Of course the Fed should raise interest rates I say move them up to 9 percent right away.
That way people would be putting more money into savings as it will at least then keep up with inflation.
No, the “Federal” Reserve should not raise rates. As a matter of Constitutional fact the “Federal” Reserve should not even be the nation’s money supplier. The US Treasury under supervision of Congress should be in charge of our then would be debt free monetary system. Look it up: Article 1, Section 8, paragraph 5, US Constitution.
Posted By Ben, Buffalo, NY : May 20, 2008 3:56 pm Quote “When the Fed lowers interest rates, the money supply is increased. This, by definition, is inflation. The increased supply of money devalues the US dollar, which decreases our purchasing power relative to other nations. This accounts for a huge portion of increased oil prices.
Inflation has *everything* to do with interest rates. ”
I have a totally opposite view of inflation and basically it’s the view that the higher interest rates are the more people have to charge for items to stay in business and pay for the higher costs of borrowed money. Hence high interest rates leds to high inflation for things we buy everyday.
I think if you look at historical data this will bare me out. During 2001 to 2006 we had almost no inflation in the price of goods as the interest rate got down to 1 percent. As soon as the Fed started to raise rates inflation took off and now we pay 12 percent a year more from inflation.
Now where people believe inflation comes from low interest rates is different than the inflation people pay when they buy something. The low interest rates we had caused the dollar to lose 50 percent of it’s value relative to the euro from 1999 to 2008. But had little or nothing to do with real inflation that people paid for things.
The fact is China produces goods so cheap even if shoes doubled in price from 5 dollars to 10 dollars a pair NIKE over here will still make 90 dollars a shoe instead of 95 dollars a shoe and just live with a reduced profit margin as they are better off than they where before CHINA when they made a shoe for 40 dollars and sold it for 60 dollars and only made 20 dollars on it.
Miguel Gomez, Ph.D? Something tells me his Ph.D is not in economics, because everything he said is inaccurate. Oil is not driving inflation…it’s the other way around! When the Fed lowers interest rates, the money supply is increased. This, by definition, is inflation. The increased supply of money devalues the US dollar, which decreases our purchasing power relative to other nations. This accounts for a huge portion of increased oil prices.
Inflation has *everything* to do with interest rates.
The Fed needs to keep interest rates low so the housing market can recover? The market will never “recover”, because prices were artifically high, thanks to a longstanding inflationary Fed policy. The US consumer needs to regain confidence?? What the hell does that even mean? The US consumer is out of money, because they over-leveraged themselves and showed zero financial discipline over the past 20 years.
Everyone is to blame for our current situation. Our entire goverment since the 80’s, Greenspan’s Fed, our citizens, wall street. Everyone.
Miguel’s ignorance is typical of Univeristy professors in this country. Go back to your ivory tower, Doctor.
Inflation is eating away our earnings with the current federal reserve policy. he is debasing the dollar hoping to rescue wall street and increasing exports. In the mean time creating inflation and down playing it’s existence. Most American like myself don’t believe the government phony numbers for inflation. Austrian economics teaches us you can’t simply print your way out of what is fundamentally flawed and broken. This nation and everyone in it is drowning in debt. It is not sustainable and we are witnessing the first tide of correction. What the fed and congress are doing is delaying the recovery.
before the bulk of the baby boomer due to retire we must get our house in order. Reducing our spending overseas is a start.
Please give us a chance, leave the rates unchanged. All the asian economies have low rates, and have had for years.
Our economy is suffering because the Fed interfered with the markets to burst a bubble, the Bush Administration has spent Trillions on inflationary programs such as the Iraq war, military, homeland security, and boarder control, all these programs added dollars to the ecomony, but not additional production capacity for goods and services available for purchase by the public or for export. Therefore, we have more dollars chasing the same amount of goods, which causes inflation.
What about the failed energy policies of our great Nation? We are driving autos that require $400 Billion Dollars to leave our economy each year—–time for electric and hydrogen vehicles.
The GOP is going to be hurting this fall, unless they address the real problems with our economy. The public needs to get educated and learn the truth.
The Fed should raise rates.
