This is one of those rare threads on HN where I can’t understand a single thing people are talking about
It’s okay, neither can the people posting
Federal Reserve lent $300B in emergency funds to banks in the past week
171–180 of 262 posts
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#172Earlier quoted context omitted.
It’s a loan, not QE. QE is no strings attached money injected into the market. QT is still ongoing as of last week, however, I don’t see it lasting. I do think a .25 rate hike will still happen.
It's all a loan, whatever name you attach to it they have to borrow to print money. Reality check: US debt to GDP ratio is over 120% and the US doesn't have the credit to borrow anymore. We're looking at hyperinflation and a long depression unless they stop printing money and we experience massive austerity/spending cuts. We are literally in an economic death spiral (that's what a debt to GDP ratio of > 120% means) a…
> US doesn't have the credit to borrow anymore
This is a ridiculous statement. The market for US treasuries is perfectly healthy.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#173I assume banks went ahead and bought subprime mortgage bonds with that $300B. And at this point why not? Everyone knows that the government will print an unlimited amount of money to keep the system going no matter what risks you take and how careless you are.
SVB and Signature banks both failed , their shareholders walked away with nothing. This does not encourage risk-taking on the part of the banks.
Why doesn't it? This bank may have failed. Their next one may not. They are playing with house money, and have limited time in the casino. Betting big is the optimal strategy.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#174Earlier quoted context omitted.
My argument is that the last 13 years of low interest rates produced a distorted economy where wealthy individuals gained more wealth without making profits, and those without assets saw their incomes and living standards stagnate. Low-interest rates produced companies like Uber, and socialized losses for bank failures. Low-interest rates meant TSLA became the most valuable company in the world while turning a loss.…
I don't disagree with anything that you are saying. The parent topic is about inflation, and throughout the least 13 years, inflation has not been a problem until - in my opinion - faulty fiscal policy during Covid. In other words, had both monetary and fiscal policy stayed the same, inflation would not have happened to the extent we are dealing with right now. But fiscal policy (government handouts) was extremely li…
"and throughout the least 13 years, inflation has not been a problem until - in my opinion - faulty fiscal policy during Covid."
It was a problem for a lot of people who either got priced out of the housing market or have huge student loans or have huge healthcare bills. The price of eggs or gas is really not much of a problem when the price of these big ticket items shoots up.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#175Earlier quoted context omitted.
there's no getting away with anything. The inflation stat "everyone" uses is preferred by economists because it is not as noisy, i.e. it has better temporal auto-correlation. However, there are all-inclusive metrics as well, and in fact those are used to compute the I-bond yield. https://www.bls.gov/news.release/cpi.t01.htm
A more cynical take on this is that the remaining goods in the basket often have "adjustments" that can be made - for example, most technology gets discounted because the new version is faster (in top-line performance) than the old version. That adjustment process allows them to create a lower-noise metric, with the side effect of also creating an inflation narrative that is convenient (unless things are well and tru…
You could say that, but then you have to explain why all my commodity investments seem so terrible.
This is mostly a joke, as I don't trade commodities; however, if BLS is juking the stats year over year with some agenda or other, basic inputs should have a steeper nominal trend line than they do, noisy as it is.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#176Earlier quoted context omitted.
It's all a loan, whatever name you attach to it they have to borrow to print money. Reality check: US debt to GDP ratio is over 120% and the US doesn't have the credit to borrow anymore. We're looking at hyperinflation and a long depression unless they stop printing money and we experience massive austerity/spending cuts. We are literally in an economic death spiral (that's what a debt to GDP ratio of > 120% means) a…
> US doesn't have the credit to borrow anymore This is a ridiculous statement. The market for US treasuries is perfectly healthy.
[deleted]
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#177Earlier quoted context omitted.
To whomever downvoted this - what happened at SVB and Credit Suisse was confidence inspiring? Trust building?
You're not being downvoted because people trust banks; you're being downvoted because commenting "you can't trust the banks" doesn't add anything interesting to the discussion, it's just a bare statement of a common opinion.
And that's not ok why? It's not against the HN policies...
And you are incorrect, my point is we can't trust the people currently in charge of much of our financial system. Not a mistrust of the institutions themselves.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#178Id be curious to know how much physical currency has been withdrawn and if there are pressures on that. Inter-bank deposits are covered for people fleeing bad banks, but anecdotally I know a few people who are withdrawing all their hard cash. I wonder if central banks will have issues with that soon.
> anecdotally I know a few people who are withdrawing all their hard cash Why (anecdotally)? Even if the bank holding your checking/savings account fails, the US federal government insures you up to $250k. And that promise is an important one for the government to make precisely because it tips fear/security scales so that people don't do exactly what your friends are doing, which is contributing to the risk of a ban…
Anecdotally, here’s one: https://en.m.wikipedia.org/wiki/Pyramid_Building_Society
Loose summary: Final payout 2005, collapse 1990. Depositors returned 51% of the dollar. As it was happening: govt says nothing to worry about. Months later: no govt guarantee lol. To someone who didn’t get involved in the run: what are going to do for food, all our savings are locked away and it’s a fortnight until next payday. Those effected unlikely to forget easily.
It’s not apples to apples, aus vs USA, conditions have changed since etc. but I think the rough jist of if you can manage to, don’t rely on the govt in a crisis still applies. Anecdotally.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#179So here's what I'm confused by. The writing was on the wall a year ago for rapid interest rate hikes. This has well-known and predictable effects on long-term bond holdings. Why didn't banks liquidate their long-term bond holdings a year ago? I can guess the answer: they wanted to protect executive bonuses and share prices. They hoped they could just stick their heads in the sands and hold those bonds to maturity. An…
> Why didn't banks liquidate their long-term bond holdings a year ago?
Who do "the banks" sell them to?
A bank can sell them to another bank. Someone is still sitting on it.
We can't sell mortgage bonds to space aliens yet AFAIK, and other banks in other countries can also see that they don't want to touch them in a rising rate environment, and they'll have their own problems back home.
Economics 101 is learning that "why doesn't everyone just X" usually doesn't work when it comes to macroeconomics.
Re: Federal Reserve lent $300B in emergency funds to banks in the past week
#180Id be curious to know how much physical currency has been withdrawn and if there are pressures on that. Inter-bank deposits are covered for people fleeing bad banks, but anecdotally I know a few people who are withdrawing all their hard cash. I wonder if central banks will have issues with that soon.
> anecdotally I know a few people who are withdrawing all their hard cash Why (anecdotally)? Even if the bank holding your checking/savings account fails, the US federal government insures you up to $250k. And that promise is an important one for the government to make precisely because it tips fear/security scales so that people don't do exactly what your friends are doing, which is contributing to the risk of a ban…
Also, if the banking system collapses, cash is worthless.