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It's the cost (price) effect. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Download my podcasts! New one every week. https://www.buzzsprout.com/1105286 Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/
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It's the cost (price) effect. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Download my podcasts! New one every week. https://www.buzzsprout.com/1105286 Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/
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| It's the cost (price) effect. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Download my podcasts! New one every week. https://www.buzzsprout.com/1105286 Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/ |
Mike but can you explain better? I understand what you mean with the rate adjustments but if the rates go up don't you also incentivize savings since people will get more money if they park it on the banks? In that sense people spend less(demand is reduced)? So these factors are both present right? or is the savings part irrelevant?I mean this in relation to the inflation effect
If the trend continues then likely yes. Rates are free money so at certain ranges just easier to move to bonds. Probably not at these levels.
It doesn't incentivise saving. Again that is a monetarist myth. People save for insurance and vanity purposes, not to earn interest.
@Neil Wilson if I have 5% interest rate I would not put the money in the bank?
Those redistributions you talk about, cause malinvesting. Maybe a farmer, expecting higher prices, does investments that don't make sense at lower prices.
Or maybe they reinvest in machinery and make their farms more productive. Rates and inflation don't drive malinvestment by themselves.
@Eugenio Triana of course there could be other variables affecting malinvesting, but the redistribution is one more variable. Given 2 same situations, with the only difference one has unexpected redistributions, the one without the redistribution will do better as the expectations are met. Also those redistributions are done by people that do not know the specific circumstances of each agent in the economy causing unpredictable results.
@Guille William We need to be looking at local administration practices in China to learn better how to run public programs.
@Zybernetics you can also look at Argentina, they are more open about what they think and do, they have free press and are a western society. You would be surprised at what ideas they generally support and they explain how it is that they are doing so well economically.
Mike is there going to be an increase in Social Security
Is mike a minimalist?
When would you ever increase rates?
Late 70"s early 80's 15-18% mortgage interest priced many people out of the market. So the cure for too high cost of financing a home purchase is to either lower the interest rates or lower selling price to match the buyers ability to afford the monthly payment.
Or extend the term…
with rate increases, i think most sectors will fall, some will rise.
margin debt is at record highs. rate increases can cause margin calls to increase thus more selling of stocks. on th e other hand, financials and banks will benefit in the long run with increasing rates so as long as the rate hikes don't cause a housing crash.
15 year old that's awesome
HI Mike I clicked on your first link and it took me to a 'win an iphone' scam page
Seems like credit cards would also benefit from consumer loan growth. Capital One looks pretty good.
Playing devil's advocate here, as you've never explained why it's generally accepted that inflation is controlled by increasing interest rates, and how it fits in with your view. Yes, increased interest rates increases prices, but this produces higher corporate and sales tax revenues (tax rates remain the same, but the percentage of larger amounts increases revenues). This reduces the supply of money, which reduces inflation. Also, the increased interest rates mean that people can't afford to borrow as much, which reduces the demand on goods and services, and thus prices.
It doesn't reduce the supply of money unless the government decides not to respond to the increase tax take by spending more. Otherwise it's offset by extra government spending. Remember increased tax reduces 'borrowing' which makes the zombies in power think they have more room! Similarly the increased cost of borrowing for individuals has never worked. It's a 50 year experiment that shows no such correlation. Why? Because if you want to solve affordability you offer fixed rate loans and extended terms. Remember a bank doesn't really want you to pay off your mortgage. They want to take interest from you until the day you die.
If you've been following him, he keeps saying that inflation is just a redistribution of wealth. From consumers to producers. Producers will not bear the cost, they will pass that on to the consumer, hence price increase. You can't control inflation through rate hikes, you can control it by increasing supply or through fiscal policy, not monetary policy which is rate hikes.
@TheReaL Cool I'm fully aware of what he says, and believe it up to a point, but it doesn't fully add up (literally-speaking). It's no good regurgitating what he says, because he repeats it every single video. If only he actually responded to comments, he may have something new to say in his videos.
Always on point
Good to see your back safe and looking good my friend! Hoorah!
Looking forward to Monday's MMT Report!
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Wouldn't cost of carry incease so that futures curves get steeper!
Yeah I never understood why people are so worried about higher rates and potentially lower stock & real estate prices. Lower prices are good, they create opportunities.
Such a complex issue. Thanks for sharing. I do think that there is a "spread" to interest rates, that assets can vary in return rate and still retain value. Traders can explain the tradeoffs very well, which is what I think most MMTers with a trading background understand very well.
This helped my understanding immensely. Thanks, Mike!🥰