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TheShroomanizer
Stranger-Danger


Registered: 06/12/09
Posts: 1,571
Loc: The Swamp
Last seen: 9 months, 5 hours
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Interest rate hikes
#27875059 - 07/24/22 08:09 AM (1 year, 6 months ago) |
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I know that many of you are familiar with our current economic hardships so I won’t go into much detail on that, but I have been watching very closely how the current governing body has been, and is continuing to address the sharp increases in global inflation, and feel that they are missing a key critical piece of the puzzle, I wanted to post here...well, cause the shroomery has always been a great outlet, and offers a very diverse field of responses and new insights. So please respond! =]
I get that throughout history, having the Fed raise interest rates has been an effective way to slow down consumer demand, and make business growth much more difficult...since Banks make it more difficult to obtain loans, and people find it more difficult in turn to find higher paying jobs.
But have you noticed that in the United States, in the first half of 2022, despite rate hikes, consumer spending and loans are still rising sharply?
Why isn’t it working in the way it always has? (I understand it is still early on, and sometimes these things take time)
I have a theory...it’s just something that I have noticed, and I have yet to hear anyone in league with the larger financial institutions address it, so maybe it’s just me, or I am wrong and I would really like to hear some feedback and constructive criticism or support.
I have noticed a broad fundamental shift in consumer spending, and Banks can always be relied upon to take advantage of stupid people....
Consumers seem to be much much less focused on the future, and less educated in general, it seems that with the massive growth in government assitence that people have grown accustomed to that “security” and are simply less fearful of being jobless, or broke, and just don’t care.
It’s a massive change in the capitalistic attitude that has governed Americas free economy. It’s all about today for the majority of lower income Americans, and will result in the continuation of a vicious cycle.
So basically what I am saying is....the lack of education, the lack or...inability to see further than a day into the future, and an over dependence on government security welfare assistance has resulted in the fed finding resistance in controlling inflation using traditionally effective policy changes.
I am fearful that even drastic measures won’t have the urgent effect that is required to temper spending, ultimately...the current reigning political party will not accept this fundamental change cause it also means admitting that their massive amounts of social spending played a key role in the problem itself, so they will continue to raise interest rates, which will cause a serious recession, and further social instability, with a higher demand for government assistance and social welfare systems.
Just my thoughts, I’m no Machiavellian
-------------------- Trading Prints -Nature gave us one tongue and two ears so we could listen twice as much as we speak-
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Hartford
Lawful Good



Registered: 11/27/19
Posts: 1,106
Loc: Tennessee
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Nature eventually starts to sue and law enforcement puts a boot in everyone's ass.
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flamel
Stranger
Registered: 08/01/22
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Re: Interest rate hikes [Re: Hartford] 1
#27885192 - 08/01/22 10:17 AM (1 year, 5 months ago) |
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i like your take, i'd like to add the fact that we are not in an economy that's growing too fast quite the opposite.
Do you see many people starting real businesses? Here in europe i see some fake franchises that are established and bust in a year or two, swallowing the savings of the fools who thought they could make it easy.
i have an example, a friend of my family was operator for a town of an alternative to uber, he invested like 50k into the contract and to rent an office, buy cars and bags and buy marketing merch for the restaurants. He was the one promoting the app to clients and restaurants on site and even doing the recruiting for the delivery boys. In the end even with corona he had to close doors, the app was crappy and he couldn't get a decent salary from it, contrary to uber, it didnt automatically manage orders, the delivery guys would have a list of orders and several would come to the same restaurant. the devs made a low effort app and this guy who thought he was being part of a startup was just a fool to be milked.
apart from those fake businesses, countless restaurants, alt therapies and nail salons.
On the other end i know a few qualified people who cant go self employed because they lack capital, so they wage because banks will never lend to them.
So wages increase slower than inflation
All assets that are held by common people drop or you still get 0.25% on savings accounts
The only ones who.can increase their margins using inflation as an excuse are the big boys or the self employed
There are a few market interventions by gvt, here gas is subsidised for instance so.it stays under 2€ but for how long? and this doesnt benefit the people without a vehicle who saw their groceries increase by 40% (milk 0.8€ -> 1.10€)
I'm starting to believe this false sense of security you mentionned is not only affecting the welfare people but us all for trusting this unlimited growth meme.
I agree with your conclusions that if this rate hike doesnt reduce consumption as usual, we will live interesting times
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Gorlax



Registered: 05/06/08
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Last seen: 15 days, 13 hours
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People are completely disillusioned with struggle right now. I'm not sure what it is but I don't get a sense of urgency from anyone around me about the current economic conditions. That is what I think is driving the lack of response from consumers. The hikes have started to kill demand but this is just the tip of the iceberg my friend.
I'm sure if you interviewed people who lost everything from the 2008 financial collapse they'd tell you how they wish they "knew" what was coming. Well if you do the research you will see what we have coming now. The governments don't want you to know that in probably a year you won't be able to find work.
Do a check of the main things needed for a happy life. They are -
-Food -Water -Shelter -Love -Safety -Learning
Do ensure that you have all the resources to keep each of these satisfied. Do find 5 things you will cut out of your budget. Do create a saving/investing/debt plan. Don't make any large purchases in the next 2 years unless absolutely needed. Don't take any credit/leverage lent out in the next 2 years unless emergency.
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high_desert
Pipe and Paper Afternoon



