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Federal Reserve pledges asset purchases with no limit to support markets

cnbc.com

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

#21

Post by rubber_duck »

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…

Wouldn't this mean that FED, which already has the control over the money supply, can now go and buy companies with the money it creates ?

If you define FED as a private entity - this sounds like theft.

If you define it as a part of the government then you are transitioning to socialism (government ownership of means of production).

Neither of these sounds like something that would be acceptable in the US political system - am I missing something here ?

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

#22

Post by [deleted] »

dntbnmpls wrote: post #16
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…

> Keep in mind they're only able to buy US treasuries and mortgage backed securities. They announced they will buy municiple bonds also. https://www.cnbc.com/2020/03/20/the-federal-reserve-is-expan... > If Congress changes the rules to allow the Fed to purchase stocks Corporate bonds first. If that fails, then stocks. Baby steps.

[deleted]

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

#23

Post by CyanLite4 »

alexmingoia wrote: post #7

How does injecting money solve a problem that’s not caused by lack of money? This market downturn isn’t a lack of liquidity, or a lack of money, or toxic assets like the mortgage backed securities. People aren’t going to stores, restaurants, and airlines because of SARS-CoV-2, not a lack of credit or money. Printing money isn’t going to create customers for businesses effected by this pandemic.

It stops the stock market slide. Which is more valuable than political talking points. Eventually these bankers are going to start doing some math and see that with 0% interest rates and unlimited firepower on Treasuries, there’s going to be massive pent up demand after this medical crisis is solved. Money will be lent to everyone, including airlines and leisure companies because there’s simply no where else to put their money. Inflation be damned. Market is always looking 6+ months ahead. And the moment bankers see a light at the end of the tunnel, this thing is going to take off like a rocket ship.

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

#24

Post by dredmorbius »

alexmingoia wrote: post #12
stefano wrote: post #10

Earlier quoted context omitted.

I guess the idea is to keep companies solvent so they'll still be there when the quarantine restrictions are lifted.

Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.

Because:

1. Nobody would buy them.

2. Small biz doesn't have access to corporate paper markets, even in the best of times.

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

#25

Post by dredmorbius »

alexmingoia wrote: post #7

How does injecting money solve a problem that’s not caused by lack of money? This market downturn isn’t a lack of liquidity, or a lack of money, or toxic assets like the mortgage backed securities. People aren’t going to stores, restaurants, and airlines because of SARS-CoV-2, not a lack of credit or money. Printing money isn’t going to create customers for businesses effected by this pandemic.

The problem isn't caused by a lack of money, but it's creating one, which exacerbates the crisis.

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

#26

Post by take_a_breath »

alexmingoia wrote: post #12
stefano wrote: post #10

Earlier quoted context omitted.

I guess the idea is to keep companies solvent so they'll still be there when the quarantine restrictions are lifted.

Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.

If companies don’t have customers, as you noted in your prior comment, how will they secure debt financing at a reasonable rate?

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

#27

Post by chrshawkes »

alexmingoia wrote: post #7

How does injecting money solve a problem that’s not caused by lack of money? This market downturn isn’t a lack of liquidity, or a lack of money, or toxic assets like the mortgage backed securities. People aren’t going to stores, restaurants, and airlines because of SARS-CoV-2, not a lack of credit or money. Printing money isn’t going to create customers for businesses effected by this pandemic.

There are certainly money problems as we speak. Millions have already lost their jobs.

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

#28

Post by spdy »

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...

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

#30

Post by akmarinov »

rubber_duck wrote: post #21
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…

Wouldn't this mean that FED, which already has the control over the money supply, can now go and buy companies with the money it creates ? If you define FED as a private entity - this sounds like theft. If you define it as a part of the government then you are transitioning to socialism (government ownership of means of production). Neither of these sounds like something that would be acceptable in the US political s…

It's not socialism if the poor unwashed people don't get anything for free. /s
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