Zeihan Says Rates Will Stay High, Go Higher

[sanman]

Peter Zeihan says that rates will stay high and go higher (personally, I disagree):



I disagree, and feel It won't be possible to sustain high rates and make them go higher, because more banks will collapse under the strain.

Too many have invested in lower-yielding assets, and were not prepared for the sudden series of rate hikes that have brought us to the current high rates.

Smaller and mid-sized banks would come under strain and show cracks, like Silicon Valley Bank did. This would cause financial tremors, and result in bailouts and consolidations.
The public will lose confidence in the system.

 

[SkyChief]

I agree with Peter Zeihan.

Inflation needs to be kept in check. The only way to do that is to limit the borrowing. (which the Fed is compelled to do by raising interest rates.)

This is a fundamental high-school Economics 101 principle.

The more money that is available, the more people will charge for goods and services. Availability of money and inflation are directly related.

Duh.

They don't teach this stuff in school anymore. That's probably why today's economists are so clueless. But Zeihan gets it.

 

[Phys251]

Peter Zeihan says that rates will stay high and go higher (personally, I disagree):



I disagree, and feel It won't be possible to sustain high rates and make them go higher, because more banks will collapse under the strain.

Too many have invested in lower-yielding assets, and were not prepared for the sudden series of rate hikes that have brought us to the current high rates.

Smaller and mid-sized banks would come under strain and show cracks, like Silicon Valley Bank did. This would cause financial tremors, and result in bailouts and consolidations.
The public will lose confidence in the system.

 

[Lord Tammerlain]

I agree with Peter Zeihan.

Inflation needs to be kept in check. The only way to do that is to limit the borrowing. (which the Fed is compelled to do by raising interest rates.)

This is a fundamental high-school Economics 101 principle.

The more money that is available, the more people will charge for goods and services. Availability of money and inflation are directly related.

Duh.

They don't teach this stuff in school anymore. That's probably why today's economists are so clueless. But Zeihan gets it.

Raising rates will lead to a recession, which will cause more government borrowing, leading to higher inflation, creating an ugly cycle.

The US government is already borrowing 6% of GDP a year, a recession will likely drive that to 10%. Add in more tariffs, and despite high interest rates inflation won't go down.

If inflation does get bad, Volcker style interest rate shock might be required leading to two or three years of a severe economic downturn, but unlike the early 80s and Reagan, the government would have a hard time spending the economy into a better state

 

[sanman]

I agree with Peter Zeihan.

Inflation needs to be kept in check. The only way to do that is to limit the borrowing. (which the Fed is compelled to do by raising interest rates.)

Reagan and his crew believed in Supply Side Economics.
You want to make prices go down? Then make more of the shit that people want to buy.
That'll make the prices go down.

Suppose baby formula was too expensive. That means there's not enough baby formula.
The solution is not to say, "Hey, let's raise the cost of capital, so that more people will have to stop buying baby formula!"
The solution is to make more baby formula.

This is a fundamental high-school Economics 101 principle.

Supply side economics also deals with the fundamentals.

The more money that is available, the more people will charge for goods and services. Availability of money and inflation are directly related.

Availability of goods & services are also directly related to inflation.
Make more of them available, and not only will prices be kept down, but you'll have more economic activity and employment too.

Duh.

They don't teach this stuff in school anymore. That's probably why today's economists are so clueless. But Zeihan gets it.

I guess they didn't teach critical thinking when you were in school.

 

[SkyChief]

Reagan and his crew believed in Supply Side Economics.
You want to make prices go down? Then make more of the shit that people want to buy.
That'll make the prices go down.

Here's something for you to research:

Why was the Federal Reserve compelled to raise interest rates when inflation reached 9%?

Suppose baby formula was too expensive. That means there's not enough baby formula.
The solution is not to say, "Hey, let's raise the cost of capital, so that more people will have to stop buying baby formula!"
The solution is to make more baby formula.

Baby formula? LOL

Supply side economics also deals with the fundamentals. Availability of goods & services are also directly related to inflation.
Make more of them available, and not only will prices be kept down, but you'll have more economic activity and employment too.

Yes, the availability of goods and services are also directly related to inflation, however the government cannot force businesses and corporations to make goods and services available. With capitalism, the availability of goods and services are determined by the Market. (and sometimes by natural disasters and pandemics.)

The Federal Reserve is not a part of government, but the Fed will often adjust interest rates in times of crisis to curb inflation. I'm old enough to remember the recession of 1980 through 1982. Inflation was close to 12%, and the Fed was compelled to raise the federal funds rate to 19%

I guess they didn't teach critical thinking when you were in school.

They didn't teach critical thinking, but they taught is that when making an argument, it's a bad idea to attack the person you are arguing with. Ad hominem arguments reveal a weakness in the position of the person making it, and yours is a good example of that.

 

[sanman]

 

[sanman]

Oh F****, those rates aren't going to come down, are they?



Small and mid-sized banks are going to be in pain, that's for sure. Going to lead to more bank consolidation.

 

[CaughtInThe]

“We are completely capable as a species of devolving into a fractured, dark, poor, hungry world while still increasing greenhouse gas emissions.”
― Peter Zeihan, The End of the World is Just the Beginning: Mapping the Collapse of Globalization

 

[CaughtInThe]

“Only the United States could engage in a war as dubious as Iraq or roll out a social policy as byzantine as Obamacare and walk away largely unscathed.”
― Peter Zeihan, The Accidental Superpower: Ten Years On