Federal Reserve pledges asset purchases with no limit to support markets • Hacker News Board

Re: Federal Reserve pledges asset purchases with no limit to support markets

#181

Post by AsyncAwait » Mon, Mar 23, 2020, 3:52 PM UTC

I like how socialism's used to save capitalism, yet you'll still have people claiming capitalism its the only system that "works".

Yes, it "works" because it has to, i.e. there's no defined scenario of it not working, apparently nor the Great Depression, nor 2008, nor measures like these still don't mean anything as far as it not working, so it works because it apparently never does not work, no matter what.

P.S. I don't mean to claim capitalism 100% does not work and socialism does, merely that maybe we need a healthy mix of both?

Re: Federal Reserve pledges asset purchases with no limit to support markets

#182

Post by saiya-jin » Mon, Mar 23, 2020, 3:53 PM UTC

Ididntdothis wrote: post #87

roymurdock wrote: post #81

Earlier quoted context omitted.

bill gates saw this coming in 2015 [1] and proposed many solutions so we could better prepare including assembling a medical reserve corps, simulated "germ games", and investments in medical R&D along with increased investment in 3rd world health infrastructure to stop the infections before they spread also many asian countries were better prepared due to their exposure to mers/sars [2]. so there was a precedent and…

“bill gates saw this coming in 2015“ Let’s not make Gates the hero here. Most people working on infectious diseases knew about these problems.

Most people in general. Every time ebola started in Africa, there were information campaigns. But as long as you don't touch and it doesn't mutate, nobody cared much for some poor uneducated africans.

Everybody just thought it won't happen during their life/term, like some big asteroid impact. Well, not anymore

Re: Federal Reserve pledges asset purchases with no limit to support markets

#183

Post by [deleted] » Mon, Mar 23, 2020, 3:53 PM UTC

burroisolator wrote: post #164

nostromo wrote: post #139

Earlier quoted context omitted.

QE is revenue neutral or positive. They buy an asset with created cash, and sell it later for a small profit. Helicopter money is revenue negative and the created cash cannot be recovered.

QE is revenue neutral in theory just like helicopter money along with taxing that same amount back on a future date is revenue neutral in theory. In practice it is more like "buy $4 trillion worth of assets with created cash and never be able to sell it for fear of creating a liquidity crisis": https://fred.stlouisfed.org/series/WALCL .

[deleted]

Re: Federal Reserve pledges asset purchases with no limit to support markets

#184

Post by xiphias2 » Mon, Mar 23, 2020, 3:56 PM UTC

nemo44x wrote: post #128

xiphias2 wrote: post #97

Earlier quoted context omitted.

Where are yields soaring? Here it looks like they are going down: https://www.treasury.gov/resource-center/data-chart-center/i... It wouldn't surprise me if the 80 year bond bubble popped this year, but I don't see that happening yet.

The same reason mortgage rates are up even as treasuries are at an all time low. Who wants to loan money in this environment? Have you looked at BBB bonds? A lot of companies have been downgraded because the conditions have changed so dramatically, driving yields up as well.

I see, thanks!

When do you think it will translate to treasury bonds crashing? I can't imagine them having 5 more years, but on the short term they can easily go to negative yields.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#185

Post by sschueller » Mon, Mar 23, 2020, 3:57 PM UTC

spdy wrote: post #28

brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

Look at the ECB they are buying stocks for quite some time now. https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.h...

"The SNB (Swiss Nation bank) is the 35th largest investor, on average, across its top 50 holdings. In most securities, the only firms with larger investments are big asset managers like Blackrock and Vanguard, which hold investments for many individuals and institutions. That means that the SNB is the largest individual fund, bigger than any hedge fund." [1]

[1] https://qz.com/1140322/check-out-the-swiss-central-banks-ins...

Re: Federal Reserve pledges asset purchases with no limit to support markets

#186

Post by cs702 » Mon, Mar 23, 2020, 3:57 PM UTC

Every decade or so, with regularity, the world seems to go through a significant economic or financial crisis triggered by some or other "unexpected" shock:

* The current crisis, starting now, in 2020;

* The global financial crisis from 2008 to the early 2010's;

* The dotcom, telecom, and tech bust of the early 2000's;

* The Asian debt crisis of the late 1990's;

* The Latin America debt crisis of the 1980's;

* The oil shock and stagflation crisis of the 1970's;

In each of these crises, a significant swath -- or all -- of the world's financial infrastructure has seized up, requiring government intervention to prevent collapse.

