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Fed hikes rates as inflation worries push up bond yields

184 points · 250 comments · wslh

  1. bwb · · focus · HN ↗
    Get ready for a fun ride my friends :)

    Fun ride =

    Oil is going up, possibly for a long time, which will have a big inflationary effect on everything. And it appears the USA government has lost the conflict it started and effectively given control over key oil delivery channels to Iran. Not to mention Saudia facing real issues from rebel groups / Yemen (simplification).

    Government debt is high in several key economies, and the bond market is being saturated with AI-related bonds, as well as possibly people finally tired of lending the USA/France/UK money at low rates and demanding higher ones. And with higher interest rates and bonds rolling over it means more and more money going to pay for the debt, rather than core services.

    Wild cards lurking in the bushes... AI, AGI, RSI.

    And yonder you have a nuclear power floundering; its only source of hard currency is being rightfully degraded, and its leadership delusional.

    And the one to watch IMO... Russian wheat export ability: wheat prices are up considerably, and combined with inflation from oil, this is the kind of stuff that creates waves of political change like the Arab Spring.

    1. darth_avocado · · focus · HN ↗
      This is the right move. Inflationary pressures due to high oil prices and tariffs are not going away anytime soon. All the economic numbers point to a need for a rate hike. Not doing so has a much larger effect on the financial system than a 25 bps rate hike. Stagflation is a bigger risk to the economy.

      Counterintuitively the rate hike can help lower things like mortgage rates by stabilizing the bond yields.

      1. ThunderSizzle · · focus · HN ↗
        We'll continue through the depression we've started since 2008. (GDP growth should be closer to 3.5%-5%, but we haven't really escaped sub-2% since 2008) - our GDP has been depressed by at least 1-2% growth since that crisis, and I think a large part of it has been the inflationary cycle we started and never stopped.

        The wars already put us into too much debt, Obama continued it for 8 years (granted, the deficit slowly went down, but it wasn't fixed). Trump and Biden did a huge disservice to the debt (but neither really cared much about it), and now I fear the path Bush, Obama, Trump, and Biden have laid will not be easily fixed.

        1. StevePrefontain · · focus · HN ↗
          GDP growth is never going to be that high again. GDP growth is just per-capita GDP growth (1-1.5% per year) + population growth (used to be 1%, now is 0% or slightly negative). GDP growth of 1-1.5% will be normal going forward and could even go lower if population decline is at -.5% per year, for example.
          1. ThunderSizzle · · focus · HN ↗
            I did list GDP growth per capita[0], so that already was accounting for population changes.

            Having said that, you are depressingly very correct. A negative population growth will cause the post-2008 depression to continue even longer, and probably more agressively.

            [0] <a href="https:&#x2F;&#x2F;data.worldbank.org&#x2F;indicator&#x2F;NY.GDP.PCAP.KD.ZG?end=2025&amp;locations=US&amp;start=1961&amp;view=chart" rel="nofollow">https:&#x2F;&#x2F;data.worldbank.org&#x2F;indicator&#x2F;NY.GDP.PCAP.KD.ZG?end=2...

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