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Fed cuts half point in emergency move amid spreading virus

bloomberg.com

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

#141

Post by heartbeats »

mbesto wrote: post #110
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?

That's just how it is with democracy. You can either be the politician who didn't really do anything for the economy, or you can be the politician who plunged the country into a recession.

Nobody wants to rip off the band-aid, even if it's infected underneath.

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

#142

Post by ajross »

throwaway5752 wrote: post #107

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…

It won't fix any of those, but it will smooth the impact of 1, 2, and 4 over a longer period, which has value. And it absolutely does treat 3 directly, though obviously there is a balance sheet problem with insurers (not the same thing as a liquidity problem!) that will need to be treated by some kind of a bailout eventually.

People are being too rigid here: this isn't a perfect policy but it's not an inherently bad idea. You use monentary policy to buffer shocks to the economy, and in that regime it's best used early and with agility. I think the Fed is fine here, though I agree that this is a very minor side plot in a much larger story.

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

#143

Post by gzu »

mindslight wrote: post #102
atq2119 wrote: post #47

Earlier quoted context omitted.

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…

lewis turning point: https://en.wikipedia.org/wiki/Lewis_turning_point

The inflation has been offshored. China's rural population has been lifted out of poverty. What happens to the world economy when china runs out of cheap labor?

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

#144

Post by headmelted »

airstrike wrote: post #119
ISL wrote: post #93

Earlier quoted context omitted.

The incubation period is not 25-30 days. The mean incubation period is 5-6 days, range 1-14 days. Source: Page 12, paragraph 2. https://www.who.int/docs/default-source/coronaviruse/who-chi...

See https://www.medrxiv.org/content/10.1101/2020.02.06.20020974v... > The median incubation period was 3.0 days (range, 0 to 24.0 days) Edited my post to include that source

Which makes 24 days an extreme outlier

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

#145

Post by xeromal »

sand_castles wrote: post #42
hsnewman wrote: post #24

I'm retired and mostly not in the market. I won't invest in the market while it is overpriced. With such low interest rates, what is a safe investment?

There is no interest without risk. I suggest Iranian, Argentinian bonds if you really want to get that blood flowing.

I wonder if syrian bonds are available?

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

#146

Post by skybrian »

pbrb wrote: post #38
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

I'm pretty worried about this. I don't think this rate cut makes any sense. You can't stimulus away a virus.

Yes but it could avoid some bad effects.

If a company temporarily can't manufacture something due to supply chain disruption, they could lose a lot of money and might need to borrow some. Getting by until things recover just got cheaper.

I'd guess there are probably similar issues for restaurants, the tourist industry, maybe construction?

But that assumes they're credit-worthy. It wouldn't help a company that can't borrow.

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

#147

Post by WhompingWindows »

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-…

You should edit that 24 days fact, it's simply incorrect and will spread misinformation.

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

#148

Post by blackearl »

mbesto wrote: post #110
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?

Better than the hyper growth and subsequent pop they went through in the 80s and 90s

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

#149

Post by A4ET8a8uTh0 »

heartbeats wrote: post #138
A4ET8a8uTh0 wrote: post #134

Earlier quoted context omitted.

It is weird for me to read this. On the surface, it is factually correct, but I am not absolutely certain the conclusions drawn are valid. Your initial paragraph seeks to address point raised by others that FED is running out of ammunition and you list of Japan as an example with other pointing out the price Japan paid for that pollicy. I suppose FED could buy all US equities on national credit card ( and if you thin…

Prudent move? It's the only move. If it's either that or a recession, then they will do it, consequences be damned.

I disagree. You can maybe delay the inevitable correction, but it is going to come. And after the sugar rush of easy credit ends, the headache will be that much worse.

Would it not be better to face some of that pain now?

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

#150

Post by y-c-o-m-b »

ISL wrote: post #93
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-…

The incubation period is not 25-30 days. The mean incubation period is 5-6 days, range 1-14 days. Source: Page 12, paragraph 2. https://www.who.int/docs/default-source/coronaviruse/who-chi...

I think there's been news floating around that the virus incubation period could be longer, which is probably where the OP got that number from. See here: https://www.reuters.com/article/us-china-health-incubation/c...

I don't see that supported by the CDC either though

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