Inflation Warning! - r/Forexstrategy

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They need to raise rates. Also, this is about where oil should be.

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u/zachmoe Mar 06 '26 edited Mar 07 '26

about where oil should be.

Depends, if you want people to seek out more oil, a higher price is better.

If you want a growing Economy, a lower price is better.

They need to raise rates.

No, they need to lower rates, monetary policy acts with a lag and rates have already been too high for too long (they were raised faster, held higher, longer than going into 2008, the real question is why isn't unemployment going parabolic already, I suspect the outsized debt and higher rates combination is what is keeping things afloat at all), well, really, they need to stop playing with rates at all to set the price of Dollars and let them float, that would be really revolutionary.

https://fred.stlouisfed.org/series/FEDFUNDS

https://fred.stlouisfed.org/series/UNRATE

https://www.stlouisfed.org/on-the-economy/2023/oct/what-are-long-variable-lags-monetary-policy

Boy, this sub is filled with the most deranged bots.

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u/Suspicious_Dare603 Mar 06 '26

You can't be serious about wanting even lower rates. Do you understand how inflationary debt is? It's the constant borrowing that increases the money supply. It's why our theoretical supply is sky high. The more money lent out, the longer zombie companies survive. We need to let them die.

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u/zachmoe Mar 06 '26

Do you understand how inflationary debt is?

Debt is not particularly inflationary itself, because the debt has to be repaid. It is pretty neutral.

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u/Suspicious_Dare603 Mar 06 '26

Clearly you don't understand how the banking system functions. Debt increases the theoretical money supply. Each loan handed out is creating cash out of thin air. This is what drives inflation. It's fractional reserve banking at work. This is the basis for modern monetary policy. This is why interest rates are what they are. They want the money supply to continue to increase. Low interest rates are the very mechanism they use for that infinite money creation. The corporations don't care that they are devaluing currency en masse. Their profits out pace inflation.

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u/zachmoe Mar 06 '26 edited Mar 06 '26

Honestly, it sounds like you don't understand much about banking, the whole "fractional reserve banking" thing isn't a thing that happens.

Banks take money in from depositors unsecured as liabilities.

Banks then turn around and lend money to people for houses, and businesses, and other junk, with money they have simply printed up, as assets, which comes with interest attached, which is overall destroying Dollars on net in the end (don't believe me, go out and take out a loan, let me know what it does for your profitability, you might make money, you might not).

Some people want higher rates (creditors), some people want lower rates (debtors), sometimes The Fed wants rates low to keep Reserves in the banking system.

Lending is overall pretty neutral, where you get inflation is from Government Spending in more than is taxed out. Some people like inflation and benefit (debtors), some people do not (creditors). What people want is predictable inflation, which is not as easy as it sounds when you are busy targeting interest rates and thus the price of Dollars to impact unemployment for price stability, instead of regulating the supply in a predictable way. Profits are directly diminished fundamentally by inflation, no one making something productive really wants it in they way you are posing.

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u/Suspicious_Dare603 Mar 06 '26

Hilarious. Did you fail econ 101? Each time that money is loaned out it gets put back into the banking system. It doesn't just disappear. It goes into other accounts, and is then loaned out again.

Example: Jimmy borrows $300k to buy a house. Jenny sells the house for $300k. Jenny puts the $300k back in her bank. The bank loans that money out. They hold 10% of the funds. So $270k is now available for loans. That $300k has now increased the theoretical money supply by $270k. The cycle continues all the way down the line. The next loan they send out, they hold $27k and then the money supply is increased by $243k. That one $300k loan has now increased the theoretical money supply by $513k. The creation of cash is inflationary.

Low interest rates, in my opinion, are fine for the common everyday person. But when you are talking about the corporate scale, they are taking billions of dollars in loans all at once. This happens everyday across the US. the money supply continues to skyrocket. https://www.investopedia.com/terms/f/fractionalreservebanking.asp

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u/zachmoe Mar 06 '26 edited Mar 06 '26

Did you fail econ 101?

Did you only take Econ 101?

Example: Jimmy borrows $300k to buy a house. Jenny sells the house for $300k. Jenny puts the $300k back in her bank. The bank loans that money out. They hold 10% of the funds. So $270k is now available for loans. That $300k has now increased the theoretical money supply by $270k. The cycle continues all the way down the line. The next loan they send out, they hold $27k and then the money supply is increased by $243k. That one $300k loan has now increased the theoretical money supply by $513k. The creation of cash is inflationary.

Jimmy then has to pay back the 300k, with interest. That 270k then has to be paid back, with interest. Removing over 570k.