Congress should look into whether the money the Fed has been lending to investment banks has been used to buy commodity futures, and in turn drive up the cost of fuel and food. Keep in mind that trading derivatives is an area of expertise for investment banks.
Who cares about the presidential race… what about the human race. Yes let’s get the rate raised and make our money worth something again.
Please raise the rates. I am also concerned about my savings. We need to make the dollar stronger, and not worry about low rate mortgages for people that should not be buying a home to begin with.
Please raise the rates.
I am more concerned about inflation making my savings being worth less than my desire for getting a low rate on a loan.
Wasn’t this whole mess caused by borrows getting low rates on homes they couldn’t afford. Loans being made by brokers that didn’t care about repayment because the broker would just sell the loan and have no concern of the consequences of a default. A home of your own is the American Dream, not a right. Not everyone can own a home.
Two rate decreases back the vote to lower the rate was not unanimous. I was surprised the last increase passed.
Shore up the dollar. The Fed is not about politics, but for the good of the country. Don’t wait for October.
Should the country and the economy be on hold during a presidential race? We still eat, drink, work during that time. Why should the Fed holds its breath? Would the result change their decision?
How many times do people have to people have to get spanked before they recognize that keeping rates at ridiculously low levels for extended periods of time leads to bad things. First of all, rates are not going to help the housing market. In the 80’s we had a massive real estate bubble and interest rates were DOUBLE DIGITS! Bubbles like this are psychological. Every generation needs to learn a lesson. I bought my house in exclusive Fairfield County CT in 1988 during the last bubble and in the year 2000 it was still worth 10% LESS than what I had paid for it. That’s 12 years of dead money. I love the CPI numbers. Inflation not so bad huh? What a joke. They’ve constructed the inflation metrics in such a way that they will ALWAYS understate the true picture. If the numbers showed the true inflation rate, cost of living adjustments in pension plans and social security would sykrocket. Not something the government wants to see. That’s why it’s a lie. As others here have pointed out, THIS is closer to a normal housing market than 2005 was. THAT was the abberation.
Absolutely raise rates NOW adn again several times before the election. Credit has been far to easy! To many people bought homes that they could never afford and why are taxpayer bailing them and the lenders out?
If one cannot afford the house, car, kids etc, quit asking me to pay for your sorry financial shape and decisions.
low intreest rates are killing teh US economy. Oil/credit cardsetc are all affected.. So raise them NOW.
No. The Fed should hold exactly where they are (with the Fed funds rate at 2.0%, equal to the core PCE), and go no lower. The Fed should continue to hold until the core PCE rises or until GDP growth greatly exceeds 2% (some say 4%), when they will need to start reining in the inflation rate, again.
Housing is a whole different beast, only vaguely related to the Fed, and it should be allowed to reprice its way down to affordability over the next 4 or so years.
I am sure the Fed will act with political instincts which match its economic instincts in managing the economy. Look out!
I agree wholeheartedly with the first recommendation by Thad Schiele; the Fed is guilty of gross non-performance of its duties and doing things it is not authorized to do. With regard to the second one, the economists (with the exception of the liars who publish the negligible inflatiion rates) ddo do their jobs; it is the political appointees who did and do not.
OF COURSE the Federal Reserve should raise rates, just like they should have raised them back in 2005 when the Real Estate market went out of control! Doesn’t take a rocket scientist to figure this one out!!
Yes. They should start inching the rates up slowly. Those of us who try to save instead of borrowing for everything we (plan to) own are suffering with anemic returns. Americans need to learn that you must earn what you posess. Our enormous debt is an enormous problem.
I would surely hope not! The idea of raising rates may (or may not) have merits but right before the election could only be seen as a blatant attempt to swing the election. Aren’t enough historically neutral branches of this government under the administration’s thumb? INS? Homeland Security? The Justice Department? The Interior Department? HUD? EPA? Now the Fed..??! What next, the US Postal Service refuses to deliver mail to people it does not like, or who have Hispanic surnames? (and therefore are of course illegals) Mr. LaMonica, you are an intelligent man… can anyone think it is just coincidental if rates are tweaked just before the election? As the saying goes, “I was born at night, but not LAST night…”
Raise rates. Duh!!!! Maybe we should wait until gas is 8 bucks a gallon and then force most of us to sell our retirement savings to live. Maybe the morgage bailout will help the braindead wantabees survive too. Only thing left now is our will to be Americans and to start growing our own vegtables like our famlies did in the years past.
