The unemployment rate is a farce...........2% of this rate are people who dont want to work........so unemployment is low
The inflation rate is a similar farce as the metrics dont make sense
That being said, the economists on this board can be tasked with explaining how the current inflation metrics work so we can agree or disagree
The fed simply controls the ability to go into more debt, at 3% debt is wonderful, at 7% people stop spending and prices go down.......pretty simple stuff...........the fed is the knight on the white horse that counter acts peoples stupidity.........people are obviously getting less stupid so rates can come down, BUT, stupid is as stupid does, so that could change......as it always has, they are protecting us from ourselves...........
Quote:
Originally Posted by spinner1001
@retiredguy123, what you asked for —
Logical reason:
As an institution, the Fed’s fundamental goals are ‘moving the economy toward maximum employment and stable prices’.[1] These are long-term goals, not goals for the next five minutes.
Maximum employment — Lower interest rates lower borrowing costs for businesses, encouraging them to invest in growth (expansion, capital assets), and hire more people.
Stable prices — Lower interest rates lead to lower expected inflation, other things equal (see Fisher’s interest rate theory [2]). Geico cave man says: ‘high inflation bad, low inflation good’. Higher inflation leads to unstable prices and lower inflation leads to more stable prices.
This is what you asked for @retiredguy123. But this ‘logical reason’ business you express in multiple posts doesn’t make sense to ask unless you want philosophy. I assume you don’t. Logic is philosophy (lots of philosophers around) and math (not many mathy folks around). But economics isn’t about logic. It’s about empirical evidence, analysis, and policy making. You want empirical evidence, not logical reasoning, right? I suggest in the future you ask for ‘sound reason’ instead of ‘logical reason’. Sound reasonable?
The logical reason you hear ‘gobbledygook’ on TV about the Fed’s policy decision is that is what TV does — sell advertising from more viewers who want entertaining. TV talking heads are often entertainers creating lots of noise, having a low signal-to-noise ratio. @retiredguy123, if you actually want to learn more you this, subscribe to The Economist and read it. You won’t learn much about it from TV channels and social media.
[1] The Fed Explained - Monetary Policy
[2] Fisher equation - Wikipedia |