Federal Reserve Is a 'Prisoner' of Its New Framework, Rajan Says
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- čas přidán 16. 07. 2024
- Former Reserve Bank of India Governor Raghuram Rajan, who is now professor of finance at the University of Chicago Booth School of Business. discusses Federal Reserve's policy. Chair Jerome Powell said the Fed was ready to raise interest rates in March and didn't rule out moving at every meeting to tackle the highest inflation in a generation. Rajan speaks with Kathleen Hays, Paul Allen and Shery Ahn on "Bloomberg Daybreak: Asia."
Always a pleasure to hear from Dr. Rajan - a gentleman and a scholar. When he sounded the alarm about the 2008 financial collapse (and exactly how it would unfold) back in 2006, the then Fed chair called him a "luddite." He turned out to be spot on with his prediction.
Greenspan was the ultimate self aggrandizing fool. His reputation is in tatters and he will be forever remembered for the 2008 crisis and the decline in trust over USA’s leadership.
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“You never want to limit your flexibility”
The clowns at the central bank in Australia have said they will keep interest rates at 0% for the the next three years.
Ha ha ha
I am sort of sure many other countries will test their central banks capabilities, how much can we bear this like India i am sure the government has pushed hard to boost local manufacturing,. We won't expect rate hikes here too early. Results are volatile markets... stressed portfolios 🎃
There are infinitely many negative numbers as well
@@neocitizen9344
Like what?
Property prices up by 25%
Bankruptcies at record lows
Share prices going nuts.
What we need is a steady hand on the wheel.
Not one that reaches for the panic button and hits it half a dozen times.
Can’t help but think they are covering up their tracks from all the over lending.
That's what emerging economies should do tbh, Australia should keep up with inflation no problem, the US not so much
@@bigboy9983 Zombie economy...
Central banks are supposed to take decisions based on the upcoming events or futuristic scenarios, unfortunately we've had central bankers across the board who make policy decision looking into the rear mirror and hence unable to avoid the incoming collision.
America is addicted to cheap debt. The central bank is under pressure to keep it low to keep the capitalists and elites richer. They are the ones who control the govenment.
2:09 - The reason the market is not pricing in a rate hike of 3.5-4% is because they know the Fed cannot go that high without a major blowup. The system is so levered with debt now that they can't let the 10-yr go much over 2% if even that. Markets are betting the Fed will have to reverse course.
Why you think we cannot have a major blowup?
@@Dinngg0 - Well, for one thing, there is so much debt we can't afford the interest rate payments. God help us if we fall into a recession before inflation is under control, the federal government won't have many options to help pull us out of it or at least prevent it from getting worse.
@@johnmininger7472 The US government can always make interest payments as they come due without bouncing a check. It could also decide to stop issuing treasuries and allow the interest rate to fall to zero.
@@007SuperSoldier This is not exactly true as the issuance of new/additional treasuries is what keeps the government able to maintain deficits year in and year out. To stop issuing treasuries would mean that the government portion of GDP is dramatically cut. In addition, much of the debt outstanding is fairly short term, which means that the government is sensitive to rate changes as current outstanding debt matures and principal needs to be paid off with new debt. So, if rates go up, there is a material impact. Personally, I don't think the Federal reserve is able to do more than 1% on its overnight rate after all the issuance in 2020-1
@@pa9121 Purchasing a bond is a debit to a reserve account no matter if the bond is issued by the treasury or the fed. And there can’t be a reserve debit without a reserve credit.
So you can only buy a bond with money the government has already spent into existence. Therefore the idea that the government funds its deficit spending with funds from bond holders is a priori incorrect. Something else is happening.
These conversations are untethered from reality. If the Fed raises interest rates to 4%, that raises annual interest charges on the $30 trillion debt by $1.2 trillion. How is the Fed going to fund that enormous increase in government spending? More debt = more money printing = more inflation. The Fed is a prisoner to 20 years of manipulated 0% interest rates and trillions of annual govt budget deficits.
