Federal Reserve slashes interest rates to zero • Hacker News Board

Re: Federal Reserve slashes interest rates to zero

#81

Post by grecy » Sun, Mar 15, 2020, 10:54 PM UTC

adventured wrote: post #45

fourstar wrote: post #33

Earlier quoted context omitted.

> If the Fed loses this fight, game over. They've already lost it. It's clear they're scrambling. You can't print your way out of this is the lesson we KNEW from '08.

> You can't print your way out of this is the lesson we KNEW from '08. Printing our way out of 2008-2010 is exactly what we did that worked, and it's what Europe mostly didn't do and their results were terrible by comparison (leading to another bad recession a few years later, after which the ECB finally learned a lesson; and finally after that, Europe began to properly recover, including countries hardest hit like S…

> Printing our way out of 2008-2010 is exactly what we did that worked

Have a look at any country in history that printed it's way out of trouble, and see how that worked out for them in the longer term.

Zimbabwe is a good recent one to look at.

Re: Federal Reserve slashes interest rates to zero

#82

Post by mindcrash » Sun, Mar 15, 2020, 10:54 PM UTC

simonh wrote: post #58

inferiorhuman wrote: post #43

Earlier quoted context omitted.

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

This is correct, the financial system is actually fine. Banks are well capitalised and stable. The problems are cash flow for businesses, incomes for low income and hourly wage earners, and health care for huge swathes of Americans. The fed has an important role to play of course, but they’re really a sideshow this time around.

>the financial system is actually fine. Banks are well capitalised and stable.

No they are not. Most big European banks are technically bankrupt. Most big American banks are technically bankrupt too. The only reason people in general do not know about this is because they used a lot of financial tricks to make it look like they are healthy.

In fact, Deutsche Bank very likely had to announce that they are bankrupt this very month due to the fact they never learned from the former crisis -- causing a shockwave throughout the entire financial market worldwide, if not for COVID. Now they can just blame COVID when the entire financial system tanks.

Here's a video explaining what has been going on in Europe all these years. It will not be different for the United States (or certain parts of Asia for that matter) -> https://www.youtube.com/watch?v=Cu6Em4a4pG4

Re: Federal Reserve slashes interest rates to zero

#83

Post by auntienomen » Sun, Mar 15, 2020, 10:54 PM UTC

colinbartlett wrote: post #8

My "high interest" savings accounts already took a recent haircut and this will accelerate that. I understand that's the idea: make investing attractive and savings unattractive. But for a regular joe like me, this is exactly the time I want to be saving more so it stings.

This may well be a good time to buy low. Take the interest rate hit for a few months and be happy you have cash on hand when opportunity knocks.

Re: Federal Reserve slashes interest rates to zero

#84

Post by thoughtstheseus » Sun, Mar 15, 2020, 10:55 PM UTC

internet_user wrote: post #61

aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

Why can't they just spin up an LLC that would buy stocks/ETFs and just write loans to it? Why would that need congressional approval? Seems like exactly what they've done with Maiden Lane LLC

They went through a bank, JPMorgan. The fed can lend to banks so they could execute equity purchases if they found a partner bank to actually do it.

Re: Federal Reserve slashes interest rates to zero

#85

Post by dcftoapv » Sun, Mar 15, 2020, 10:55 PM UTC

dnautics wrote: post #72

dcftoapv wrote: post #25

Earlier quoted context omitted.

Asset purchases will help to stabilize markets - The fed became a huge driver of liquidity from from 2016-2018 - There was a noticeable increase in market toxicity when they started letting assets roll of their balance sheet in 2018 I'm more optimistic about the impacts of their role as a liquidity provider than I am about their role holding down the effective overnight borrowing rate.

Are you optimistic about the wealth transfer implications of their activity?

Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This has caused material demand and supply side shocks that we haven't seen in my lifetime or my parents' lifetime.

I'm likely on the younger side of the hacker news demographic and I still believe that this is the right action to take at this moment.

