Trump + The Fed/Economy In General

Political and religious discussions go here. Tread lightly.
Post Reply
Freed Roger
Seeking a Zubaz seamstress
Posts: 25221
Joined: September 4 07, 1:48 pm
Location: St. Louis

Re: Trump + The Fed/Economy In General

Post by Freed Roger »

Trump telling the "boneheads" at his appointed Fed to bring negative interest rates. The theater of absurd is normal under King Orange.
Freed Roger
Seeking a Zubaz seamstress
Posts: 25221
Joined: September 4 07, 1:48 pm
Location: St. Louis

Re: Trump + The Fed/Economy In General

Post by Freed Roger »

Trump telling the "boneheads" at his appointed Fed to bring negative interest rates. The theater of absurd is normal under King Orange.
User avatar
Radbird
There's someone in my head but it's not me
Posts: 44563
Joined: April 18 06, 5:08 pm
Location: Clowns to the left of me. Jokers to the right. Here I am.

Re: Trump + The Fed/Economy In General

Post by Radbird »

pioneer98 wrote:Here's Why The Prior Jobs Report Numbers Were Wrong By Over Half A Million
In a stunning announcement, The Bureau of Labor Statistics reported that the official payroll numbers in 2018 and 2019 were vastly overstated. It turns out that the amount of new jobs created were tremendously inflated and had to be reduced downwards by more than 500,000 jobs. This embarrassing admission raises questions as to the actual strength of the job market, the success of the Trump-initiated tax cuts and how exactly these numbers are calculated.

The U.S. Department of Labor releases the jobs report on a monthly basis. It serves as a gauge as to the financial health and well being of the country. For instance, if there are more people obtaining jobs, then it is deemed good for the economy. Corporations, the government and individuals will make financial and life-critical decisions based upon these numbers, which reflect the direction of the American economy.

The newly revised numbers indicate that over 60% of the downward revisions emanated from the retail, leisure and hospitality sectors. These industries are closely tied to consumer spending. Our economy is highly dependent on individual spending, as it comprises over 70% of the economy. According to the Associated Press, “This was the sharpest downward revision in jobs totals since 2009, when the economy was just starting to emerge from the Great Recession.”
I'm really surprised they didn't suppress this until after the election, but then again, nothing matters any more. Trump will just tweet "FAKE NEWS!!!" and we will all move on.
A week later and no one at BLS has been forced to issue a memo stating the the official numbers were Vastly Understated.
Freed Roger
Seeking a Zubaz seamstress
Posts: 25221
Joined: September 4 07, 1:48 pm
Location: St. Louis

Re: Trump + The Fed/Economy In General

Post by Freed Roger »

Trump wants to juice the best economy ever even more with negative interests rates. Publicly lobbying for them.

Weak. And yet another abuse of presidential powers for his own purpose
User avatar
IMADreamer
Has an anecdote about a townie he overheard.
Posts: 11659
Joined: December 6 10, 1:09 am
Location: Illinois

Re: Trump + The Fed/Economy In General

Post by IMADreamer »

How do negative interest rates work? Will I have to pay the bank to keep my money there? Will the bank pay me to take out a house loan? I don't understand.
Socnorb11
The Last Word
Posts: 19905
Joined: June 21 06, 8:45 am

Re: Trump + The Fed/Economy In General

Post by Socnorb11 »

IMADreamer wrote:How do negative interest rates work? Will I have to pay the bank to keep my money there? Will the bank pay me to take out a house loan? I don't understand.

:D

Right there with ya', IMA!
User avatar
thrill
bronoun enthusiast
Posts: 28697
Joined: April 14 06, 10:45 pm
Location: extremely online

Re: Trump + The Fed/Economy In General

Post by thrill »

Socnorb11 wrote:
IMADreamer wrote:How do negative interest rates work? Will I have to pay the bank to keep my money there? Will the bank pay me to take out a house loan? I don't understand.