But what you forget to mention is that the interest gets paid to ourselves lol Dont you get it yet? America runs the world why are trying to impose fear on the public?
Bring on 4% bye bye
The “interest rate” or overnight rate you are referring to being hiked is not exactly the same rate that is on our 30T of debt my friend
@@michaelc1063 more debt has to be created to pay it off in the first place
there might be a country requiring some "freedom and democracy" to bring the post world war 2 marshall plan under control again
The Fed is a "detainee" of its own QE. 😂
well said!
they did wayy too much wayy too fast
I'm marking your observation as "transitory". 😂
Absolutely. Why was the Fed buying MBSs ? That’s not a corporate bond rather it’s more like a stock.
The Federal Reserve played chess with itself and one side just called check mate. No way out of this mess.
Precisely we are in control of our own destiny. The majority of the debt is owed to ourselves!! 🤣
America runs the world 👍🇺🇸🇺🇸
It's insane to think that we were fed with "Transitory" reference all year long until a 7% inflation mark forced them to retire the use of that word, Fed chief should've been sacked then and there, Rajan still believes that inflation would be down to 2-3% in nearby future which it doesn't seem like, as per their logic to reduce inflation at current levels the real interest rates should've been 8 or 9%, that's how much the Fed is behind, but then when the aim of Central Bank is to keep Wallstreet happy and to hell with common public, this is the sort a bubble we'll keep getting every 5-7 years. I never thought I'd say this but the developing/lesser developed economies around the world already began raising rates last year. Guess we'll know if it's too late or no soon!
Thats the thing man. Inflation is not 7%, probably somewhere around 20%.
@@Geekmasterproduction True, and the Fed continue to keep rates at near 0, what's even more surprising is almost every developing nation began tightening the money supply last year itself whereas the Fed hasn't even begun shrinking the QE, let alone increasing rates. But then, when your aim is to keep wallstreet happy and to hell with the common people, what else could one expect?!
It is not 7%. It is Biden who probaby directed Jerome to turn around since inflation threaten his next election. He has been kicking the can every since, hoping for u turn in inflation that hasnt happened.
@@jamestrank5928 true that, and the mainstream media does a cover-up by feeding us nonsense of how the GDP growth has been best since 1984, not stating that we've never had a prior year as bad as we had in '20, so a comparison holds no grounds, and at the same time there's little to no mention of inflation. Irrespective of what Biden does to please voters, his tenure till date has not only ruined the fiscal discipline of US but also drastically demeaned the global prowess and equity US once held. Sad!
Wait for them to change the formula again and say look inflation is just 1 percent, we need to print more. Lol
The fed actually said that inflation is good and a sign of a strong economy.
Th dollar’s best days are behind it.
3:22 “Ofcourse there is a very big USSR.. oh sorry Russia”
Ooooopsie 😂
0:29 especially as a former central banker yourself 😂😂 you see there's a hell lot of difference between what you should do theoretically and what you CAN do practically. But very well put by professor Rajan 💯💯
I predict they wont even get to 1% Fed Funds Rate before theyre back to ZIRP or maybe next leg down will be NIRP.
Present economic scenario of growing economy would get changed with change of Fed's monetary policy of stopping buying bonds or printing money and raising bench mark interest rates from near Zero.
Fed is not able to take measures of tightening the monetary policy as the same would result in derailing the economy growth.
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If having a stable currency is a measure of how well a government is doing the U.S.Congress & Federal Reserve get an F.
Fed on hopium now...stocks tanking...remove liquidity...its all over...Futures tanking...2018 all over again...Fed will have to learn from Japan...unlimited QE...then hyper inflation
Japan has deflation though....
There is no inflation in Japan.
The Fed basically did Nothing today about Inflation. We continue to see the Fed buying bonds and mortgage back securities until the end of March to prop up Stock and Real Estate Markets! The Fed wants inflation to 'Devalue US National Debts" by Devaluing the USD.
Correct.
