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This afternoon, monetary policy geeks such as myself watched Silver Fox himself explain the Fed’s idea of raising interest rates by three-quarters. This is the most aggressive interest rate action banks have taken since 1994.
Let me summarize the comments of Federal Reserve Chair Jay Powell: Inflation is bad. We are doing our best. No one really knows what’s going on.
The transaction is as follows: The disastrous inflation report released on Friday almost guaranteed that the Fed would have to do more than the half-point increase previously shown. Prices soared 8.6% from the previous month. This means, for example, that you are heading in the wrong direction. The report was so bad that some analysts expected Powell and his cheerful economist to work harder to raise rates.
The answer is that I didn’t want to scare the crap of investors who were just angry with the bear market.
And that so-called 75 basis point move seems to have put Wall Street in a pinch. It showed that the Fed was serious but not panicked. The market rebounded in the afternoon trading.
Why is higher interest rates important?
It’s one of the Fed’s main tools to keep prices down. Central banks are raising the cost of borrowing money for businesses and people by raising interest rates from near zero at the beginning of the year. If you’re trying to expand your business, buy a house, or borrow any kind of loan for some reason in the short term, this is obviously terrible.
Life is already so high, and now you’re going to jack up my credit card interest rates, Jay? What are you supposed to stop shopping now?
And the answer is, most. Dear citizens, don’t stop shopping altogether. Your greedy desire for consumer goods is the world’s largest economic stimulating engine, stopping the trip to the target you go for just one quick thing and confusing us all with the new lamp, We will have a propane tank for our camping trip, three swimsuits, some new stationery and a blender.
My colleague Nicole Goodkind is reporting from DC today. In the room where it happened …
Ford is recalling 2.9 million units About problems that can roll off while parking. Basically, the driver parks the gear, but some vehicles have defective parts that prevent them from actually parking. Safety regulators have received four reports of injuries and six reports of property damage that may be related to this issue.
The “big idiot” theory is a popular concept in finance, not to mention the darker art of the Ponzi scheme. The idea is that you can always make money with worthless or overvalued assets unless other (more stupid) people are willing to bid on them higher.
Imagine an asset that is essentially a few lines of code, has no obvious intrinsic value, and has no demonstrable real application. But if you can convince more people to buy the asset, you will infuse the asset with endless hype from a handful of early adopters who can make a strong profit. You’re in business, throwing some buzzwords, tribalism, FOMO, and the support of a handful of celebrities.
If you’re not sure, talk about Bitcoin, which is definitely hit this week. And just by stacking Bill Gates looked down Crypto and its sister products, NFTs, are “based on a idiot theory greater than 100%.” (Translation: It’s a scam).
Cryptocurrency loyal people shrug, despite the plunge and turmoil in major trading platforms, Reported by my colleague Nicole Goodkind. They say this crash is part of the life of the Bitcoin business — the bear market’s lows are low, but highs are also high.
ICYMI, here is a summary of the last few days:
- Bitcoin, the world’s most valuable cryptocurrency, slightly surpassed the psychologically significant $ 20,000 level on Wednesday. This is about 70% below the high of nearly $ 69,000, which was reached just seven months ago.
- The second-largest cipher, Ether, has lost about one-third of its value since Friday, 75% off its highs.
- Coinbase, one of the major cryptocurrency exchanges, has fired 18% of its staff.
- Another exchange platform, Binance, said it had to suspend withdrawals for several hours on Monday and some transactions were “stuck”. On the same day, the Celsius network also stopped withdrawing due to “extreme market conditions.”
But investors who have been in crypto games for years haven’t seen this kind of thing before, so they don’t seem to be so worried (at least not yet).
Bitcoin has lost more than 80% of its value due to the previous two long recessions, but the coin has bounced — and some. During the 2017-2018 crypto bear market, Bitcoin fell 83% from about $ 19,400 to $ 3,200. Three years later, in November 2021, it was over $ 68,000.
You see, cryptocurrencies aren’t the only bad week / month / year. Virtually all stocks have been hit by monetary tightening, which keeps investors away from betting on higher risk assets such as tech stocks and cryptocurrencies.
However, cryptography has its own problems. It’s young – like, born in 2009. Like, one of the youngest members of Generation Z. Like, it is not yet in junior high school and it will still take 10 years before it can be legally drunk. The market is almost completely unregulated and is supported by many celebrities and inexperienced investors. They wouldn’t know the blockchain from butter churn to head with a gun if I had to bet.
People like Bill Gates, Warren Buffett, Jamie Dimon, Attorney General of New York Letitia James, and a small but ever-growing number of technology leaders are more to warn the general public and legislators about the risks of crypto investment. That’s why it’s loud and organized.
Those skeptics are now smarter as crypto tanks. As Buffett famously said, “We only know who is swimming naked when the tide is low.”
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