Fed reduced the interest rate by 0.25%
Will this encourage you to make a major purchase such as a car or a house?
Will this encourage you to make a major purchase such as a car or a house?
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Interest Rate
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How to Make Smart Money Moves After the First Fed Rate Cut of 2025
Find out what the Federal Reserve's rate cuts mean for your finances.
www.wsj.com
Nope
KenH
Well-Known Member
No. My car is only four years old and gets me from point A to point B. My house is paid for and I am not interested in purchasing another house.
KenH
Well-Known Member
1) The chairman of the Federal Reserve does not set interest rates. The Federal Open Market Committee(FOMC) sets the federal funds rate, as they did this past Wednesday. It is interesting that since the .25% federal funds rate cut on this past Wednesday, that, as I write this, the 2-year Treasury bond rate has gone up from around 3.49% to around 3.56%, and the 10-year Treasury bond rate has gone up from around 4.01% to around 4.12%.
2) I disagree with the dual mandate that the Congress gave to the Federal Reserve. I think the Federal Reserve should only be concerned with maintaining a steady purchasing power of the U.S. dollar.
3) The general level of prices does not generally come down - it is called deflation - and one should not desire sustained or large deflation in the general level of prices. That is what happened in the 1930s - it is called The Great Depression.
4) That the general level of prices does not generally come down is seen if one watches the first season of "The Andy Griffith Show" from 1960. One can pretty much take any prices in that season and multiply them by 10 to get pretty much in the ballpark of prices today.
5) I really don't like the idea that 2%, much less 3%, should be the target inflation rate for the United States. Over ten years, 2% inflation reduces the purchasing power of the U.S. dollar by 21.9%. Over ten years, 3% inflation reduces the purchasing power of the U.S. dollar by 34.4%. I think that the target inflation rate should be 0%.
2) I disagree with the dual mandate that the Congress gave to the Federal Reserve. I think the Federal Reserve should only be concerned with maintaining a steady purchasing power of the U.S. dollar.
3) The general level of prices does not generally come down - it is called deflation - and one should not desire sustained or large deflation in the general level of prices. That is what happened in the 1930s - it is called The Great Depression.
4) That the general level of prices does not generally come down is seen if one watches the first season of "The Andy Griffith Show" from 1960. One can pretty much take any prices in that season and multiply them by 10 to get pretty much in the ballpark of prices today.
5) I really don't like the idea that 2%, much less 3%, should be the target inflation rate for the United States. Over ten years, 2% inflation reduces the purchasing power of the U.S. dollar by 21.9%. Over ten years, 3% inflation reduces the purchasing power of the U.S. dollar by 34.4%. I think that the target inflation rate should be 0%.
atpollard
Well-Known Member
Are "you" (people in general) prepared to adjust expectations that your wage will also never increase unless you get a promotion?
Or that your HOUSE will never appreciate (but will depreciate) in value?
These are the flip side of the "inflation" coin.
This is exactly how things worked under the Gold Standard in the 1800's.
KenH
Well-Known Member
The United States prospered greatly using the classical gold standard from 1880 - 1914.
"The era of the international gold standard, which economists sometimes call the classical gold standard, lasted from 1880 to 1914. This was the era of ascendant economic liberalism. There was relatively free trade in goods, services, labor, and capital. Combined with sound money in the form of the gold standard, the result was unprecedented economic growth. Real income per capita in the United States increased by over 60 percent in a generation and a half. Inflation over this time period, while it fluctuated on a year-to-year basis, was virtually zero, as you’d expect when the money supply is bound to the supply of gold. Free markets — or as free as they can be, given the realities of politics — lifted millions out of absolute poverty during this era. Classical liberalism delivered on its promises."
- excerpt from The Economics of the Classical Gold Standard | AIER
I should probably note that the term "liberalism" used in the quote refers to classical liberalism, not liberalism as the term is commonly used politically today.
KenH
Well-Known Member
Seems to me that it is better to receive no increase in wages(other than reasons such as an increase in one's productivity or an increase responsibilities) with no increase in the general level of prices, than it is to receive a 3% wage increase just because the general level of prices increases 3%.
But I am old and have been called, in an editorial in the Arkansas Democrat-Gazette in 2014, "anachronistic".
atpollard
Well-Known Member
I do not object to the concept. People just need to take it as a package deal.Seems to me that it is better to receive no increase in wages(other than reasons such as an increase in one's productivity or an increase responsibilities) with no increase in the general level of prices, than it is to receive a 3% wage increase just because the general level of prices increases 3%.
But I am old and have been called, in an editorial in the Arkansas Democrat-Gazette in 2014, "anachronistic".
Sadly, we live in an age when people want to increase spending (on them) and lower taxes (on them) and also want the government to magically balance the budget by spending less (on everyone else) and raising taxes on people that are “not them”. After 50 years of following this economic plan, it is “someone else’s fault” that it isn’t making THEIR lives better.
I think they need to still be raising; not cutting.
They keep kicking the long overdue major correction down the road, it will become a massive crash.
Cutting interest rates causes inflation and increases prices.
This is actually how it should be. The only time property should improve value is if improvements are made or demand increases. This is just common sense economics. The idea that I should buy a house at $100,000 and have the value of the house increases like the stock market is absurd.
Raises don’t help any because of inflation. Raises only help when they exceed inflation. It’s been a few years since I have seen raises beat inflation. At one point, owners were actually telling the employees that they could only give raises that were equal to half of inflation. That means we were effectively getting pay cuts.
Flip that coin.