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OK here’s the problem looking at a very ground-level view. People have adjusted all their budget and spending based on the current expenses and interest that have been low for so long that any Fed interest rate hike increases will be expenses for car, house, boat, home improvement’s, rent causing money to be taken off the table. Now you have increases in goods already in the limited supplies causing those prices to skyrocket. There is a ceiling to how much money the average household has and they will cut back on everything else to make payments to those loans. They have no idea how tight people are running with their income versus expenses already and any increase the
Fed makes will shut down any extra spending that household had. Even 1/4% will send a shockwave across the low to middle income ones that have loans on everything.
What nice report ！！！！
I find it funny when his tongue slips out USSR whole talking about Russia.
Why yall so good
Its not the inflation that’s transitory it’s the interest rates that’s going to be transitory.
I'm thinking about losing weight some day in the meanwhile I'm eating a cheeseburger while i make that statement. Fed is full of it. Why didn't he raise rates today? or yesterday? because they aren't serious.
Spot on.
Ur not overweight, it’s just transitory.
“Aggressive as of today?” Laughable deluded commmentary
Raghu ram rajan great scholar
you don't want to limit your option, but sometimes it is not up to you. Bluffing won't save you when you are naked.
Fed is focused on keeping asset prices are high. If asset prices collapse, wealth gets wiped out. Depression is next. Not to mention $31T debt and related interest. Easier to live with single digit inflation. Just kick the can down the road.
There dual mandate is consumer price stability and full employment. Not asset price growth, congressional budgets or wealth effects.
Basically, if you have a business idea that generates 0 profit is great as it is better than negative returns in government bonds
Exactly!! That's why the markets are high.
Explain to me with 7% percent inflation with near 0 percent interest rate and unemployment to 4 percent how will fed raise rate. With 2 percent is gone eventually go back to near 0 it’s gone be a wave diagram
Weigh the options, what's worse: raising rates and dealing with a higher unpayable national debt, or keeping rates artificially low and continue dealing with inflation and other related market problems? This is a live action movie and sh!t is hitting the fan rapidly everyday.
You hit the nail on the head. Its a bad situation - they are still praying that inflation subsides on its own otherwise - its not pretty.
True. It’s no good either way, add to the fact Russia has drawn the US to war at the most perfect time and the movie is only getting started.
Unpayable debt ? They never had any intention of paying the debt.
You know what at the end of few rate hikes, you won't see inflation coming down !!!
In what universe are long term bonds with negative real interest rates acceptable? They talk like this is not a problem.
The Fed and markets have gone crazy and acting like the current situation is normal. It's like normalcy bias during a pending disaster. The train is on a collision course.
my guy accidentally said USSR
After Alan Greenspan, people calling themselves financial analysts are still taking the Fed’s public statements at face value?
LET IT RAIN!,.....
He just said that in order to curb inflation interest rates need to be higher than the inflation.
Did I hear that right, and if I did, WTF?
Fertilizer cost literally twice what it did last season. Many crops will not be economical to even plant. Food production is decreasing due to the climate becoming unpredictable
People, we are in freefall and there's nothing ANYONE can do about it. 2022 will be the year where society fell apart.
Can you please explain to me in more detail please
No
There is no doomsday scenario
@@BrandonClark-StocksPassports and no economic bubbles
How do interest rate hikes fix a supply chain issue? Help me out here 🤔
You still think inflation is from the supply chain! Lol
Politicians blame supply chain issues for inflation, they don’t want to admit all the money printing the last two years is the main cause
Perhaps a reduction in inflation to the intended 2% would bring down costs enough to spur up demand. This increase in demand would give businesses incentive to produce more, in turn prompting them to invest and hire more in order to meet said increased demand, fixing supply chain issues in the process. Of course this does not factor in "zero tolerance" Chinese lockdowns, or that global supply chains are not diversified enough.
Interest rates don’t fix supply chain issues. But they do cause an economic contraction which will cause energy costs to go down, which will reduce the cost of everything consumable including food, rent, etc. They also do a lot to also trigger deflation in many other ways.
They limit how many people can buy Ferrari's and Rolls Royce's which atm cant keep up with demand.
