Should the FED do rate hikes? (US)

[Independent voter]

The median personal income in the US is only 26k a year. Even .25% is a lot sucky for a lot of people.

the median household income is at $50,500

[Gheld]

I'm not saying 0% interest is a good thing. I'm just pointing out the fact that predatory lending practices combined with poor fiscal education have ensured that when they go back up its going to hurt

[Gamdwelf]

the median household income is at $50,500

Personal vs household

- - - Updated - - -

Also they left rates the same.

[The3rdCatalyst]

http://www.marketwatch.com/story/in-...me_latest_news

"The following are selected highlights of the press conference of Federal Reserve Chairwoman Janet Yellen after the central bank’s decision not to increase interest rates.

On whether the Fed could hike next month: “So as I’ve said before, every meeting is a live meeting where the committee can make a decision to move to change our target for the federal funds rate. That certainly includes October. As you know and I’ve stressed previously, were we to decide to do that, we would call a press briefing and you’ve participated in an exercise to make sure that you would know how to participate in that press briefing, should it happen.”

On what it would take for the Fed to hike: “To be clear, our decision will not hinge on any particular data release. Or on day-to-day movements in financial markets. Instead, the decision will depend on a wide range of economic and financial indicators. And our assessment of their cumulative implications for actual and expected progress towards our objectives.”

On why inflation is running under its 2% target: ”An important reason for that is that declines in import prices reflecting the appreciation of the dollar and declines in energy prices [that] are holding down inflation well below our target and well below core inflation. We expect those effects to be transitory and with well anchored inflation expectations we expect inflation to move back to 2%. Now in the intermeeting period, we have seen some further appreciation of the dollar and some further downward pressure on energy prices. And that creates a bit of further drag on inflation that I would view as transitory, as very likely to be transitory. So I continue and the committee continues to expect that inflation will move back to 2%. So this should be a small thing and in the meantime the labor market has continued to improve.”

On why markets have been volatile: “I think developments that we saw in financial markets in August in part reflected concerns that there was downside risk to Chinese economic performance and perhaps concerns about the gaps where policymakers were addressing those concerns, in addition we saw a very substantial downward pressure on oil prices in commodity markets. And those developments have had a significant impact on many emerging market economies that are important producers of commodities as well as more advanced countries including Canada which is an important trading partner of ours that’s been negatively affected by declining commodity prices, declining energy prices.”

On whether the Fed considered negative interest rates, as one participant called for: “So let me be clear that negative interest rates was not something that we considered very seriously at all today. It was not one of our main policy options.”

On whether the Fed has furthered income inequality with low interest rates: “The main thing that an accommodative monetary policy does is put people back to work. Since income inequality is surely exacerbated by having a high unemployment and a weak job market, that has the most profound negative effects on the most vulnerable individual. To me, putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that’s not something that increases income inequality.”

[buck008]

I thought the current interest rate was at 3.25%? Best I can tell, that's the current number.

[Hooked]

If the fed raises the rates what happens to the interest on the national debt?.

[Grummgug]

Western economies suffer from the fallacy of the false dilemma. That is, we are presented with two options and ignore a third option that is better.

The mainstream press wants us to think there is only two ways to fix the economy:

1. cut interest rates to zero (known as stimulus)
2. cut debt (known as austerity)

If you are ignorant about economics, you might actually fall for this. Both of these solutions have problems.

1. cutting interest rates just warps the economy. It punishes savers needlessly and forces them to take risk they probably shouldn't take. That creates bubbles in assets that will pop when rates rise later.
2. cutting debt is deflationary. It helps shore up the balance sheet but you can slide into a very nasty depression if you cut debt when the economy is barely viable.

But the whole thing is a fallacy (as I said from the start). If I was elected president, I could fix the economy tomorrow and create a fantastic boom with loads of high paying jobs and nice interest rates. The plan is to cut regulations on businesses. This was the Carter/Reagan plan from the late 70s/early 80s. They slashed and burned regulations, which gave businesses massive incentive to spend money to grow. That they did, in all kinds of sectors, and in turn in created lots of high paying jobs. Its a massive stimulus that would ALSO allow the government to raise rates safely.

Make me president and I could get us 5% annual growth, loads of new high paying jobs, and an interest rate at 5% in a few years. Its easy. But modern world leaders are idiots.

[buck008]

Western economies suffer from the fallacy of the false dilemma. That is, we are presented with two options and ignore a third option that is better.

The mainstream press wants us to think there is only two ways to fix the economy:

1. cut interest rates to zero (known as stimulus)
2. cut debt (known as austerity)

If you are ignorant about economics, you might actually fall for this. Both of these solutions have problems.

1. cutting interest rates just warps the economy. It punishes savers needlessly and forces them to take risk they probably shouldn't take. That creates bubbles in assets that will pop when rates rise later.
2. cutting debt is deflationary. It helps shore up the balance sheet but you can slide into a very nasty depression if you cut debt when the economy is barely viable.

But the whole thing is a fallacy (as I said from the start). If I was elected president, I could fix the economy tomorrow and create a fantastic boom with loads of high paying jobs and nice interest rates. The plan is to cut regulations on businesses. This was the Carter/Reagan plan from the late 70s/early 80s. They slashed and burned regulations, which gave businesses massive incentive to spend money to grow. That they did, in all kinds of sectors, and in turn in created lots of high paying jobs. Its a massive stimulus that would ALSO allow the government to raise rates safely.

