Left and right have become increasingly convinced that the economy is doing well when their side is in power, regardless of objective economic indicators. link to twitter.com
amigator
2 years ago
We might need a history refresher course. Why was the Fed created? It is to bail out the big banks. That is the sole reason for the Fed. All this other stuff is just fodder to keep the public un aware and in the dark as to its true mission. How about a discussion on who owns the FED? Major shareholders?
Maximus_Minimus
2 years ago
Is it too difficult to say that lawlessness is the rule in the land(s), and noone in position of authority cares?
These clowns debate whether 2% or higher inflation is their mandated price stability, and not a beep.
Crookedness all around to let a bankrupt system live another day.
Eddie_T
2 years ago
Well, Cuomo’s out. I thought his public statement was pretty good. You need to FF to 8:15 or so to get the start of it.
The third congressional mandate is to keep interest rates moderate.
Why is this third mandate so conveniently ignored?
Zero to negative interest rates are extreme by any historical measure, not moderate.
RonJ
2 years ago
The FED’s “mandates” are a political fraud.
The FED seldom achieves its mandate of full employment. It is as consistent as a stopped 24 hour clock. As the economy booms, the FED finally achieves “full” employment, at which time, the next recession is approaching, along with the next multi year crawl to the next era of “full” employment.
The FED’s fraudulent version of of stable prices, is the equivalent of dropping a frog into room temperature water and slowly turning up the heat, 2 degrees at a time.
No, the Fed mandates arent a political fraud, it is the Fed leaders that are outlaws.
“The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production” – Federal Reserve Act, Section 2A
Look at monetary and credit growth and economy’s long run potential and try to figure out how far the Fed has moved forn the congressional mandate.
thimk
2 years ago
“Inflation is Half Our Mandate” . well ya, in a debt based system one has to keep the pledged asset’s value equal to or greater than the nominal loan value . Hopefully I stated that correctly , but you get the idea. Mandate #1 is an unintended consequence of this effort . The feds inability/unwillingness to properly respond to a potential bubbles , allows heavily capitalized entities to buy on the cheap once the bust occurs.
Captain Ahab
2 years ago
The FED comes at a high price:
Negative real interest rates transfers wealth from savers to gamblers,
Simply put and completely correct, in terms of the Fed’s REAL mandate (not its stated mandate).
Doug78
2 years ago
By Golly, is that a spherical cow I see at the top of Mish’s post?
Ziggy
2 years ago
Joe Manchin had the tenacity to call out the FED on its lack of fighting inflation. Maybe he will go further and submit legislation to take away the FED’S dual mandate and replace it with a single mandate of price stability. The legislation would also have to include a definition of price inflation that measures what people are spending rather than the phony hedonics, core manipulations etc. The FED is clearly irresponsible and needs to have it’s wings clipped like a parent disciplines a child.
ed_retired_actuary
2 years ago
Mish,
You attribute the Fed’s current near indifference to inflation risk to dishonesty and corruption. Although that may play some role, I think incompetence and arrogance may be at least equally important. I spoke with a retired economics professor yesterday, who told me that the Fed Open Market committee members are mostly untrained in macro-economics, and very reluctant to admit mistakes as you have pointed out. Although the Fed has a large and sophisticated economics staff, he believes that the Open Market Committee pays little attention to staff economists regarding monetary policy. Hence, they are prone to make the seemingly obvious mistake of ignoring the long and highly variable lags in the impacts of their actions on the economy
Indeed I have stated many times they act out of ignorance, not mallace
Karlmarx
2 years ago
What caanit continue will stop. All Ponzi schemes fail in the end.
It took decades for Madoff to fall and the fed has more tools than he did.
But one things all prospective Ponzis need is the ability to get the suckers to trust them. I think its pretty obvious that the federal reserve is losing the trust of investors which is why it jas turned to market mainpulation big time.
Inflation is their last remining tool
dbannist
2 years ago
C’mon Mish…..we all know that the Fed’s dual mandate is to keep interest rates low so that the government can keep borrowing at an obscene rate and to enrich the elite so they can keep buying rapidly inflating assets.
So, I’d agree with you one one of their mandates.
Eddie_T
2 years ago
“Mandate #1 is a huge success already. Unfortunately, the Fed is struggling with Mandate #2.”
I’d say they’e doing pretty well, considering the sheer size and duration of the swindle. Only a few curmudgeons ever complain. Most go quietly into poverty when they retire, if not before.
Just read a survey of why people take early retirement. Number one reason is that they want to retire while they’re still capable of enjoying life (56%)…but the number two reason, sadly, is that they need the money from social security. So about 15% of 62 year-olds who take social security do so because the reduced benefit will still support them as well, or nearly as well, as their crappy job.