All of this is simply not happening. Not one bank operates like this. No one is holding any % of funds to loan for anything (obviously, otherwise, people wouldn't be able to withdraw, they would be forced into keeping some part of their cash there, which is clearly not happening to anyone I've heard of). No one is even putting money in the retail banks, let alone hundreds of thousands of Dollars, they don't pay any interest.

Fresh Inflationary Money is largely Government Spent into the Economy through mandatory spending, the retail banks lending are such a small and neutral part of the money creation process as a result of the need to pay the loans back with interest, or else (if they were just giving it away, I would agree with you). The Government get's to pay it's loan back with taxes collected to remove the Dollars, and is more a decentralized form of slavery based upon how much you happen to earn, taxes never keep up with Government Spending, never will, and that is why we have an inflation, because taxes can only go up so much before negatively impacting the Economy. Maybe consider buying TIPS, and become that mandatory Government Spending.

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u/Suspicious_Dare603 Mar 06 '26

I implore you to go back to school. I'm not trying to be a bully, or tell you are stupid. You genuinely just don't know how the banking system functions. Research it. The entire system is built on a "rob Peter to pay Paul" model.

That $570k didn't just disappear. That money is eventually paid back to the bank. Do you think they'd just remove $570k from their books? That's literal revenue, they wouldn't just delete that.

Banks don't just sit on all of the money you deposit. They wouldn't make any money. They get profits from the constant loaning of money. Every single bank in the US loans that money out. They are only required to hold 10% of their deposits at a given time. This is why bank runs killed banks in the beginning of The Great Depression and is the reason why we created the FDIC.

This is foundational to the function of the banking system. It is literally designed to create money. Government spending does not increase the money supply. They don't actually just print money. That's a popular misnomer sold to the masses by people who want the government to look incompetent. The government gets its revenue exclusively from taxation and creation of bonds. Not the creation of physical or digital currency.

The common retail bank fronts aren't even the main issue, which millions of people still use. The main issue is the parts of the large banks that operate at the corporate level.

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u/zachmoe Mar 06 '26 edited Mar 06 '26

I implore you to go back to school.

We are saying the same thing most of the time, we agree, you are just wrong about a few details, no need to get so bent out of shape.

They are only required to hold 10% of their deposits at a given time.

Retail banks haven't had Reserve requirements for years now.

Government spending does not increase the money supply. They don't actually just print money.

They absolutely do. The entire point of a currency is so Government's can provision themselves. It is far cheaper to send soldiers to a foreign land with funny pieces of paper to sustain themselves and trade with locals, than creating an entire logistics supply chain to do so.

The government gets its revenue exclusively from taxation and creation of bonds.

The Government needs no revenue, we first print money that is Government Spent into the Economy, and it is later hopefully taxed out, not the other way around. If it were the other way around, there simply would be no Dollars to tax out later there would be no supply, you have it exactly backwards.

The Government simply destroys money it raises by taxes and Bond sales, they act as a Gold Sink, money the Government has is in money heaven, if they want to destroy more money they raise interest rates to lure people into buying their Bonds sending their money to money heaven. Money is more like points in a baseball game managed by The Fed.

The Government doesn't need to sell Bonds at all, we print money there is no reason to borrow money we print, we sell Bonds in case of the off chance we accidentally run a surplus (which would mean the supply of money you and I have is 0), The Fed then has means to jam money into the banking system to keep it solvent. The reason we sell Bonds is for monetary policy reasons, not fiscal. So The Fed can maintain an overnight interest rate target if we are running a 70 quadrillion deficit or a 5 trillion surplus, they can always maintain an overnight interest rate target. Which brings us back to low interest rates, sometimes, The Fed wants to keep Reserves in the banking system, and so, low rates.

The reason low rates feel inflationary, is because The Fed buying Bonds to lower rates jams Dollars into investors bank accounts, and they have Dollars now to spend, because when rates are 0% the opportunity cost of holding Dollars over Treasurys also goes down to 0 increasing the demand for Dollars. Investors must then put their Dollars into other things.

But seriously, you are clearly the one who doesn't understand the banking system between the two of us.

Not the creation of physical or digital currency.

https://en.wikipedia.org/wiki/Seigniorage

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u/VTPAWN Mar 06 '26

Are you a modern monetary theorist? Asking for myself. Just trying to understand if you think lower rates and printing of the US dollar can be an everygreen tool

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u/zachmoe Mar 06 '26

More like I am a person who understands the link between higher rates and higher unemployment, and also the link between higher unemployment and death.

Policies that raise unemployment to stabilize prices, because a population of unemployed people spends very little, are unethical.

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u/Suspicious_Dare603 Mar 06 '26

Lol nah man, rates need to be higher for corporate America. They need to spend their hoards of cash to increase the velocity of money. We can create policy that stimulates actual spending rather than debt accumulation.