A natural question to ask is whether the financial infrastructure we have today has been well-engineered to be robust to these remarkably regular shocks.

Judging by the regular seize-ups, it doesn't seem to be.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#187

Post by burroisolator » Mon, Mar 23, 2020, 3:58 PM UTC

JumpCrisscross wrote: post #155

burroisolator wrote: post #145

Earlier quoted context omitted.

Why wouldn't helicopter money solve the liquidity problem? Imagine you're a rich investor and you get a check from the government. You see a Company X that is suffering from liquidity issues but otherwise is doing great. Company X's stock is now plummeting because of fears of its insolvency. You, along with other investors who also received checks from the government as part of this helicopter money policy, decide to…

> Why wouldn't helicopter money solve the liquidity problem? One, it is not targeted. The Fed can pump vast quantities of liquidity into the heart of the credit markets in a way private actors aren't set up to. Two, it is not fast enough. Companies will go bust while waiting for politicians to authorize a cheque, the Treasury to cut it, investors to cash it and then to identify and decide upon an investment. Three, i…

I think if there was proper planning in place, you could have money sent out to people in a day, especially the demographic that would most likely be investing the extra cash. People already electronically pay their tax returns. Payments are taken up by the next day if you so specify; there is no reason to believe the same thing can't be done in the reverse direction. You don't need to physically cut checks for everyone, only those who specify or can't be reached with other means. Betting against investors to be able to quickly find investments is almost like betting against capitalism itself. If you're slow to invest, then you'll lose out on making money. Additionally most people while thinking of something more specific to invest in will probably be depositing this money into a generic savings accounts at first: while this happens, banks will be able to reallocate this capital to fit their needs.

If I knew that the policy was going to be that every time there is a liquidity crisis people will be getting checks (or electronic payments), then I wouldn't be scared of any runs in the same way. Again, is the argument that the Fed is better than private households in being a distressed investor?

Helicopter money can be taxed back. I know that is unlikely but so is the probability that the Fed's balance sheet going to zero: https://fred.stlouisfed.org/series/WALCL.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#188

Post by derefr » Mon, Mar 23, 2020, 4:00 PM UTC

dlgeek wrote: post #174

derefr wrote: post #134

Earlier quoted context omitted.

> It is 110% not good to have any major corporation go into a technical default. Q: rather than going into debt, would it be possible for the government to just... suspend the activation of financial covenants generally for a while? Enact a law putting a temporary patch on how contract law works vis-a-vis financial instruments? Something like... any covenant with triggers written after date X would now be required to…

No. That'd be considered an unconstitutional "taking" of the economic rights from people relying on those contractual terms. See Eastern Enterprises v. Apfel, 524 U.S. 498 (1998).

Re: that judgement, why is the stock market allowed to halt trading? For that matter, why are savings banks allowed to restrict access to their customers' savings during bank runs? Wouldn't people have the "economic right" to de-leverage [and thereby kill] these institutions in these situations?

Re: Federal Reserve pledges asset purchases with no limit to support markets

#189

Post by dwnvoted2hell » Mon, Mar 23, 2020, 4:01 PM UTC

Danieru wrote: post #126

Lots of voices missing the mark: the fed is acting to keep the corporate bond market from seizing up. Corporations finance part of their borrowings through bonds. These bonds need to be paid in full + the interest when the bond matures. Corporations and banks typically repay some of these from cash, and some by issuing new bonds. Right now no one is getting to issue new bonds at all. Banks cannot lend because the ris…

We've been writing corporate America a hall pass for quite some time. With many of these, I'm sure it's time to say "We'll loan you the money, on the condition the government owns you if you don't pay up." And if there is any company trying to lend more than their value...just end them - they've effectively become a cancer.

Re: Federal Reserve pledges asset purchases with no limit to support markets

#190

Post by [deleted] » Mon, Mar 23, 2020, 4:02 PM UTC

Danieru wrote: post #126

Lots of voices missing the mark: the fed is acting to keep the corporate bond market from seizing up. Corporations finance part of their borrowings through bonds. These bonds need to be paid in full + the interest when the bond matures. Corporations and banks typically repay some of these from cash, and some by issuing new bonds. Right now no one is getting to issue new bonds at all. Banks cannot lend because the ris…

[deleted]