Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Fed cuts half point in emergency move amid spreading virus

bloomberg.com

Post reply on HN
Print view View original

101–110 of 499 posts

Re: Fed cuts half point in emergency move amid spreading virus

#101

Post by aazaa »

rbinv wrote: post #72
aazaa wrote: post #51

For those saying the Fed is running out of ammunition, study what the Bank of Japan has done. It owns close to 80% of the Japanese ETF market currently, with no end to the expansion of balance sheet in sight. After buying long treasuries, it's not unreasonable to imagine the Fed buying stocks, either individual issues or ETFs. The President would be for it, and it would be hard to drum up any opposition to it in cong…

What would be the endgame here?

I suspect it will nurture a massive structural problem few today would understand or care much about. It will be allowed to grow unabated because, frankly, there will be bigger fish to fry.

Maybe a little like subprime leading up to 2008. The problem was written off by just about everyone who bothered to look, until something snapped and it was the only thing that mattered.

We may be seeing the start of this in the repo market, which once again had a convulsion today. I doubt many care about it or really understand it, and that goes double for policy makers.

Re: Fed cuts half point in emergency move amid spreading virus

#102

Post by mindslight »

atq2119 wrote: post #47
ptyyy wrote: post #5

We're basically running out of tools to combat an actual financial crisis. https://www.investopedia.com/terms/l/liquiditytrap.asp

Only because the toolset is artificially restricted for ideological reasons. Fiscal responses (having the government spend actual money, either on things like infrastructure it by just handing it out to the population, which will then largely spend that money as they see fit) rather than monetary policy responses (reduce rates and hope that people will borrow more) are known to work well in most cases. The Corona vir…

> inflation has arguably been far too low for far too long anyway...

Do you not need a roof over your head, health insurance, a car, college education, etc? Inflation has been rampant, it's just not apparent in manufactured goods because the actual cost of production dropped rapidly with offshoring and technological progress. Without significant inflation, we would have seen a steady march down of consumer prices, as happened in computing.

Re: Fed cuts half point in emergency move amid spreading virus

#103

Post by bluedevil2k »

learc83 wrote: post #86
bluedevil2k wrote: post #57

Earlier quoted context omitted.

A fiscal stimulus? Yes, let's go even more into debt than we already are.

It doesn't matter how much debt we are in provided the rate of return for the investment is greater than the interest on the new debt. And that's without considering that inflation is very low, so we can print our way out of some of it.

I find it ironic that the people who say "the government should just spend tons of money because the debt doesn't matter" and don't care about punting the problem to the next generation are the same ones who say how irresponsible the Baby Boomers are for punting the environment problem to the next generation.

Re: Fed cuts half point in emergency move amid spreading virus

#104

Post by samvher »

JumpCrisscross wrote: post #68
airstrike wrote: post #27

From what I gather after spending more time than I'm willing to admit listening to every finance talking head out there, the consensus on the street seems to be that this will result in a temporary market recovery followed by the continued deterioration of stock prices given that fiscal or monetary* policy can't really affect the real economy in the near term* i.e. if the supply chain is indeed impacted due to COVID-…

> fiscal policy can't really affect the real economy Fiscal policy ( e.g. the government buying tanks) absolutely affects the real economy. The central bank doesn't control fiscal policy. It controls monetary policy. Monetary policy also affects the real economy, just indirectly.

Right. And from what I understand, even if monetary policy does not directly solve virus or supply chain issues, it can make life easier for corporations loaded with debt (there are many) which might get into trouble as the economy deteriorates.

Re: Fed cuts half point in emergency move amid spreading virus

#105

Post by [deleted] »

airstrike wrote: post #94
toomuchtodo wrote: post #75

Earlier quoted context omitted.

The entire world is about to have a supply chain disruption that you can't stoke into recovery using central bank policy. The Fed rarely lowers interest rates without notice. They're spooked.

> The Fed rarely lowers interest rates without notice. Just to play devil's advocate, the world also rarely has an epidemic of this magnitude...

[deleted]

Re: Fed cuts half point in emergency move amid spreading virus

#106

Post by mullingitover »

rbinv wrote: post #72
aazaa wrote: post #51

For those saying the Fed is running out of ammunition, study what the Bank of Japan has done. It owns close to 80% of the Japanese ETF market currently, with no end to the expansion of balance sheet in sight. After buying long treasuries, it's not unreasonable to imagine the Fed buying stocks, either individual issues or ETFs. The President would be for it, and it would be hard to drum up any opposition to it in cong…

What would be the endgame here?

What's the term for when the government owns all the industries?

Re: Fed cuts half point in emergency move amid spreading virus

#107

Post by throwaway5752 »

This is not solving the problem which is 1) the US is drastically behind in testing the population 2) it will not fix disrupted international supply chains 3) it will not fix liquidity crises at health insurers, hospitals, and life insurers and 4) it will not fix demand if people do not want to go shopping at any price because of non-financial concerns.

I presume the Fed knows this, and what worse is this seems to be due to political pressure.

Finally, when this does not work, it will reduce peoples' faith in the Fed.

Re: Fed cuts half point in emergency move amid spreading virus

#108

Post by airstrike »

landryraccoon wrote: post #95
airstrike wrote: post #49

Earlier quoted context omitted.

This reduces the interest on your mortgage

If you already own a home. Otherwise housing is just more expensive. Lower interest rates mean houses can be sold at higher prices for exactly the reason you gave.

Sure, price and yield are inversely related, but I would imagine there would be less demand for new housing in a worse economy bringing prices down

Re: Fed cuts half point in emergency move amid spreading virus

#109

Post by ilikehurdles »

standardUser wrote: post #63
pastor_elm wrote: post #8

>The Fed also said in the statement that the “fundamentals of the U.S. economy remain strong.” So why cut the rate? Doesn't make any sense.

Bowing to pressure from King Trump. Edit: Trump has loudly and consistently attacked the Federal Reserve for scheming against him and trying to sabotage the economy, something completely unprecedented considering the Fed is famously intended to be independent. He ratcheted up these complaints even further since the outbreak of Convid-19. Then, the Fed takes the unusual step of cutting rates between sessions (for the…

So has it been all but confirmed that the Fed is no longer an independent office?

Re: Fed cuts half point in emergency move amid spreading virus

#110

Post by mbesto »

aazaa wrote: post #51

For those saying the Fed is running out of ammunition, study what the Bank of Japan has done. It owns close to 80% of the Japanese ETF market currently, with no end to the expansion of balance sheet in sight. After buying long treasuries, it's not unreasonable to imagine the Fed buying stocks, either individual issues or ETFs. The President would be for it, and it would be hard to drum up any opposition to it in cong…

> For those saying the Fed is running out of ammunition, study what the Bank of Japan has done.

Oh you mean the economy that has been stagnate for 20 years?

Post reply on HN