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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

#181

Post by throwaway5752 »

ajross wrote: post #142
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…

Yeah, I didn't want to seem alarmist and talk about solvency crises in the insurance market. But I would be interested what impact this might have on life/health/related reinsurers. I feel like targeted intervention in that sector similar to the auto manufacturers is a better thing to plan for and I'm not sure that a 50 basis point cut is going to help as much as you do in 1/2/4 and will be insufficient in 3.

One thing that bothers me and I don't see discussed here is how much the market moved ahead of the announcement. It is very alarming that this sort of information leaked ahead of the announcement as much as it did. I would be interested to know how that reached the market.

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

#182

Post by airstrike »

quotemstr wrote: post #180
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 don't think fiscal policy can affect the economy? Direct spending will result in increased production up to the productive capacity of the economy, won't it?

You can't produce anything if you can't buy parts

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

#183

Post by wpietri »

lawrenceyan wrote: post #135
airstrike wrote: post #114

Earlier quoted context omitted.

I've edited the post accordingly, it was a brain fart moment... But thanks for your sincere feedback

I'm 100% understanding of brain farts. It's just that to do so on something as fundamental and basic as monetary versus fiscal policy, to me feels like, a mistake a non-layman wouldn't make. It's not like you can chalk it up to an issue with similar spelling either. 'Monetary' and 'fiscal' are written completely differently.

I'm not quite following. Are you only expecting experts to comment here? If so, are you an expert in the frequency and type of textual errors and how that relates to expertise?

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

#184

Post by unreal37 »

yumraj wrote: post #176

China started with single digit cases, which then spread countrywide with tens of thousands of cases and many deaths. They quarantined cities, built 1000 bed hospitals in 10 days. And now after about 2 months they are seeing a slowdown. Why would this exact scenario regarding growth in the number of cases not play out in the US? The only difference is smaller population, but cities are dense here too. However, unlike…

Apparently China will have a massive economic cost to this.

"New data on China that has trickled in over the last few days suggests the damage coronavirus has wrought on the world’s second-largest economy could be worse and more prolonged than previously expected, despite a decline this week in the number of new infections in the country."

[0] https://business.financialpost.com/news/economy/five-signs-t...

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

#185

Post by coliveira »

This is a big mistake. There is nothing the Fed can do revive the economy from the Corona virus, because this is not a demand problem, it is a supply problem. The economy WILL slow down because the major parts of the economic chain have been considerably affected by this virus. You cannot use more money when there is less to buy and sell. This will happen simply because whatever solution to the virus disruption will take time to be implemented.

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

#186

Post by derrick_jensen »

jvanderbot wrote: post #172
jrs235 wrote: post #163

Earlier quoted context omitted.

“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.” ~ Someone, supposedly Thomas Jefferson Edit: ~ "Thomas Jefferson" changed to "~ Someone…

"Spurious" * No documentation ties it to its putative originator. * Its earliest known reference did not appear until long after the death of its supposed originator. * Multiple sources are claimed for its origins. * Contextual information indicates the words are of more recent origin than claimed. (deflation/inflation) 1. https://www.monticello.org/site/research-and-collections/pri... 2. https://www.snopes.com/fact-…

To be fair, within the Constitution there is a clause where the Gold standard is required for all debts and tender (https://en.m.wikipedia.org/wiki/Contract_Clause), of which Thomas Jefferson wrote the majority. Even if he didn't say it himself, the sentiment was strong enough between all parties that it was included in the beginning.

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

#187

Post by [deleted] »

wefarrell wrote: post #83
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/monetary policy has a real effect on the economy but only on the demand side.

[deleted]

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

#188

Post by Trias11 »

lottin wrote: post #153
JumpCrisscross wrote: post #68

Earlier quoted context omitted.

> 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.

Monetary policy is about increasing or decreasing the money supply. The argument is that it cannot have long-term real effects because if it did we would all be incredibly rich, since it costs nothing to increase the money supply by whatever amount. Every underdeveloped nation would simply increase their money supply and poverty would be a thing of the past.

Like Zimbabwe.

100 Trillion Dollar bill anyone?

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

#189

Post by adrianN »

unreal37 wrote: post #173
adrianN wrote: post #160

Earlier quoted context omitted.

GDP per capita doesn't look stagnant: https://tradingeconomics.com/japan/gdp-per-capita

Looks like the population of Japan is falling faster than the GDP of Japan. So "per capita" is kinda misleading here.

I think GDP is pretty much meaningless and GDP per capita is a much more useful statistic.

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

#190

Post by School-Cotton »

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-…

If that were really the consensus among traders, it would be priced in, by definition.
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