:D

Right there with ya', IMA!
Consumers don't get paid to take out loans. You can't qualify for a negative interest rate loan. When the fed lowers interest rates but certain banks don't share their confidence in the money markets, they hoard cash. Think of that cash as if it's in your savings account. If you get 1.5% in your savings account, it accrues interest. If you get -1.5%, the bank would be taking money from you, essentially charging you for having savings. This is what negative interest rates do to the bank's hoarded cash reserves. It incentivizes them to participate in money markets by loaning that cash out to consumers and businesses because if it sits there, they pay for it. It has only really ever been used in horrible economies where expectations are so low that both consumers and banks become very conservative, even after a central bank has injected various stimuli into the economy, such as boosting government spending, lowering interest rates, or straight up cutting you a check, George W. Bush style. If those stimuli are introduced and it doesn't kick start consumer spending, which is what Keynesian economics states is the most accurate measure of economic health/growth, the central bank sets negative interest rates so that banks will get back in the business of lending, which gets loanees in the business of spending again. And since customer savings isn't anything more than numbers on a ledger, the banks don't have that combined total in reserve, so they wouldn't be able to take that negative interest out of your balance, I'm 99% sure. It would come out of their cash reserves, but your balance would remain unchanged and they would still have to pay the agreed upon interest to you.

For Trump to try to do this in a growth economy is unheard of and totally [expletive] up. Complete shenanigans to buy political capital in an election year. It's unethical, it's unwise, and it's totally Trump. He's essentially doing that thing that you do when you want to get your security deposit back on your apartment when you're young. He's putting toothpaste in the holes instead of spackle. He's touching up paint over mold spots. He's trying to hide stains in the carpet. Banks don't believe his [expletive], the more he tries to pressure them with lowering interest rates and they're starting to be more conservative with loans in anticipation of a downturn. He's trying to force their hand with unprecedented meddling.
Socnorb11
The Last Word
Posts: 19905
Joined: June 21 06, 8:45 am

Re: Trump + The Fed/Economy In General

Post by Socnorb11 »

Superb explanation. Thanks thrill.
User avatar
thrill
bronoun enthusiast
Posts: 28697
Joined: April 14 06, 10:45 pm
Location: extremely online

Re: Trump + The Fed/Economy In General

Post by thrill »

I'm no expert and this is all pretty new to me as I try to learn more about finance and investing, but a key distinction about federal reserve interest rates: those rates are the rate that they loan money to banks to keep in reserve. All banks have a reserve requirement that they have to keep on hand to cover liabilities. It's a sliding scale based on the amount of deposits the bank has on it's books. Say it's 10% on a bank with 100,000,000 in deposits. They have to keep cash reserves of $10,000,000. But what if they're getting sweet, sweet low rates from the fed like they have been lately? Current rates are 1.75 - 2%. Say you qualify for a 5% loan for your small business? They make 3% on the delta between the low rate that they borrowed it from the govt at and the rate at which they fed it to you at. So if that bank with the 10% reserve rate wants to keep loaning the cash they get from our deposits on their ledger and they don't want to dwindle their resources by contributing to their cash reserves, they borrow from the fed. So if your loan is 5%, they borrow at 2% from the fed, they make a sweet 3% without having to increase cash reserves or slow down the rate at which they extend loans.

So Trump has been steadily pressuring the fed to lower rates since he got elected. They've been complying. Recently, however, a lot of banks, financial experts, economists, etc have been pointing to recession warning signs which has lowered appetites to hand out loans to entities that may be over-extended already. Well that does Trump no good because it doesn't increase the supply of money in the economy and thus doesn't increase his precious GDP growth rates that he wants to point to during the upcoming campaign to tout how great he's been for the US economy. So he keeps asking them to lower them because he's trying to get these more conservative institutions to keep the money/loan taps flowing.

Michael and some of the other more sophisticated finance guys here should correct me if I'm wrong, but I would anticipate very favorable federal bond rates if we vote out Trump as the next fed/administration tries to naturally decrease the amount of money in the economy in order to stabilize interest rates naturally. Could be an extremely safe investment opportunity with a better than usual return. The way it's supposed to work is that the fed operates independently of the federal govt, so even if he wins, they will probably want to naturally increase interest rates, but who knows? Seems like they've been following his lead.
greenback44
Hall Of Famer
Posts: 11535
Joined: June 26 06, 8:54 pm
Location: kintore/yuendumu

Re: Trump + The Fed/Economy In General

Post by greenback44 »

Huh. OK, Bernie, you earned some cred here.
Post Reply