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Interest rates are viewed as the be all end all for the economy. Is that true?
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Interest rates are viewed as the be all end all for the economy. Is that true?
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Mike Norman considers the following as important:
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| Interest rates are viewed as the be all end all for the economy. Is that true? |
When interest rates go up people take less loans. Sure fed pays out more but there are a lot of business not happening because it doesn’t make economic sense with how much it will cost to service the debt. So which effect is bigger?
I work for a large luxury business I can't name, were having trouble getting new customers…no panic per se yet. Stock market has been grossly overvalued compared to history good earnings or not. It's good to see some of it burn down like arkk
But you are discounting govt and institutions that have to take loans regardless of the rate level. In todays world, institutions loans far outweigh individuals consumers. And that is why rate hike is inflationary…higher rate raises overall money supply/repayment down the road since those loans are still being processed
Just look at the empirical evidence. The effect is demonstrably indeterminate.
Yep, heading to the bunker to hunker down myself. This market is sure to crash.
Happy birthday man, enjoy California. You're crazy but you're alright.
Mike are you flip flopping ?
After decades of economic orgy, the economy needs to bite the bullet and sort itself out for the benefit of future generation and economic well being. It's like taking medicine before the cure arrives. When people are so used to easy money through low interest rate, there's no financial discipline and people spend beyond their means. It's impossible to have growth year on year indefinitely, the pain has to come one day. Let the market crash and rise again to glory!
Yet household debt is nothing. You're begging daddy gov for austerity and you don't even need it.
An MMT principal is taxes destroy dollars, they don’t pay for federal spending, yet you said that the TGA balance, from tax payments, is near a trillion dollars and will slowly be spent down. If taxes are destroyed, how can they pay for spending? I’m confused. Can you help me?
It is done indirectly through those dollars that would have otherwise had to have been created to fund current deficit..
The point is taxes and spending are two different operations. Taxes are not necessary for spending. They do take dollars out of the economy. Then spending adds dollars to the economy. Also taxes help regulate the value of the currency and provide incentives to the private sector. What MMT says is that since the Fed is part of the Government then (Congressional handcuffs aside) the Government could still spend without tax dollars in its account since it creates the currency.
@David Gerlitz thinking it through, tax receipts in the TGA do not pay for new federal spending. Instead they eliminate liabilities created when the Treasury previously spent dollars into the economy by the Fed marking up reserve accounts. If they did pay for spending, then the invoices would be paid twice. So Mike was saying that the balance in the TGA would be spent into the economy when the Treasury created new spending. As he said, a slow process.
Happy Birthday Mike! Keep up the good work!
Sobering video , Mike. Have a safe trip and thanks for your thoughtful analysis.
Leakage/trade deficit is a better a better swap… we are receiving actual goods and services while they getting dollars
Well…..I'm glad I put 50% out of the market. Now I just wait for the upturn…again. Or the nukes….whatever comes first. LOL. So whatcha think? Is Putin gonna fold??
I get seasick from the moving camera.
No one knows when Powell will stop hiking rates– 2022? 2023? . The stock market will stop falling when Powell switches to dovish.
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Great work Mike! Looking forward to Monday's MMT Report for sure.
Safe travels Mike! You rock!
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Thank you and happy birthday Mike! Curious, if not interest rates, would would be the “lever” to help our economic issues?
Markets are red, red, red… Whatever tax inflows and MMT say. Sorry.
Mike, both covid and the war were not black swan events. Both those events were catalyzed by two countries who both happen to be the most powerful nations within the BRICS alliance and who both happen to have been hoarding commodities for years prior to these events as well as developing alternate payment systems to SWIFT. They also happen to have a strong alliance and have jointly stated "Friendship between the two states have no limits. There are no 'forbidden' areas of cooperation." On top of this, they have also happened to expressed strong disdain for the way America abuses it's dollar hegemony. Yea, alot of coincidences, right?