When he talks you listen
I don't understand why we are calling thing hawkish or dovish. All it does is confuse people.
You gotta learn investment lingo buddy
Raise rates federal finds rate to 5 %. Do a shock and awe!
Equities would drop 30% overnight.
TRANSLATION : “ I too am a central bankster snake and I laugh that you think there is such a thing as a financial market. We will continue policies to make the top 10% richer and impoverish the rest. Like all snakes , I speak with a forked tongue “
I'm not here to publish
Easy money is a drug and the central banks have the market hooked on it. The withdrawal symptoms might be too ugly to bear. Is the addiction worse than the cure?
These people are prisoners of the old ways
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Wonders what Rajan has to say about India’s Fed
FYI,He was Governor of India's FED.certainly India grew as stable economy in his era.
There is zero chance that the FED raises rates significantly.
Nobody has talked about the fact that the Fed said in their report that they think the labor market is strong and inflation is here, but they're choosing not to raise interest rates at this time and to continue purchasing assets-- no reason given! Could they be any more dovish than the situation getting so bad they have to acknowledge it to save face, yet still choosing to do nothing? I have no idea why anyone is calling this hawkish.
Recently, lemons went from 4 for a$1 to 2 for a $1. According to Powell's calculations, this is slightly above his target of devaluing the dollar by 2% every year. Since FED went to work in 1913, US $ now buys less than a nickel's worth. FED has always been an over achiever.
We must audit the Fed! Now.
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Kiss your 401K, Goodbye.
the wealth gap in this country is gigantic and unemployment is dispersed and displaced. perhaps fed need to listen to sound person like Mr.Jeremy Grantham
Growth is already falling a lot, Next quarter it’s
Sorry Mr. Rajan, your implicit suggestion that a rate hike of about 0.5% every quarter is necessary, will kill equity markets. Japan has the lowest rates in the world and yet there is no inflation in Japan. Fed has to take financial markets alongside.
Japan doesn’t run trade deficit like USA, It runs trade surplus means more production than its own consumption
Japan is nothing like the US, stupid comparison. They aren't running massive personal and corporate debt for starters
This just means that Japan is not very productive. Their businesses only need to generate about 0.5% APY per year to remain solvent, and yet supply is still not outpacing demand.
fed raises rates is a threat to market dow/s&p will drop and then turnaround will be right back to near 0 and problem is passed and we just kicked the can little further buy more time.
fed cannot ride on near 0 interest rate for 15 years and help wealthy buy million dollar properties. while kill the middle class and poor with high interest, with low wages. I have seen this erra in 2010
All these discussions are temporary.
Stick markets are set to perform.
YES, inflation is TEMPORARY due to a tightened oil market + transportation cost. What is strange is that we are in a deflationary recession due to falling global demand on account of job losses + low income jobs. THE PROBLEM for Americans is NOT INFLATION, but THE UNSTOPPABLE FALL OF THE U.S. $. IT'S TABOO TO TALK ABOUT AS IT WOULD ADD FURTHER DOWNWARD PRESSURE ON THE OVERPRICE EQUITY MARKETS driven by fear of A SHARP, INEVITABLE DOWNTURN that will wipe out the wealth of the equity markets. The thinking seems to be it's going to happen, BUT LET"S NOT HAVE IT HAPPEN NOW. By doing everything to avoid it CREATES THE SERIOUSLY ARTIFICIAL EQUITY MARKET we currently have that prevents THE BEAR FORCES from tempering the market value by KEEPING THEIR VALUES REAL. :D Ken, Toronto, CANADA
Buy the dip Ken, you will do great.
