Thread

1. dabinat · 1789588567 · focus · HN ↗

   Prediction: this causes a recession in two years, right after a Democrat wins the White House, who will be blamed for it. The economy will turn around after a few years, just in time for a Republican to win and claim they fixed it.

   This is how Republicans have a reputation for being economically savvy despite actual evidence to the contrary, because the general population doesn’t understand that economics runs on a time delay.

   1. carefree-bob · 1789594347 · focus · HN ↗

      A 0.25% rate hike is going to cause a recession? How, exactly, would that happen?

      Honestly it seems your post is heavy on politics but I am not seeing an actual argument anywhere in there.

      My canned response to people being upset at various policies or ratios, whether it is inflation, or bond yields, or market movements, is to ask them what they think the correct value should be. Stop complaining about the movement and instead ask them for their target. You think a 4% FedFunds is too high or too low? What do you think the correct value is and why? You think the stock market is too high or too low, what do you think the correct value of the index should be?

      Most people, who were just moments ago vociferously complaining about a movement, when asked this question fall silent, because they have no idea what the target should be, and because they have no idea about the target, they really have no business complaining about movement. Instead, they use the movement as a springboard to air their ideological beefs. But if you are going to tie some thesis to a rate hike, you better be able to explain what you think the correct rate should be and why. I'm waiting.

      Personally, I think a 4% rate is perfectly fine. 5% may even be warranted, and historically this has not been a high rate, if you assume, say, 2.5% inflation and 2% GDP growth, this is a pretty reasonable place to be.

      1. esalman · 1789611868 · focus · HN ↗

         I don't think numbers matter here.

         Bond prices shooting up is a result of market losing trust in US, or it's ability to not default.

         Dollar is famous backed by $700T military. But the world has seen how it failed to secure a strait.

         The current US government has broken all kind of promises. I want to highlight two in particular - free trade and immigration.

         World economy has benefited for decades on the promises of free trade. The tariffs have eroded the promise and trust.

         The government is also openly supporting elements who are hostile to immigrants. Immigrants are the backbone of US economy, has been for over hundred years. Immigrating to the US requires years of preparation, long term planning, and giving up on other luxuries and opportunities. When the government starts breaking promises by changing rules and moving the goalposts overnight, it discourages participation.

         1. carefree-bob · 1789612233 · focus · HN ↗

            The dollar is not "backed" by a military. China has a huge military and no one uses the Yuan for third party trade. Why not? Because China does not run trade deficits that allow third parties to acquire the Yuan in the first place, it does not have open capital markets that allow third parties to store their surpluses in Yuan, and it does not have the investor protections that give investors confidence that they can pull their savings out whenever they want.

            You know a nation that does have those things other than the US? Switzerland, which is why a lot of people use swiss Francs, even though Switzerland does not have a huge military. People need to stop reading Graber and others who have no economic training and don't understand global balance of payment accounting. Having a large military does not translate into people wanting your currency, otherwise China, North Korea, and Russia would have well used international currencies, rather than being forced to use the currency of their rivals.

            1. esalman · 1789613011 · focus · HN ↗

               Your points are valid. But there's a reason why dollar is "petrodollar" - when we say it's backed by US military it's really the axis of US-Israel-Saudi Arabia which control military as well as resources. People use US dollar not necessarily because they want, but because they have to. I also do not know who Graber is but I'll look it up.
            2. dpc050505 · 1789652289 · focus · HN ↗

               The petrodollar system resolved the 70s inflation crisis after Nixon sent the head of the CIA to Saudi Arabia. The US military backed revolutionaries during the arab spring because the dead dictators wanted to start a pan-african currency with which to trade oil. Iran, Venezuela and Russia were under sanctions and treated as enemies in very big part because they were selling oil for other currencies than the USD.

               The US dollar is propped up by constant US dollar liquidity related to the fact that you need it to trade significant quantities of oil with the vast majority of producers. That situation was held up by the US' military might. Starting shit with Iran and being unable to finish it means there's no reason for oil producing countries to keep financing american debt on the cheap. What are they going to do? Restrict their own access to crude?

               There's more to it, but the USD for gas scheme is a big structural chunk of the financial house of card. You break that and the rest won't hold up very long. And it's not like other structural parts of what makes the USD the global reserve currency aren't getting eroded either. Fed independence stands there glaringly obvious.

            3. lenkite · 1789670457 · focus · HN ↗

               The dollar is most certainly backed by military of the Corporate States. This is eminently observable to the rest of the world, who tend to get "regime changed" when the talk comes about not using the USD.

               The leaked, then, declassified emails about Gaddafi and how his "Gold Dinar" was considered a threat really opens your eyes on why the Corporate States maintains a very big stick to hit anyone they don't like in the world and most especially nations who were foolish enough to disarm, stupidly trusting the Corporate States.

Unofficial Hacker News client; not affiliated with Y Combinator.