Registered: 10/25/16
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Loc: Hidden Study
Last seen: 11 months, 5 days
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Re: Interest rate hikes [Re: Gorlax]
#27885912 - 08/01/22 07:14 PM (1 year, 5 months ago) |
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I honestly think it's post pandemic despair..when you lose half your older relatives to Covid and the world is in neverending chaos, now with Putin threatening nuclear war every two days, record temperatures and apocalyptic fires.. why bother to save. Aren't reproduction rates down too? Another thing that's definitely a problem in the US is that student debt is really crushingly high to the point where people don't see the any benefits from saving and investing. It all gets sucked into the student loan black hole.. And then if you have medical debt here in the US, forget about it. People are cashing in their 401ks and saying, screw it, I'm going to live because I'm never going to be debt free so why bother.
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TheShroomanizer
Stranger-Danger


Registered: 06/12/09
Posts: 1,571
Loc: The Swamp
Last seen: 9 months, 5 hours
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Yes to all above...but the future belongs to those who believe in it the longest.
I amended that statement from “victory belongs to those who believe in the longest” both are true.
So by giving up on any kind of positive future, and not working towards a better tomorrow, be it lack of faith, or consistent failures, even those with kids seem to be living their lives for themselves...it will perpetuate a downward spiral until things get so very bad that the only way back is up.
This is what happened in the 30s, so many people starved, the dust bowl destroyed so much food production, and was preceded by war and plague, followed up by the most devastating war the world has ever known to accumulate to around 200 million un-natural premature deaths, lowest birth rates, lower quality of life, food prices were higher and employment was lowest....during the time of no hope, we saw the rise of communism, rise of socialism, extremism, long list follows...and we are fast approaching the place of no return.
This of course is a natural process, call it a global cleansing...but it takes very strong people to make it through to see the other side of those kinds of times...and I really don’t believe people have the strength, discipline, understanding or education to see the light at the end of this tunnel...
Before it gets better, we will suffer...the majority of us will suffer so very greatly that I believe we are seeing the formation of a second great generation. I believe millennials have been handed a world on fire, set this way mainly by a very priviledge baby boomer generation that reaped the rewards of their fathers, and paid very low prices for those privileges...many of us will fail of course, but those who believe, and can see..those who don’t succumb to this infectious socialist ideology (it’s taking the world by storm) because it offers security in a time when nobody can offer it. The great lie.
Stay strong. Be smart. Use your head.
-------------------- Trading Prints -Nature gave us one tongue and two ears so we could listen twice as much as we speak-
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khatvanga
Stranger

Registered: 09/18/22
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Last seen: 1 year, 3 months
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The problem is that raising rates from zero to 3% basically does nothing to fight 8% inflation.
IMO we are really in a process of normalizing rates and risk preferences. Rates aren't supposed to be at zero and capital practically worthless.
We are just going to get back to more historically normal rates in the 5% range but not be able to lower rates at will during economic downturns because of inflation.
The US is exporting inflation with these rate moves though to basically anyone who has to deal with USD. Hard to see how we don't have a long global recession to cool everything down.
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TheShroomanizer
Stranger-Danger


Registered: 06/12/09
Posts: 1,571
Loc: The Swamp
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Re: Interest rate hikes [Re: khatvanga]
#27955704 - 09/18/22 08:21 AM (1 year, 4 months ago) |
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What it does do is discourage business loans, because banks tend to hike up rates to match what they are paying to the FED, this in turn trickles down to discourage business growth, even personal loans, and in this day, very few people can operate without loans, so overall it does discourage spending, this will have a long term effect and act as a braking system to a “run-away” economy and just slow it down some.
(If all is done perfectly, and properly, and the public response is what it’s anticipated to be)
-------------------- Trading Prints -Nature gave us one tongue and two ears so we could listen twice as much as we speak-
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Brian Jones
Club 27



Registered: 12/18/12
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It also discourages consumer spending because credit cards charge the prime rate plus a lot more. Smart people limit their credit card use, and others get themselves into trouble, then they stop. So like you say, it trickles down.
Unfortunately, it's very difficult to manipulate the economy perfectly, and it will probably require a lot of unemployment to slow down spending which lowers inflation, which will a necessary phase for the macroeconomy, but not good for the unemployed.
-------------------- "The Rolling Stones will break up over Brian Jones' dead body" John Lennon I don't want no commies in my car. No Christians either. The worst thing about corruption is that it works so well,
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TheShroomanizer
Stranger-Danger


Registered: 06/12/09
Posts: 1,571
Loc: The Swamp
Last seen: 9 months, 5 hours
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Exactly, more often than not...with the combined effect of the media blowing it out of proportion, coming out of a time where people are hesitant to work, or demanding more, etc..
There are so many negatives that are happening/have happened with the power to affect macroeconomic conditions now that I highly doubt this will work without 2-3 years of extreme economic pain. It will work though, just going to get very hard, I’m not an optimist when it comes to rebuilding a global economy.
-------------------- Trading Prints -Nature gave us one tongue and two ears so we could listen twice as much as we speak-
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