The break-even on working until 70 and then taking the substantially higher benefit is age 78, and 62 year-olds have a life expectation of living to 83 or so. For people with little or no additional retirement benefit, they accept 20 years of poverty just to not have to show up for some job they hate, more or less.
I don’t plan on SS. I know it will be there in some form but I’m pretending it doesn’t exist at all. So many people plan on it being a major part of their income. Personally, I plan on having so much income from other sources I can afford to give my SS check away and not miss it. Still, for those who depend on it, they are likely to get a large increase in January of next year….too bad all that will be taken by rent increases and increased food costs. Inflation isn’t a hidden tax like many say it is…it’s a tax on people who don’t understand math. If more people understood what inflation does to their fixed income there would be more protests. Instead? People cheer when they get a raise not understanding they just got screwed over. However, for those with rental properties with loans on them…inflation is something I cheer (even though I consider inflationary policies morally reprehensible). I can’t prevent it so I may as well profit off of it.
Just thought that it is worth mentioning that in the decade or so leading to the pandemic, the share of folks who take Social Security at 62 has gone down dramatically, down by almost one half(!) between 2005 and 2018. It will be interesting to see if the pandemic begins to reverse this trend.
That’s probably wrong, for most of us. It depends on how bad inflation gets. As of now, there is no reason at all to assume Social Security benefits won’t exist. The problems are (a) loss of buying power and (b) a likelihood of means testing in the future.
The notion that there is this huge funding shortfall and SS will fail to pay out at all is a fairly silly idea.
How does a person go their entire life and not manage to save even a dollar is beyond me. I’m surrounded by retirees living off of social security alone, and renting because they do not own a home. Even a dumpy trailer only costs like 3k and another 3k for the land to put it on here. The cost to buy that is like saving a quarter a week. C’mon, anyone can do that. I do agree that those that live in poverty at retirement are getting screwed by the way the CPI is calculated, since almost all of them rent and rent inflation is a real thing.
I didn’t either, when I was your age. But with two high earners, we stand to collect $7700/month at age 70. My wife is just over 2 years away, and it’s less than 5 for me.Who knows if that will buy anything when we’re 80 though. Your guess is as good as mine.
I’m looking now at possibly rolling my RE into one or more DST’s It’s a decent option imho for accredited investors with a lot of rentals. A way out of the active role in managing the asset, and one that pays reasonably well. It’s one option, anyway.
Why not just turn it over to a rental agency. Sure, they take 8-10% off the top, but you get to keep everything else. I think even with a rental agency you’d beat 15% returns, far above anything else you can invest in that is reasonably stable. I won’t invest in anything that gets me less than 20% cash on cash back annually personally in real estate.
I’ve not studied up on the DST tax advantages though so maybe that would make it worth it.
The tax advantage of DST is simply that DST’s qualify for the 1031 exchange….it amounts to (likely) a little less cash flow and a little less upside on equity (at least compared to the great markets you and I are in)…but they are big LLC’s that handle everything….no cash inputs beyond the initial investment….no active role at all in management.
They invest in multi-family and medical offices and big self-storage projects. You get a payout of 5-9% and then also take profits when the project sells…typically in 5-7 years.
I use a management company already for most of my properties ( I’m down to one that I manage completely)…but I still have to make sure they’re not robbing me blind or wasting my money…..this year I’ve been pretty involved in the maintenance side……which I needed to do to cut costs.
The DST keeps you in RE and making fair returns without the headaches of coming up with large sums of cash for deferred maintenance items ( 2 roofs for me this year, a dead body clean-up and a downed tree that smashed a couple of fences……and a couple of really expensive make-readies. It can hit you all at once.)
Even landlords deserve to really retire at some point…if they want to.
True enough about landlords retiring. For now, I refuse to hire anyone to do anything on my properties except the AC man, a trade I never learned. In one sense that greatly increases my overall rate of return. In practice though, I cannot scale that rate of return. I have a limited number of hours. In fact, I’m maxed out now at 80 hours a week every week since March. That has to stop to spend time with family.
I even replaced a roof this past summer, which saved me 7k in costs but cost me time with my kids. I’m not sure I chose wisely honestly. However, at 43 I can do much of the work. Pretty sure I won’t be doing that at 70.
I wouldn’t do a dead body clean up though…..shudder.
I get it, but we have to deal with life as it is, not as we think it should be, The idea that the Fed might be reformed or eliminated is naive, in my view. That means hedging your dollars with some kind of asset that keeps up with or beats inflation.
RE, when bought with 30 year money, has beaten inflation,……at least it has since my first sophomore year of college.
Stay Informed
Subscribe to MishTalk
You will receive all messages from this feed and they will be delivered by email.
– Federal Reserve Act, Section 2A
So, I’d agree with you one one of their mandates.
I’ve not studied up on the DST tax advantages though so maybe that would make it worth it.