[H8crilA]

Why would anyone believe in a bunch of bureaucrats in the first place is beyond me.

They showed tremendous incompetence in letting the crisis happen (laughable oversight, too low rates).

This whole meme "the FED will bail us out" has to die before it dies naturally of fatal failure. The real economy is the real economy, not a bunch of econ PhDs wondering why the Phillips curve is not working any more. But we all know it'll take a fatal failure to remove it from people's minds.

Seriously, just think about it - you're trusting a bunch of bureaucrats that know no better than to follow what the bond market thinks (https://www.cmegroup.com/trading/interest-rates/countdown-to...). The blind leading the visually impaired.

And yes, as of Friday (last closing) the bond market tells the FED very clearly to cut the fed funds twice, already on the next meeting (Mar 18, 2020). Since Dec 2018 when Jerome Powell was humiliated by the markets and also somewhat by the President he dares not to do anything else than what the markets tell him to do, so very good chance for 2 cuts.

[aguyfromnb]

>too low rates

Define "too low". The world is awash in capital, no one is going to borrow from you at 5%+. Or are you one of those "we should raise rates so we can lower them later" people?

>you're trusting a bunch of bureaucrats that know no better than to follow what the bond market

The Fed are confined to monetary mechanisms. The rest falls on politicians. But the powers-that-be seem to have decided that they will not allow us to have a deflationary bust again, so they are going to print money and deal with the inflationary consequences down the road.

[H8crilA]

> Define "too low". The world is awash in capital.

You defined it in the next sentence. Capital should be the judge of prospectuses - i.e. of ideas to implement in the real world. When there's too much capital there's no judge (i.e. it's not really capitalism any more).

All bubbles are a consequence of too much money and too much credit/faith in something.

[throwaway34241]

If the Fed is already often failing to achieve their target inflation rate, wouldn't raising interest rates cause them to undershoot it even further and lower investment / set off a recession?

I think their point is that while it's arguable that rates are too low, congress needs to change fiscal policy for them to be able to raise rates, so it's unfair for the Fed to get all the blame here. They're using the policy tool they have to execute their mandate and the other (maybe better) policy tools are out of their hands.

[toomuchtodo]

Correct. These are fiscal policy problems, not monetary. The Fed is helpless with the tools they have while Congress needs to act.

[ceejayoz]

> The world is awash in capital, no one is going to borrow from you at 5%+.

https://www.valuepenguin.com/mortgages/historical-mortgage-r...

> Continued hikes in the fed funds rate pushed 30-year fixed mortgage rates to an all-time high of 18.63% in 1981.

[H8crilA]

Exactly, Paul Volker is the last Fed president that actually implemented a policy (of killing inflation), rather than just respond to what the market tells him to do.

He is remembered as a hero. Ray Dalio did an interview with Volker not long before Volker passed away:

https://youtu.be/mMN17uBzCw4

[PeterisP]

It's not about abstract belief in a bunch of bureaucrats, it's about waiting on the very, very large flows of money that these bureaucrats might open or redirect. The investors' pockets don't care if the dollars in them were created by the real economy or the fed.

[H8crilA]

This is the type of groupthink that gets one in trouble. I'd rather base my decisions on real world business performance.

[PeterisP]

All short-term market fluctuations are more based on groupthink than on real world business performance. Even when there's a fundamental, strong, unavoidable real world business reason for the price to move significantly, the timing of that price movement will be determined mostly by the groupthink and not the real world business reasons (the classic "the market can stay irrational longer than you can stay solvent").

So if your decisions are of the type "what should I buy and hold in the long term" then definitely real world business performance is key as that will determine where that price will be in a couple years. But if you're not going to hold the same position for long and are trading on markets, well, groupthink is a very, very influential factor that determines the price you're going to get today or tomorrow.

[H8crilA]

Totally agree. And I do think short term trading gets people in trouble :). At least the vast majority of people. Not everyone is cut out to be a top notch speculator like Soros.

[brettproctor]

(To be clear, I personally don't think the fed will be able to get themselves out of this one. I'm just stating most market participants think they can.)

I certainly agree w/ you that it will take a fatal failure to kill this meme, and I think that failure might be coming up.