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The Fed's $2.7T mortgage problem

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Re: The Fed's $2.7T mortgage problem

#11

Post by konfusinomicon »

jjoonathan wrote: post #4

Problem? No, it's working as designed: as a plausibly deniable mechanism to print trillions for rich people. Meanwhile, inflation will be blamed on the billions printed for poor people. "Balance sheet that never rolls off" is very much in the same genre as "loan that is actually a grant" and "financing tax cuts with debt."

I dabble in news sources from both sides of the aisle and I've not heard the opinion that inflation is a result of poor people, only that its the result of a perfect storm of the pandemic and an unjust war halfway across the world, which mostly makes sense... who is blaming the poor?

Re: The Fed's $2.7T mortgage problem

#12

Post by __john »

konfusinomicon wrote: post #11
jjoonathan wrote: post #4

Problem? No, it's working as designed: as a plausibly deniable mechanism to print trillions for rich people. Meanwhile, inflation will be blamed on the billions printed for poor people. "Balance sheet that never rolls off" is very much in the same genre as "loan that is actually a grant" and "financing tax cuts with debt."

I dabble in news sources from both sides of the aisle and I've not heard the opinion that inflation is a result of poor people, only that its the result of a perfect storm of the pandemic and an unjust war halfway across the world, which mostly makes sense... who is blaming the poor?

Everyone knows inflation is because of the stimmies.

edit: /s

Re: The Fed's $2.7T mortgage problem

#13

Post by lifeplusplus »

konfusinomicon wrote: post #11
jjoonathan wrote: post #4

Problem? No, it's working as designed: as a plausibly deniable mechanism to print trillions for rich people. Meanwhile, inflation will be blamed on the billions printed for poor people. "Balance sheet that never rolls off" is very much in the same genre as "loan that is actually a grant" and "financing tax cuts with debt."

I dabble in news sources from both sides of the aisle and I've not heard the opinion that inflation is a result of poor people, only that its the result of a perfect storm of the pandemic and an unjust war halfway across the world, which mostly makes sense... who is blaming the poor?

People mean poor people when targeting stimulus checks

Re: The Fed's $2.7T mortgage problem

#14

Post by JumpCrisscross »

readthenotes1 wrote: post #6
unchocked wrote: post #2

Given that there's nothing forcing the Fed to unload these mortgages, the option of putting them on the market (thus driving commercial mortgage rates higher) seems like a policy lever that will be good to have, cooling real estate inflation selectively separate from the federal funds rate.

Driving rates higher won't cool inflation except by raising prices - which is inflation. They want to stifle the demand so as to match supply better, but when it's a supply shock and the United States is short something like 3 million houses, it seems a fairly punitive and misguided way to approach solving the problem.

> rates higher won't cool inflation except by raising prices - which is inflation

Rates rising drives prices down. Of the mortgages on their books. And of the homes collateralizing them.

Re: The Fed's $2.7T mortgage problem

#15

Post by candiddevmike »

upupandup wrote: post #7
candiddevmike wrote: post #5

The recession in 2008 was never really fixed, we just kicked the can down the road.

what does this mean exactly? We can't raise the rates anymore without substantial structural shift in our economy? Such as the end of ridiculous earnings-to-price multiples?

Pretty much, to me I think the problems facing the US economy entirely revolve around wealth inequality and require significant, painful policy measures to fix.

Re: The Fed's $2.7T mortgage problem

#16

Post by anm89 »

upupandup wrote: post #7
candiddevmike wrote: post #5

The recession in 2008 was never really fixed, we just kicked the can down the road.

what does this mean exactly? We can't raise the rates anymore without substantial structural shift in our economy? Such as the end of ridiculous earnings-to-price multiples?

We took a crisis of bank and consumer balance sheets and relocated it to the government balance sheet by artificially generating liquidity backed by government liabilities. We didn't change many of the underlying mechanics (if you believe that the mbs rating schemes and bad mortgages were a symptom and not a cause which I do, we did fix those things)

The problems with a debt crisis at the sovereign level is there is only one can left to kick and that's the inflation can. The government says they don't want inflation but if it comes down to real solvency issues, they are going to give in to inflation, if the choice is between that and defaulting.

We basically have been playing a liquidity shuffling game since the first tech bubble.

Re: The Fed's $2.7T mortgage problem

#17

Post by JumpCrisscross »

> it will incur big financial losses that reduce the funds the central bank returns to the Treasury...expect officials to face tough questions from Capitol Hill to explain why they've lost billions of dollars on behalf of the American people

This isn't how it works.

No doubt, some will try to spin it that way. But the Fed balance sheet's gains and losses are an accounting artefact. (It will always make money when lowering rates. It will always lose money when raising them. This is close to mathematical fact.) The Fed can't go broke. Its operating metrics are inflation and unemployment.

> the selling would likely push mortgage rates up further, at a time the housing industry is already starting to groan under the pressure of rising rates

This is the real issue. But it's why we have an independent central bank. Nobody likes rate rises. It's why economies with weak institutions wind up hyper inflating. (No, we're not.)

Re: The Fed's $2.7T mortgage problem

#18

Post by phil21 »

upupandup wrote: post #7
candiddevmike wrote: post #5

The recession in 2008 was never really fixed, we just kicked the can down the road.

what does this mean exactly? We can't raise the rates anymore without substantial structural shift in our economy? Such as the end of ridiculous earnings-to-price multiples?

"Too Big to Fail" was introduced into our vocabulary.

I think beyond that it's too many words to really get into?

Re: The Fed's $2.7T mortgage problem

#19

Post by ZoomerCretin »

__john wrote: post #12
konfusinomicon wrote: post #11

Earlier quoted context omitted.

I dabble in news sources from both sides of the aisle and I've not heard the opinion that inflation is a result of poor people, only that its the result of a perfect storm of the pandemic and an unjust war halfway across the world, which mostly makes sense... who is blaming the poor?

Everyone knows inflation is because of the stimmies. edit: /s

Often what everyone knows to be true and what is actually true are distinct.

Re: The Fed's $2.7T mortgage problem

#20

Post by Mountain_Skies »

konfusinomicon wrote: post #11
jjoonathan wrote: post #4

Problem? No, it's working as designed: as a plausibly deniable mechanism to print trillions for rich people. Meanwhile, inflation will be blamed on the billions printed for poor people. "Balance sheet that never rolls off" is very much in the same genre as "loan that is actually a grant" and "financing tax cuts with debt."

I dabble in news sources from both sides of the aisle and I've not heard the opinion that inflation is a result of poor people, only that its the result of a perfect storm of the pandemic and an unjust war halfway across the world, which mostly makes sense... who is blaming the poor?

It appears that one side is fantasizing about what they'd like the other side to say so they can attack on that. Of course, we're talking about a country of over 330 million so it is possible to find someone somewhere that holds any given opinion even if it's not widely shared.
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