocracy is panicking over good news for Main Street: wage growth is now tragically outpacing the rate of price hikes.
    Overall unweighted wage growth is at 6.7%, but overall inflation is at 8.3%. That means people are losing ground in actual fact.

    Quote Originally Posted by IMPress Polly
    Seriously, month-on-month inflation has been flat since the early does of summer while wage growth has been less flat.
    Sadly, you've fallen for Biden's rhetoric. The rate of change has been flat, meaning it is not getting worse, but the rate is around 8.3% annualized. That's not good.

    Quote Originally Posted by IMPress Polly
    The Federal Reserve and their dreaded interest rate hikes! Of course, about 5% has been the average historical rate of interest the Fed has charged the nation's banks, but the fact that it appears to headed back toward a similar rate -- back toward normal -- after 14 years of roughly zero appears to be cause for a full meltdown in their eyes.
    All of the financing for the last 14 years has been at very low rates of interest. Higher rates of interest means that projects that require financing must be able to service higher debt costs. That means less will get funded for awhile, and that is often a cause of recession.

    Quote Originally Posted by IMPress Polly
    We keep hearing about a new recession. The inflation recession hit in the first half of the year, folks. (Remember those two back-to-back quarters of negative growth that happened to align with a marked dwindling of people's savings rates and increased bankruptcies and poverty?)
    We have an inverted yield curve. That means short term rates are higher than long term rates. When that happens, projects that require long-term financing do not get funded. That tends to result in recession. It's about 80% reliable for a future recession. So the debt markets are signaling recession.

    Quote Originally Posted by IMPress Polly
    Most people view a more affordable cost of living at a 3.7% rate of unemployment as a good thing, ya know?
    Part of the unemployment rate--and this will persist for awhile--is that Baby Boomers are at retirement age. People are leaving the workforce and never coming back. That's nice if you have skills and are looking for a job, but it's difficult if you're looking to hire. My supervisor was killed in a car accident last December, and last month we finally brought on someone qualified to fill the role. That's not a great thing for business.

    Quote Originally Posted by carolina73
    This is almost all created by Biden's anti-Fossil Fuel agenda and can be reversed. The problem is that it will take longer to reverse than it took him to break it.
    Energy is a big part of it, but all the stimulus money is what's driving prices higher. It was unneeded, obviously. It was just done to try and buy votes, because Trump got 12M more votes in 2020 than in 2016, and the establishment is in a panic about this. As Margaret Thatcher once said, the problem with socialism is that eventually you run out of other people's money. That's where we are now. I think people need to look at a broader view of this too. Europe is in serious trouble, because of their reliance on Russian gas. Many of us--me, Donald Trump, and others--have warned about the geopolitical risk of this trade. If Germany was serious about global warming, it should never have shut down it's nuclear power plants in favor of Russian gas. Germany is the fourth largest economy in the world, and it will be on its knees this winter. The Euro is worth less than one dollar right now, and the British Pound, which has traded from $1.50-2.40 per pound is now at $1.07. That's wonderful for exports, but rising export demand and the need for imported inputs are both inflationary when the currency is weak.

    I think the stock market has another leg down. We might get a short term bounce, but with an inverted yield curve and rising rates, the markets are signalling recession.

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