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Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

cnbc.com

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Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#51

Post by adaisadais »

asickness231 wrote: post #35

"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how can we find 1.5t in the budget but no money for universal healthcare, student loan forgiveness, ubi etc. The markets wouldn't be so important if there were a safety net.

We have a fiat currency. The Government creates “money” whenever it pleases. The money is “Backed by the full faith and credit of the United States”.

I completely agree that in the long term this is completely faulty and just helps to exacerbate the underlying causes of economic crisis. But our government (typically) does not act in long-term interests. We as a people do not hold our politicians accountable.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#53

Post by selectodude »

adaisadais wrote: post #40
munk-a wrote: post #31

How much more effective would it be to put this purchasing power toward simply combating the virus? Probably a lot...

I wish the Fed would give the $ back to the American people and let them decide what to do with it. The growth would be slower but it would be more genuine. This would help those most affected and would help to weed out bad actors. But I am not the Chairman...

The Fed isn’t responsible for cutting checks. Congress can direct the Fed to sell bonds and then distribute the money but the dollars were never the American people’s to begin with.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#54

Post by SilasX »

asickness231 wrote: post #35

"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how can we find 1.5t in the budget but no money for universal healthcare, student loan forgiveness, ubi etc. The markets wouldn't be so important if there were a safety net.

I 100% agree that the Fed's actions are troubling and it's boxed itself into a corner, and has very ineffective tools for what it's trying to do, but ...

This injection isn't really comparable because those other things are expenditures, while the 1.5t refers to short-term loans to very creditworthy borrowers. It really doesn't come at the cost of providing universal healthcare.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#55

Post by lend000 »

In times of panic, remember that in the worst likely scenario, this virus will slow consumer spending, increase demand for hospitals, stagnate productivity for about 12 months, and kill about 0.4% of the world's population (using Spanish flu infection patterns for reference, which infected ~25% of the world population). At that point, there will be sufficient herd immunity (and likely effective treatments or vaccines) to allow the virus to decay into obscurity.

Then the economy will pick up the pieces again, with actual technology, hard capital, and active workers in the workforce still existing after the hard times. I expect this market crash to look most like 1987, which saw new highs 2 years later.

The long term consequences, besides loss of life, are that most market interventions will protect interest rates for large businesses with huge credit lines and existing debt, while small businesses go under, furthering consolidating income inequality.

Would a crash be worse without intervention? Perhaps. But the long term consequences would also be more natural and redistribute resources more fairly, in my opinion.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#56

Post by oxymoran »

munk-a wrote: post #31

How much more effective would it be to put this purchasing power toward simply combating the virus? Probably a lot...

You have to read between the lines here. They did this because there was not enough liquidity to cover the institutional sell off in the bond market. In other words, had they not done this, there very well could have been a run on the banks. That would be very very bad. You can’t fight the virus if hospitals can’t pay doctors.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#57

Post by daxfohl »

tmpynews wrote: post #45

I honestly don't think this is going to work. Markets and investors are notoriously greedy and have a very short memory. This infusion will lift the market for a day (if at all) and institutions will make money and the next day the news cycle will take over and the selling will continue. We are in the early phases of negative news so not sure effective this will be.

No idea how you get downvoted. Market has already sold off the gains from the stimulus. Lasted a few minutes. Not very well spent money IMO.

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#59

Post by ipnon »

asickness231 wrote: post #35

"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how can we find 1.5t in the budget but no money for universal healthcare, student loan forgiveness, ubi etc. The markets wouldn't be so important if there were a safety net.

The Fed isn't printing 1.5 trillion greenbacks and handing out fat sacks on Wall St. They are providing short-term loans to increase the amount of money in circulation (liquidity). The intent is to increase the total amount of trading occurring so that the market can return to equilibrium sooner than later. The Fed wants to prevent firms from not making trades solely for lack of liquidity in the market.

edit: "from making profitable trades" -> "from not making trades"

Re: Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets

#60

Post by JustSomeNobody »

taiwanboy wrote: post #30
newyankee wrote: post #27

What can a retail investor really do ? Is this even a free market. Cannot even do passive investing safely enough.

This is to help an otherwise very healthy US economy (low unemployment rate, solid gdp growth, income increases) from being taken down by an one time external, expiring event and panic that flows from it. What is the point not supporting crucial companies in the stock market? Are you really better off if target or chevron or Hilton goes under? And tons of people have no jobs and there no access to staples?

It begs the question of how healthy is the economy if a one time external, expiring event can take it down.
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