Why are interest rates so low?

[Snobdds]

Watch the birdie. While you were raking in the dough, the massive economic stimulus on top of an already expanding economy was burying you in guano. Interest rates are low because the Fed bought treasuries to keep them low, and all that money went right into the economy. In the olden days when there were actually adults in this country, this was known as "monetizing the deficit" and was considered a sign of the impending apocalypse. If nobody is willing to loan the government that much money, just print more.

Asset inflation has been roaring for several years now. People who think they understand economics were delighted by the gains in their stock portfolio, blithely ignoring the fact that the cash value of any investment depends on a functioning monetary system. The Fed is dancing on a tightrope without a net. There is no way they can sell their bond portfolio without bringing down the economy. There is no way the federal government can service its debt if interest rates rise enough to make bonds an attractive investment.

I expect a crash that will make 2008 look like a Sunday picnic. I expect everyone's taxes to double, because the US Government has frozen bond redemptions, and has retreated to cash only operation. If you don't like that scenario, close your eyes, click your heels together three times, and chant, "It can't happen here."

Focus...

and how does this relate to the tax cuts you railing against?

 

[ROUSTABOUT]

Because when interest is low it is easier for the government to service it's debt. Think of bonds foreign governments buy to support our economy. Less money has to be paid out. That's why they are over here buying hard assets.

 

[Larry Caldwell]

Focus...

and how does this relate to the tax cuts you railing against?

A trillion bucks.

 

[MossRoad]

I tried to start a thread on inflation here a year or so ago. It went nowhere, and I can't even find it in a search. IIRC, one phrase I posted was, "If current economic policy does not cause inflation, we know nothing about the cause of inflation."

I have a low opinion of economists. Their theories have little predictive value. I'm more of an historian. I am old enough to have seen this scenario before, and have studied enough history to know our current crunch is not unique. Substitute national debt for war reparations and we look just like the Weimar Republic.

https://www.tractorbynet.com/forums/threads/inflation.437158/

 

[Larry Caldwell]

https://www.tractorbynet.com/forums/threads/inflation.437158/

Yeah, I don't have permission to view my own thread.

 

[PuffyC]

Watch the birdie. While you were raking in the dough, the massive economic stimulus on top of an already expanding economy was burying you in guano. Interest rates are low because the Fed bought treasuries to keep them low, and all that money went right into the economy. In the olden days when there were actually adults in this country, this was known as "monetizing the deficit" and was considered a sign of the impending apocalypse. If nobody is willing to loan the government that much money, just print more.

Asset inflation has been roaring for several years now. People who think they understand economics were delighted by the gains in their stock portfolio, blithely ignoring the fact that the cash value of any investment depends on a functioning monetary system. The Fed is dancing on a tightrope without a net. There is no way they can sell their bond portfolio without bringing down the economy. There is no way the federal government can service its debt if interest rates rise enough to make bonds an attractive investment.

I expect a crash that will make 2008 look like a Sunday picnic. I expect everyone's taxes to double, because the US Government has frozen bond redemptions, and has retreated to cash only operation. If you don't like that scenario, close your eyes, click your heels together three times, and chant, "It can't happen here."

I don’t necessarily agree with all your theories but I always enjoy your insight. You seem to be one of the few who bases their opinions on more than just “because that’s what CNN/FOX news told me”. 10 thumbs up for you sir.

 

[MossRoad]

Yeah, I don't have permission to view my own thread.

Ahh, sorry about that. It was closed then removed from public view a year ago due to politics and general rudeness amongst members.

For your own information, the lead you quoted for that thread was:


"If inflation doesn't kick up this year, we really don't know what causes it. All the pieces are in place." - John Phipps

 

[jyoutz]

Larry, I see you don't understand how targeted tax cuts work....then you try to draw parallels to the 60's, which is crazy because nothing is even remotely close.

Educate your self...

IRS data proves Trump tax cuts benefited middle, working-class Americans most

Republicans’ 2017 tax reform law did exactly what was promised: It lowered taxes for all income groups.

thehill.com

I don’t know how it lowered taxes for all groups. I lost a lot of deductions In the 2018 tax bill. We always used to receive a modest tax return; now we have to pay every year. My relatives who own businesses are doing well under the new tax laws.

 

[FERLING]

The older I get the more I start to think it's all a load of BS and smoke and mirrors.

Look at the historical price of gas and diesel vs crude oil. We hit $140/barrel back in 2007-2008 and I wasn't paying $2.00/L for gas at the pumps - closer to $1.40/L. Our peak oil price set this year is under $120/barrel.

Funny how the news right now is getting spun up over monkey pox which is pretty much an STD and covid has disappeared.

Monkey Pox is the latest and greatest, Covid is old news kind of like the Flu. News likes to report on the news that attracts people to their web site.
As for gas / diesel price Big Oil has found out they can price their product at whatever price and the public continues to buy it. Remember when gas use to be higher than diesel fuel and propane & kerosene use to be dirt cheap?

 

[Hay Dude]

I don’t know how it lowered taxes for all groups. I lost a lot of deductions In the 2018 tax bill. We always used to receive a modest tax return; now we have to pay every year. My relatives who own businesses are doing well under the new tax laws.

You never take a break from pummeling people who own businesses, do you?
Maybe turn your disdain for small business loopholes towards the very government that created them?
Its not quite the utopia you make it out to be.

 

[jyoutz]

You never take a break from pummeling people who own businesses, do you?
Maybe turn your disdain for small business loopholes towards the very government that created them?
Its not quite the utopia you make it out to be.

I have no disdain for business owners, I have plenty in my family. Just pointing out that they were the only beneficiaries of the 2018 tax cut.