We might be stuck paying it off for awhile, but I would rather deal with an inflated fed balance sheet than an entire generation of Americans coming of age during a giant economic pullback.

Re: Federal Reserve slashes interest rates to zero

#86

Post by imglorp » Sun, Mar 15, 2020, 10:55 PM UTC

dcftoapv wrote: post #75

imglorp wrote: post #54

Earlier quoted context omitted.

Most republican administrations have displayed that "get mine and get out" behavior--causing recessions--since Teddy Roosevelt.

Obama's admin let one of the world's foremost financial institutions fail and caused a mass market panic / giant economic setback. Their reasoning was entirely political and caused millions of people to lose their jobs. I'm independent, but claiming that Republicans cause recessions is pretty ironic considering the economic damage the last Democratic admin did.

In that case, the recession began during Bush, who provided the first bailout around $800B. Obama did another bailout of similar amount.

I was talking about starting recessions, not digging out of them, so my statement holds.

Re: Federal Reserve slashes interest rates to zero

#87

Post by HaloZero » Sun, Mar 15, 2020, 10:56 PM UTC

dcftoapv wrote: post #75

imglorp wrote: post #54

Earlier quoted context omitted.

Most republican administrations have displayed that "get mine and get out" behavior--causing recessions--since Teddy Roosevelt.

Obama's admin let one of the world's foremost financial institutions fail and caused a mass market panic / giant economic setback. Their reasoning was entirely political and caused millions of people to lose their jobs. I'm independent, but claiming that Republicans cause recessions is pretty ironic considering the economic damage the last Democratic admin did.

Which financial institution are you referring to here?

Re: Federal Reserve slashes interest rates to zero

#88

Post by [deleted] » Sun, Mar 15, 2020, 10:56 PM UTC

dcftoapv wrote: post #75

imglorp wrote: post #54

Earlier quoted context omitted.

Most republican administrations have displayed that "get mine and get out" behavior--causing recessions--since Teddy Roosevelt.

Obama's admin let one of the world's foremost financial institutions fail and caused a mass market panic / giant economic setback. Their reasoning was entirely political and caused millions of people to lose their jobs. I'm independent, but claiming that Republicans cause recessions is pretty ironic considering the economic damage the last Democratic admin did.

[deleted]

Re: Federal Reserve slashes interest rates to zero

#89

Post by AznHisoka » Sun, Mar 15, 2020, 10:57 PM UTC

taiwanboy wrote: post #59

aazaa wrote: post #15

The Fed can, and will do much, much more. The signal here should be read as "whatever it takes to avoid a depression." Among other steps, this is likely to mean: - Negative-yielding long-term treasuries - Direct purchase of stocks or ETFs, which would require congressional approval. Expect the discussions to start soon. The steps already taken and the ones to be taken will create financial manipulation on a scale nev…

The government can simply ban shorts, much like 2008, and what other European stock markets have done already. That would kill the shorts dead in its tracks. Then the stock market would stabilize, in time for businesses to stabilize and hopefully by summer everything will be recovery focused.

What if stocks dropping was mostly due to people selling their holdings?

Re: Federal Reserve slashes interest rates to zero

#90

Post by dcftoapv » Sun, Mar 15, 2020, 10:58 PM UTC

csense wrote: post #78

dcftoapv wrote: post #71

Earlier quoted context omitted.

We used to think that rates couldn't go negative for exactly the reason you just described. Turns out that assumption was wrong for a few reasons a) holding onto money is expensive b) in many cases banks have incentive to hold government securities c) sometimes they are outright required to hold government securities d) this is related to (a), but there is risk in holding onto cash where government debt is in many ca…

So people are willing to accept small negative rates if it would be less than the operational costs of shipping enormous truckloads of bills around, storing them, securing them, and insuring them against theft / fire? Is that's what's going on here?

That's kind of the thought, yes. Negative rates should not be sustainable for any significant period of time and most interest rate models are built on that assumption.