I Still Need Help Understanding Macroeconomics

[gab13by13]

So now the Fed, smart economists, mainly the Fed president from Minneapolis are all hedging cutting interest rates. Last week when the Minneapolis Fed president did his negative fed speak the stock market tumbled.

Here's where I am coming from; this latest negative Fed speak is based on a magical inflation number of 2.0. All economic policy has to be based on getting inflation to 2.0. Here is where I disagree, me, someone who only took Econ 101. Inflation can be maneuvered, triggered. Don't give me that lesson I had in Econ 101 about the invisible hand of the market, there are visible hands, merely the mention of a possible war between Iran and Israel sent the price of oil to $90 a barrel. I don't see the price of oil going down because it will be manipulated to stay high. I can even envision 5 dollar gasoline right before the election. Oh and the price of oil/gasoline is a driver of inflation = no rate cuts, maybe rate increases.

We did have a supply issue during the pandemic which caused prices to increase boosting inflation. Now the supply issue seems to have abated where is the invisible hand of market lowering food prices and other items? We consumers are well off enough to keep paying the higher prices it seems.

Unemployment is down, wages are up, stock market is at an all time high and yet the sand in the gears, that magical 2.0 inflation number. Why the hell can't our economy run smoothly at 3.0 inflation? Why hasn't anyone asked that question?

The invisible hand of the market only works if people in high places allow it to work.

The fuckers want a downturn in the economy right before the election and "they" can or will try to make it happen. Talk me off my ledge.

[cachukis]

1. Inflation is an indicator of the pace of an economy.

The faster money moves through the system, the faster the catchup.
We now have a trillions of dollars world. I can't think in trillions.

[rampartc]

2. this is a great post

and not everyone can pick jp a copy of keynes general theory and understand it immediately,

john kenneth galbraith gave the best popular presentation on pbs during the 1970s that is still available on u tube, and perhaps someone with rhiannon class patience can assemble that into a post of links?

milton friedman had a similar pbs show in that era as well. that one led us from ayn rand to greenspan and the 2008 crash. it is the only economics most conservatives understand, which means they are often totally wrong..

heilbroner's "worldly philosophers " is a fun little book that will have you talking like an economist in no time.

thorstein veblen's "theory of the liesure class" lets loose a few surprising economicsecrets

"the great crash 1929" by galbraith is also non technical, but counters their dumb ass revisionism of the new deal.

when ever talking economics , even among ourselves, keep "how to lie with statistics" in mind.

[JT45242]

3. The fed has only a hammer so everything is a nail... plus the foxes are guarding the hen house

1. The only thing that the fed can do is manipulate interest rates to try to steer the economy. This is at best a blunt force tool and at worst a real negative impact on real life people.

2. The fed chair is appointed by a president and serves a long term but most of the actual federal reserve come from large banks -- we all know the ones -- the ones that were too big to fail and bribe congress critters (legally thanks to Citizens United) to not regulate them. So, what the fed does is as all microeconomics classes will tell you is really geared toward maximizing shareholder wealth in those banks.

3. Inflation is often manipulated for political reasons. OPEC nations can lower production, gas prices go up and that will trigger inflation. The recent inflation was overwhelmingly caused by greedflation of the virtual monopolies or colluding small groups that own most major sources of inflation (food production, grocery sales, etc) in most industries that have only a few companies that control the overwhelming percentage of the market. It is in the best interests of the megacorporations and their billionaire owners to stop Democrats and get Republicans elected because (R) will lower or eliminate corporate taxes and regulations. Gut working protections, and in general do everything to maximize shareholder wealth to their owners (oops, donors).

The problem with everything they teach in Macroeconomics (my son is taking AP Econ this year and we talk about it all the time) is that it is based on a bunch of assumptions that are no longer true. There is no real competition. Supply and demand can be manipulated by the two or three corporations who control entire industries (e.g., 90% of all poultry in the US goes through about 3 companies and their subsidiaries -- that allows them to keep pay to farmers low as they have basically allocated regionally who gets what and keep prices high as they have no real competition.)

Congress needs to step in but this is wheer the corporate overlords support of teh astroturf Tea Party first and MAGA movement second come in. A non-functioning government does not only not pass new laws, regulations, and taxes, but it is also unable to renew laws that are expiring that should have bipartisan support like Clean Water, Clean Air, etc.

[gab13by13]

4. Something else

High gas and oil prices are a driver of inflation. Recently the US has become a net exporter of petroleum products. So when Saudi Arabia and others get TV coverage for cutting back on oil production the "visible hand of the market" immediately increases the price of gasoline in the US.

Yes we import crude oil, but only 10% from Saudi Arabia, the majority of our imports come from Canada.

Remember back when we heard drill baby drill so that we can become energy independent? Aren't we getting close to that? When other countries cut back on oil production then we should cut back on petroleum exports, we should increase our strategic oil reserves. Oh but to do that our government may have to take over Big Oil, there is money to be made in exporting petroleum products.

Yeah I know the price of oil is set globally but damnit, we export more oil than we import now, just force Big oil to stop exporting when other countries try to drive up the price. I know it isn't that simple but it sure seems like there are simple ways to raise the price of oil and gas and no easy ways to lower them.

[Fiendish Thingy]

5. 3% inflation may be just fine for the current red hot Bidenomics economy

But if the fed cuts rates too soon, or too deep, we could be looking at 5% inflation or worse come November, erasing much of the wage gains made from Bidenomics.

So, the Fed says “not so fast” regarding rate cuts (after telegraphing cuts for several months), and all the investors who banked on cheaper borrowing rates throw a little tantrum, and the market slips down a paltry 1%..

Since the market has been hitting record highs, the bigger worry should be when the inevitable correction (drop of 10-15%) will arrive. I haven’t seen any predictions yet, as the red hot Bidenomics economy looks like it will keep on chugging along for the foreseeable future (but not forever, even when Joe is re-elected). There are many uncontrollable variables that could affect when the correction does finally happen.

Anyway, “Negative Fed speak” is only negative depending on your perspective. To me, the Fed saying they will delay rate cuts because of recent inflationary trends isn’t negative, it’s “Responsible Fed speak”.