 

[Larry Caldwell]

I don’t necessarily agree with all your theories but I always enjoy your insight. You seem to be one of the few who bases their opinions on more than just “because that’s what CNN/FOX news told me”. 10 thumbs up for you sir.

That's not surprising, since I don't watch either CNN or FOX News. Current events are ephemeral.

 

[dmccarty]

...
As for gas / diesel price Big Oil has found out they can price their product at whatever price and the public continues to buy it. Remember when gas use to be higher than diesel fuel and propane & kerosene use to be dirt cheap?

Gas in many US states is taxed less than diesel and the Federal tax is higher on diesel than gas. When ULSD was required, diesel prices went up due to the extra processing required to clean up the fuel.

The world was in an energy crisis last year due to government policies. These same policies in Europe certainly made Putin think that European addiction to Russian natural gas, as well as coal, oil, diesel and gasoline, would allow him to attack Ukraine without a response from European countries. Due to Putin's War, European countries have cut purchases of Russian energy products and even though they are still buying from Russia, the reduction in purchases from Russia leads to a reduction in the supply of the various energy commodities, driving up prices. Until Putin's War is ended it is just going to get worse.

Last year, high energy prices in Europe were forcing people to decide on keeping warm or buying food. If Putin's War is not ended by next fall, the higher energy AND food prices caused by Putin will cause even more serious hardship for many around the world this winter.

Turkey's economy is a mess due to their President's economic decisions. Official inflation is almost 75%. Yes, 75%. Real inflation is higher as it is suspected that the inflation numbers are being fudged. Turkey, as well as other nations, has to subsidize bread and other foods for it's population. Increased wheat prices are squeezing these countries, and attempts to raise the prices paid by consumers has not gone well in Egypt. Egyptian history is full of food riots and chaos due to shortages and increased prices of wheat. Until Putin's War is ended, it is going to get worse.

 

[Larry Caldwell]

A petroleum economy is certainly convenient, but as we have known for the last 50 years, just about anything can interrupt the supply. Sabotage. War. Corporate policy. National policy. Accident. A ship stuck in the Suez. Pipeline leaks and explosions. Hurricanes. Didn't the SE have a big gasoline shortage last year because some pipeline sprung a leak? Convenient but stupid.

 

[ultrarunner]

I encourage anyone thinking the grass is greener to give self employment a shot... be your own boss.

Everyone in my family is self employed going back generations and I was for many years until I was invited to work for a local Hospital.

In many ways staying the self employed course proved to be more lucrative as I only curtailed my business never shutting it down.

America is full of self employed family business... local service station, family farm, real estate agents, still some docs, accountants, daycare, mechanics, authors, etc...

I respect those thinking they have a better idea putting it to the test...

 

[Larry Caldwell]

One of the great things about being in business for yourself is that so much becomes tax-free. Invest in your business. Commuting expenses. Work clothing. Tools. Telephone. Internet. Shop. Insurance. Tax prep. Licensing. There's a whole laundry list of things you pay tax on if you work for someone else, but suddenly become tax free if you are self employed. If you incorporate you can rent office space in your home and pocket the cash without paying FICA. The same with issuing yourself dividends. Being self-employed opens up tax loopholes you can fly an airliner through.

 

[MossRoad]

I encourage anyone thinking the grass is greener to give self employment a shot... be your own boss.

Everyone in my family is self employed going back generations and I was for many years until I was invited to work for a local Hospital.

In many ways staying the self employed course proved to be more lucrative as I only curtailed my business never shutting it down.

America is full of self employed family business... local service station, family farm, real estate agents, still some docs, accountants, daycare, mechanics, authors, etc...

I respect those thinking they have a better idea putting it to the test...

Or have a good skill set, a dependable employment record, be able to pass a drug test, and a network of friends and business contacts that know what you're capable of.

When I lost my job of 30 years, I had another one lined up within 2 hours. Then I got calls from friends that found out through my wife's church and had several job offers the following Monday.

That was a good feeling and eased my anxiety quickly.

 

[ultrarunner]

One of the great things about being in business for yourself is that so much becomes tax-free. Invest in your business. Commuting expenses. Work clothing. Tools. Telephone. Internet. Shop. Insurance. Tax prep. Licensing. There's a whole laundry list of things you pay tax on if you work for someone else, but suddenly become tax free if you are self employed. If you incorporate you can rent office space in your home and pocket the cash without paying FICA. The same with issuing yourself dividends. Being self-employed opens up tax loopholes you can fly an airliner through.

Yep... it's one of the things immigrants marvel at... opening your own business.

Know a family that escaped Cambodia... mother and father with infant and toddler... found a curbside lawn mower and started lawn care and took off from there... mom raking leaves with baby on a front carrier...

Three kids all University Grads... Engineer, Lawyer and Doctor... parents didn't speak a word of English and still run their grounds care business...

It's similar for several Chinese friends with restersunts or Mexican in the Concrete and Paving business.

The dream still works even when the odds are stacked against...

Irish Tom is a builder of multi million dollar spec homes... left Ireland with 8th grade education and hired on as a framer... He and 4 others pooled their money and built a modest spec home nights and weekends... then it was three of them and then Tom had enough to build his first with his 13 year old son... Now his son and son in law carry on...

Sacrifice for the next generation is a common theme...

 

[Snobdds]

I have no disdain for business owners, I have plenty in my family. Just pointing out that they were the only beneficiaries of the 2018 tax cut.

Which again is not true...

You keep trying to paint a picture, but it's always wrong.

 

[jyoutz]

Which again is not true...

You keep trying to paint a picture, but it's always wrong.

It is true for the middle class, most of us non business owners lost deductions and got a crappy standard deduction that didn’t make up for the lost deductions. There were some other benefits for those in the low income category.