Make me president and I could get us 5% annual growth, loads of new high paying jobs, and an interest rate at 5% in a few years. Its easy. But modern world leaders are idiots.

You're kind of ignoring the fact that it didn't work. Reagan saw an increase of about 1% in total GDP over the course of his presidency with higher unemployment than Carter, whose presidency is widely regarded as a disaster. The amount of Americans living in poverty increased as well. He actually raised taxes on the highest income Americans. The cutting of regulations made rich people very rich, but it never translated to more or better jobs, lower consumer costs, or an increase in the quality of life for most Americans. This was the start of the disappearance of the American middle class and the ever widening gap between the rich and the poor.

The only actual way to improve the economy is to put more money in the hands of more people through higher and stable wages and supporting the middle class. This raises demand for products across the board and allows consumers to spend more freely, which makes those businesses very rich. The masses will spend. The top will not necessarily reinvest that money into their company and create more jobs. In practice, in fact, they do not.

[Grummgug]

You're kind of ignoring the fact that it didn't work. Reagan saw an increase of about 1% in total GDP over the course of his presidency with higher unemployment than Carter, whose presidency is widely regarded as a disaster. The amount of Americans living in poverty increased as well. He actually raised taxes on the highest income Americans. The cutting of regulations made rich people very rich, but it never translated to more or better jobs, lower consumer costs, or an increase in the quality of life for most Americans. This was the start of the disappearance of the American middle class and the ever widening gap between the rich and the poor.

The only actual way to improve the economy is to put more money in the hands of more people through higher and stable wages and supporting the middle class. This raises demand for products across the board and allows consumers to spend more freely, which makes those businesses very rich. The masses will spend. The top will not necessarily reinvest that money into their company and create more jobs. In practice, in fact, they do not.

Those are some awful stats you have there. The economy was a disaster in the 1970s and it drastically improved in the 1980s. Inflation was out of control in the 1970s and government's answer was more and more controls which just kept breaking the economy more. It wasn't until they cut regulations that the economy could heal itself.

[Mark01gt]

The US has had 0% interest for over 7 years. If we had rate hikes it would give evidence that the economy is doing well. There is some other evidence that things are okay, like low unemployment, but the counter argument is that those are low paying jobs which were added since 2008.

In general, is the US economy doing well or is it healthy enough to start adding interest again?

Most of the jobs added since 2008 are low paying fast food jobs and or part time jobs. I've seen mcdonalds and taco bell restaurants flying up all over the place, but hardly any office jobs or factory jobs being added. I think the fact that there's a record number of people on food stamps is a sign that we aren't doing that well. But let's elect another Dem in 2016.

[buck008]

Those are some awful stats you have there. The economy was a disaster in the 1970s and it drastically improved in the 1980s. Inflation was out of control in the 1970s and government's answer was more and more controls which just kept breaking the economy more. It wasn't until they cut regulations that the economy could heal itself.

It briefly corrected and then it got worse. The dot com bubble is what ultimately righted the ship and that had nothing to do with politics.

[The3rdCatalyst]

Those are some awful stats you have there. The economy was a disaster in the 1970s and it drastically improved in the 1980s. Inflation was out of control in the 1970s and government's answer was more and more controls which just kept breaking the economy more. It wasn't until they cut regulations that the economy could heal itself.

The same could be said about the great depression. There was a depression in 1921 but was quickly correct from the free market and unregulation. In 1929 the great depression was attempted to be solved with social policies which only put us deeper in debt with inflation and spending. We only go out of it with trade and manufacturing but also lessened the amount of social welfare. Once WWII ended we did not put the social welfares back in place.

I believe the amount of inflation we have in the US plus the high amounts of social welfare is keeping us from having a recovery. But no one will go for that because... I don't know why. Am I missing something? It seems that is it a significant trend with these variables.

[buck008]

The same could be said about the great depression. There was a depression in 1921 but was quickly correct from the free market and unregulation. In 1929 the great depression was attempted to be solved with social policies which only put us deeper in debt with inflation and spending. We only go out of it with trade and manufacturing but also lessened the amount of social welfare. Once WWII ended we did not put the social welfares back in place.

I believe the amount of inflation we have in the US plus the high amounts of social welfare is keeping us from having a recovery. But no one will go for that because... I don't know why. Am I missing something? It seems that is it a significant trend with these variables.

Actually, FDR's massive social program expansion got people working and helped the economy tread water until World War II. In fact, Hoover attempt to let the market correct itself and that didn't particularly work out for him. Manufacturing weapons, food, vehicles, etc for the Allies before we even entered the War is what actually brought us out of the Depression. Truman mostly continued FDR's policies after the War ended as well. There was no great period of deregulating and cutting social spending after the War at all.

[Deleted]

They can't really.

The Fed has cornered itself by initiating QE 8 years ago and not raising rates a couple of years ago when they should have started.

Every country in the world is now addicted to QE, ECB/BOJ and even China central banks are intervening.

Since then, all the emerging economies have been borrowing in USD.

With the current weakness in emerging economies, raising dollar interest rates would cause multiple defaults globally, creating huge financial instability.

There wasn't a rate rise this week, as expected, and there might not be any until 2016 - and maybe not even then.

Simply put - the Fed is out of control and the market knows it.