@@peterdangelo5882 THE KEY TO INVESTING IN THE STOCK MARKET is to have "in place" decision rules: for example, if THE WORTH OF A STOCK you own goes UP 10%, YOU SELL! And, should it go DOWN (should it "dip") YOU SELL! However, THE KEY DETERMINING FACTOR is "the market trend": if it's POSITIVE (Stock prices are going UP!), you stand to make $; if it's NEGATIVE (Stock prices are going DOWN!): GET OUT! (CUT YOUR LOSSES). THE BANKS are laughing - NOW - given THE "HIGHLY" OVERPRICED STOCK MARKET driven by fear of an impending SEVERE CORRECTION. UNFORTUNATELY, though, DOWN THE ROAD - IN THE NOT TOO DISTANT FUTURE - they'll be INVESTING AT A LOSS. The coming "severe" global economic contraction will be SO SEVERE (BECAUSE IT WILL BE PROLONGED OVER A FEW DECADES) that THE ONLY AMERICAN BANK that can possibly survive is the-now-American-owned Toronto Dominion Bank. The small ones will go SOONER. There are CONTRIBUTING FACTORS: 1. the LEVEL OF BAD DEBT on the books; 2. their habit of RISKY LENDING. THE STRONGEST DRIVIN OVERALL NEGATIVE FACTOR is THE FALLING U.S. $ that NO ONE wants talk about for fear of SPOOKING American STOCK MARKETS. THE GOOD NEWS is that U.S. banks are passing THE FINANCIAL STRESS TESTS today! That's NOW! THE BAD NEWS is they'll tank - LIKE THE TITANIC. What we are talking about is THE INEVITABLE QUASI-COLLAPSE of the U.S. economy. Ken, Toronto, CANADA
Is china showing off emp tech?
Wall Street is tailgating FED and following too closely. Inflation is not a large problem yet but financial markets always overshoots. The FED should not be having a view and inflation policy of day to day. I think FED should view inflation as a medium term target meaning as long as inflation stays around 2 percent over time it is fine to have higher inflation in 1 year of 7%. What the FED does is apply the brake but not stop the train. Just like the US trade numbers or size of debt there were times market intent focus on these numbers and then no one cares. There was a time when every money supply numbers came out and traders go crazy. FED should guide the market not the other way around the key is stop listening to Goldman or Professors.
WALL ST NOMINATED NY FED BOARD MEMBERS. Not listening to wallst will never happen
They have their orders from Biden. They need to be seen to be doing something about inflation otherwise Pelosi doesn't get reelected. I hope they do make a significant policy error, a crash would be great for a lot of people.
Wondering this Raghu ram rajan who broke the economy of india is giving his insights for American economy.
How did he break it,?
Hyperinflation is on the way.
Better restart QE sòoooooooon
It will take inflation to 70%
Bruh Raghu ram keep getting major L's he criticized India switching over to digital payments. Critcized over giving NBFCs more freedom so that there are avenues of easy credit. Idk what else he will say why are poor people getting better facilities?
Professor, do you think Muslim women should stop wearing hijab to school? How do you think will it affect the economy??
the Fed discussion was a bunch of Blah blah blah... mixed messages and no real clear message.
It's on purpose
Everything will be fine.
There will not be a huge market crash....I can tell you that.
We will kind of sputter downwards or upwards then we take off again in 2023
No one can foresee the market, anything can happen.
The elephant in the room, actually, a dinosaur, is the huuuge military spending.....why need this?
It allows us to charge higher economic rents!
QE karma....no free lunch ....
mine the asteroids they are worth trillions just don't do that if they are on a Collision Course with are planet
Baloney
Gteat to see the fall of U.S. love from India.
USSR 😂
Bitcoin fixes this 🦖✌️🌋🇸🇻
LMAO. No your monopoly money is no solution to anything. I see El Salvador are thinking about removing shitcoin as legal tender. Good for them, the sooner they undo that mistake the better.
Total BS, CYA.
Fed is acting responsibility. It's a process not a quick fix. Slow and steady.
Fun fact: Rajan used to be Powell of India
3:23 racism and xenophobia in one slip
All Indian are reserved.
By RBI.
MAY PLEASE UNRESERVE.
ECONOMY VS PHILOSOPHY.
everything he says is obvious
Rajan has been a paid speeker and speaking whatever payer says.
Actually ha has become mad after he has been kicked out from RBI.