I believe they should raise rates, the lowering of rates has only decreased the value of the dollar. The average worker certainly hasn’t had pay increases to balance out these huge fluctuations in dollar value and the cost of goods. What a ridiculous situation this has become with the Bush Fantasies and Bernacke Bumbles….
Good grief. Why not give this country a chance at healing from the reeling that set in with the housing market slippage of recent months? Not to mention the whallop being received at the gas pumps and grocery stores.
NO RATE INCREASES, UNTIL HOUSING IS ON STRONG FOOTING.
Are you people really serious? The whole housing crisis was caused by the Fed artificially keeping interest rates too high in order to “prick the housing bubble and let the air out slowly”. If they hadn’t kept the rates so high and had started to lower rates back in the spring of 2007, then most of the people with sub prime loans could have sold their homes, as the foreclosure mess would not have deflated the values so much that everyone is afraid to buy for fear of continued depreciation.
Our problems are related to an economy DEPENDENT ON OIL (BOTH DOMESTIC AND FOREIGN), and lack of LEADERSHIP IN OUR GOVERNMENT!
First of all, I think the Federal Reserve should be desolved. They are the reason we are in this mess in the first place. Second, why should an election race effect how economists do their job? If they have economic goals, and not political goals, it should have no effect on how they do their job. This story only strengthens the argument that the Federal Researve has unhealthy results on the economy, because it is influenced by politicians instead of free markets.
YES! The Fed should HIKE rates and not stop until they hit 7-8%. The problem has never been liquidity, but financial quant jockeys from NYU, Duke, and MIT who thought they were Gods, creating models that do not work, which eventually blew up in their faces! Thank you Dr.Frankenstein! The President of Germany is right-”The banks have made a monster of the financial markets and I haven’t heard a mea culpa.”
Miguel Gomez, PHD, is a typical liberal from the ivory towers. Oil has nothing to do with inflation and the invasion of Iraq has nothing to do with the price of oil. If Bush #43 did not protect us from Sadaam Hussein, Iraq would have trained terrorists to hijack planes or worse and attack our buildings with chemical or nuclear bombs. I guess Mr.Gomez feels safe in Redmond, Washington, but I wouldn’t have felt safe with Hussein in power, in the densely populated northeast!! I am able to sleep at night because of G.W. Bush. History will show he is an American Hero!
Inflation is the velocity of money, a phenomenon of the central banks, that print money out of thin air. If the developing countries of the world could not print money, they could not pay for nor cause a rare commodity to rise in price!!
The solution lies with the Fed. The Fed can speed up the volume of money, BUT THEY CANNOT CONTROL WHERE IT GOES. In the 80s it was commercial real estate, the 90s tech, in the early ’00s residential real estate, and now commmodities. What do all these bubbles have in common? Alan Greenspan.
The housing bubble must continue to deflate. Housing, despite the downfall, is still considerably unaffordable to the average person. So even if liberal think tanks like Barney Frank want the government to bail out people WHO HAVE borrowed, it WILL NOT help the people WHO WANT to borrow in the future. On the contrary, it will make it much more difficult for average people in the future.
The adjustment will be painful, but the Fed MUST raise interest rates to beat inflation. Volcker style. We shall see if Bernanke has the stomach.
Middle Eastern money is driving our inflation. They buy oil futures with the very money that we send them for the oil we buy. You only have to invest five percent of your capital to purchase futures. Think about it who better comes out a winner on this.
House prices are not crashing, they are just coming back to normal. Printing money (aka Fed reducing interest rate) is nothing but a tax on the entire country (via inflation) to keep house prices inflated. Politicians and Fed officials are welcome to use their personal funds to help keep house prices high, -but it is morally and constitutionaly wrong to tax every citizen for it. (Constitutionally wrong: The constitution say all laws apply equally to all citizens…. but bailing out only home owners and not bailing out other loosers, like stock market investors, las-vegas gamblers, etc tantamounts to discrimination in ‘bailing out’, -which is unconstitutional).
