Mistakes the Fed made:
1-Mischaracterizing inflation as transitory. By that, they meant "it is temporary, it’s reversible, don’t worry about it.”
2- Second mistake came when the Fed recognized that inflation was “persistent and high”. And “They didn’t act. They didn’t act in a meaningful way.”
3- Third mistake, is that after not easing off the accelerator last year, “they are slamming on the brakes this year.
Jerome Powell himself has gone from “looking for a soft landing to soft-ish landing to now talking about pain,” And That's the cost of a Federal Reserve being late.
"The Fed had made mistakes of historical proportions: The last two years are one of the biggest policy mistakes in the 110-year history of the Fed, by staying so easy when everything was booming.”
“They were way too easy through 2020 and 2021, and now ‘there're going to be real tough".
Now the Fed must not only overcome inflation, but repair its damaged reputation, as well.
https://fortune.com/2022/10/09/recessio ... -el-erian/
However, for better or for worse, all modern, capitalist economies include banking systems based on fractional reserve lending coordinated by central banks that routinely and continuously issue new fiduciary media into the economy. As long as this is the case, then the cycles of boom-and-bust that we regularly experience, as described by ABCT (Australian business cycle theory), will unfortunately be inevitable. Given the ubiquity and entrenched position of the current monetary arrangements, for the time being recessions are just part and parcel to the way our economy works.
https://www.investopedia.com/ask/answer ... inevitable.
Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund or variation ofTimboSlice wrote: "People really need to stop overthinking this."
I have two (2) more bullets left to fire, Positive ROI for the year lookin’ rather bleak…
Best of Luck (everyone) in all you choose to endeavor!!!
https://www.cnbc.com/2022/10/10/arks-ca ... -bust.html
Just waiting for the last Robin Hood retailers to give it up, since their stimulus checks (and margin accounts) have just all been expended.
Unfortunately, we do not follow Austrian economics (Menger, Von Mises, Hayek, etc) which basically says the economy will right itself without government intervention. The US is following a Kenysian approach (central bank) that say the government must step in and direct (manipulate) the economy using fiscal and monetary policy. Have they done a good job of that? I leave that to others to debate.
Scar, your statement implies that these cycles occur regardless of government intervention. You are correct on that point but to suggest government policies have no impact on the potential length or severity of the cycle or other problems policy causes is not correct either. This is going to be an interesting ride to say the least.
I would rather focus on how best to navigate this bust/recession cycle. I have been through several recession cycles over my investing career. Unfortunately, I have been heads down saving during those since they were early in my career and I did not pay much attention. I am not convinced index investing is going to give great returns in the near future.
Now as I am getting closer to expecting a return of my money, I am more tuned in to market/economy happenings. Trying not to make dumb mistakes down the home stretch. This is probably a good opportunity to generate wealth over the long term if it can be played right. I sure could use a crystal ball right now.
A strong dollar is a problem. There are a lot of 3rd world countries that take out loans in USD to grow their economies. Servicing their loans under a strong dollar is bankrupting them. Eventually their pain will be our pain.jimcasada wrote: ↑Mon Oct 10, 2022 11:37 pm So what does the future hold? It's hard to say. I think everybody agrees that a market pullback was way overdue, but I've never seen a recession occuring with such low unemployment rates and a strong dollar overseas. It's all about supply & demand. Keep your eye on the dollar.
In short it is all our fault. We (modern society) have earned it, sadly.
Poor Policies are the problem; beginning with the bad decision making from the current Administration (1st day in office) to remove the US as THE GLOBAL LEADER IN OIL EXPORTS, to the recent delay’s in the Fed to curb the tide of Inflation. They could have acted much sooner, but for Political Reason’s (i.e. Chairman Powell comin’ up for re-election & not wanting to get on the wrong side of the new Administration), chose not to.
Best of Luck (everyone) in all you choose to endeavor!!!
Warren Buffett - "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
Not directly, and not to any great extent. The Fed is a pseudo-private institution.
These are the ways it's private:
- it isn't under the direct control of any federal entity
- it's board members and workers are not civil service government employees
- it makes all decisions independent of the Executive, Legislative, and Judicial branches
- the Fed considers itself "independent within the government" rather than "independent of government". In other words, it's an independently contracted private entity authorized by Congress (via the Federal Reserve Act) with sole monopoly to control most aspects of monetary and banking policy within the US
- It is the single largest holder of US national debt, to the tune of around $6 trillion currently (for comparison, China currently holds about $980 billion, or 3.2% of US debt). "Quantative Easing" the act of the Fed buying more US debt at rates that the Fed says it will set. It would be silly for the government to lend money to itself, so it created / authorized the Fed as an independent private entity to do the lending.
These are the ways it's federal:
- the President, with the advice and consent of the Senate, appoints the Board members for 14-year rotating terms. The Chair is appointed from among Board members by the President alone.
- the Fed derives it's governing / management / oversight / "Do what we say, or else!" authority from the Federal Reserve Act of 1913
- the Fed's board members can be impeached and removed from office
From wikipedia: "Although an instrument of the US Government, the Federal Reserve System considers itself "an independent central bank because its monetary policy decisions do not have to be approved by the President or by anyone else in the executive or legislative branches of government, it does not receive funding appropriated by Congress, and the terms of the members of the board of governors span multiple presidential and congressional terms."
So yes, the President and Congress can ask / negotiate / beg / attempt to influence the Board in order to affect monetary policy. However, the only leverage that the President and Congress has is to threaten impeachment of individual members, or to refuse to confirm them for a second term. In reality, the Fed answers to nobody.
Disclaimer: All of the above is my own understanding of how the Fed operates and views itself. I'm not intimately familiar with it, so if somebody knows better than I, please chime in.
Recommended Reading: http://tspcenter.com/forums/viewtopic.php?f=14&t=13474
"It's not what happens to you, but how you react to it that matters" Epictetus
Keep that in mind each time you get confused by a Fed announcement, plan, or action.
Disclaimer: The contents of this thread are known to the state of California to cause cancer. (As they always seem to know more than the rest of us)