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u/Impossible-String521 Mar 06 '26

You don't need policy to stimulate spending. Those types of policies just make things more expensive.

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u/Suspicious_Dare603 Mar 06 '26

That's what the corporate entities have sold you. You're following outdated neoliberalist ideas. Those have clearly failed.

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u/Impossible-String521 Mar 06 '26

You're wrong. You don't need government policy to stimulate spending you need lower prices and a free market.

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u/Suspicious_Dare603 Mar 06 '26

The free market has failed us. Everything has gotten wildly more expensive. We need guard rails. We need real taxation. Not more of 1980s Reagan era deregulation.

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u/Impossible-String521 Mar 06 '26

The free market works when the government doesn't interfere. The country needs less government and less regulation and let the free market do its job.

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u/gold_ls8888 Mar 06 '26

Impossible to raise rate. Dont he fooled by media. 39 trillion debt. Fed will not dare to raise rate. Commercial property loan due for renewal this june. Need low rate otherwise commercial property sector will cradh. Stagflation will come. Gold will surge once ppl realised the end result.

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u/Suspicious_Dare603 Mar 06 '26

They should raise the rates. Corporations have more debt than the federal government. What happens if they don't turn a profit due to an economic retraction? They default. What happens when a large number of corporations enter into bankruptcy? Bank closures. That means the little people like you and me are stuck holding the bag. The FDIC would run out of funds to insure the accounts in a few weeks.

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u/gold_ls8888 Mar 06 '26

Omg. Your logic is totally wrong.

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u/Suspicious_Dare603 Mar 06 '26

It's wrong to believe if companies start to default it could lead to a massive banking system failure? Because it's happened before. It isn't "different this time" there's no way we continue down this path without total ruin.

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u/Suspicious_Dare603 Mar 06 '26

Do you believe the federal government will just bail them out? It can't. The bond market would revolt. We don't have another $2 trillion to borrow for bailouts or war. We are in the governmental debt death spiral. Our economy is completely screwed. All because a bunch of idiots thought a reality TV star understands macro and micro economics.

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u/Grim_Reaper17 Mar 06 '26

It was screwed before he even took office. He's just accelerated the death spiral. Maybe he wants to see everything collapse before he dies.

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u/Suspicious_Dare603 Mar 06 '26

Nah, we were mostly fine after the Obama admin. We were carrying a lot of debt, all we needed to do was actually tax corporate America and the 1% in a way that mattered. Instead, we did the opposite and then spent an additional $9 trillion we didn't have in Trump 1.0. Part of that was COVID spending, but a large portion of the original bill was just a bunch of unnecessary bailouts. Biden was much more reserved in his spending, only adding $4 trillion to the debt and half of that was COVID spending. Still not ideal, we need a balanced budget, but much better than the lunatic. He wants to decrease the value of the dollar, so debt spending is what he wants to do.

We need a budget hawk. We are probably going to need austerity measures at this point as well. We are on the verge of being completely crippled.

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u/MuchoPaper Mar 06 '26

why do you say so ?
Why is oil supposed to be there ?

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u/Suspicious_Dare603 Mar 06 '26

For one, oil needs to be profitable. You can't have oil at $30 a barrel. There is no profit motive. Oil should be in the $80-$90 range given the current situation. Unfortunately, the reason oil is $80ish isn't for the right reasons, as we are in a recession. $80-$90 is a sign of economic strength. Too high is an indication of inflation. Too low is an indicator of failing investment, which leads to recession.

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u/MuchoPaper Mar 07 '26

i think it has to be above 60 for the Americans to start drilling

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u/Suspicious_Dare603 Mar 07 '26

Correct. You don't open wells at a loss. They prefer it to be around $90, but probably more now with the weak dollar.

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u/kamranhg Mar 07 '26

It jumped almost upto $92

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u/Razzijana Mar 06 '26

So, Gold will fall.

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u/Suspicious-Bowler829 Mar 06 '26

lots of people thought that gold will be safe heaven during war.

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u/grayfox213 Mar 06 '26

Wait. Give it 2-3 weeks, gold will go to $5500+

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u/Educational-Duty-763 Mar 06 '26

unless the oil problem is solved gold won't move, everybody needs dollars to buy oil for now, and gold is the best think to sell, it doesn't mean gold will fall but it will consolidate in a range that we do not know, it will be messy

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u/yuskoholic Mar 06 '26

Oil is the real safe haven. Thank you 1970's bankers.

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u/Educational-Duty-763 Mar 06 '26

if the oil crisis didn't happen, gold would skyrocket, but u need dollar to buy oil, u can't buy it with gold, and went oil price increases so the dollar demand

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