Like the Supreme Court, the Fed follows the election results. If they can figure out a way to help Wall Street quietly they will do it
Yes, I think they are the ones that caused a lot of this mess in the first place. Gas & food has went higher while the dollar goes lower because of it. I wish they would do it now then wait for October.
Of course they should raise rates!! They never should have been lowered to where they are now. Protect the dollar. Let the recession happen. Ever hear “no pain no gain”?
The best comment here, in my opinion, came from Miguel Gomez. Except, that I disagree with him on keeping rates low to save housing. The realestate bubble must be deflated, and the sooner the better, even if it means lots of more painfull foreclosures. Most people thought the equity on a house was the same as savings in a bank. How many of us have also saved in a bank account. Americans have spent themselves into poverty. The sooner the housing market collapses, the better for the economy. Unfortunately, I’m still one that believes that next year, after the election, the real collapse will start. Realestate prices must still correct at least 30% or more in most places.
The lower dollar is the only plus for the economy right now. That is, it is helping International companies compete in what is a new world, controlled by the Asian economies.
I agree that the Fed should take a hike. As for the Fed’s sensitivity to the election? Screw the politics, save the people- not the bankers! May the best man win!
Should they raise rates? Yes. But will they? No, of course not. The Fed is more concerned with large banks and their ability to provide liquidity than they are in prices for the general population.
Protect the profit of Goldman Sachs. So what if the little lady down the road has no money to buy food with?
I don’t think the Fed should have lowered rates in the first place. I think that excessively low rates is what started the subprime mess and inflation in food and fuel prices. I think that by keeping rates low the Fed is laying the foundation for the next inflationary bubble. The Fed should waste no time in getting rates back up. Do it now. The Fed does not fight inflation. The Fed creates inflation.
Yes the FED should be considering a rate hike. The weak dollar and corresponding increases in the costs of oil and other commodities are of greater concern. Like they did in the past they will ultimately contribute to a greater rate of inflation. For all the rate cuts made to date lenders are still holding back out of fear, which has nothing to do with current interest rates. Driving to a stronger dollar and decrease in oil and other commodity prices will actually benefit the economy more now. It may be the better juice then anything else. It is all translating into higher prices right now. Hard to believe increasing rates may actually boost the economy.
The idea that interest rates will affect inflation is an economic fantasy. What is driving inflation now is oil – we’re not replacing reserves at a rate fast enough to meet demand. This drives up oil prices, which drives up fertilizer and fuel prices, which drives up food prices. Couple that with the plummeting dollar (thanks, George, for invading Iraq and dragging down the US economy for 6 years!) drives up import costs. Voila, inflation, which has nothing to due with interest rates.
The Fed needs to keep rates low so the housing market can recover and the US consumer can regain his confidence. Higher interest rates will only increase foreclosures, saturating the housing market even more, plunging us into a deeper recession.
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The federal reserve should raise interest rates a quarter point at every meeting until its up to par with the European central bank. We are a nation that relies upon foreign creditors to finance our spending. Bernanke is debasing the dollar and consequently creating inflation all over the world. When the world is fed up no pun intended, they will stop holding dollars and divert their savings and investment into non dollar denominated assets. When this happens our nation will resort to printing money out of thin air to pay bills like Argentina and Weimar’s Germany. Don’t be fool by foreign fund investments. Foreigners are buying up our assets b/c they want to get rid of their dollar holdings and exchange for hard assets. Once thats over, companies will not find capital so easily. Bernanke had to bail out Bear sterns to prevent the Pandora’s box from opening. What’s in the box? $ 500 trillion worth of derivatives. Which company has the most, you guess it JP Morgan $90 trillion. The fed is in a catch 22. His options, control inflation through raising rates. Or rescue wall street at the expense of main street. He has chooses the latter but not for long. When stagflation and hyperinflation rears its ugly head, he has no choice but to raise rates. When he does, expect more bubbles to burst; commercial property, credit card, car loan, student loan, derivative market, and lastly bonds.