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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

#211

Post by quotemstr »

airstrike wrote: post #182
quotemstr wrote: post #180

Earlier quoted context omitted.

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

What you're talking about is government spending crowding out private spending, which is what happens when the economy is already at full capacity. In this situation, all the spending does is cause inflation, since money alone does not cause goods to spring into existence. It's like pushing on a string.

But are we close to full capacity?

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

#212

Post by HSO »

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…

> Buy stocks. Buy treasuries. Do so with wild abandon, because the Fed has your back. Just watch out for the moment when the whole thing jumps into reverse and no amount of market manipulation will stop the bleeding.

In other words, buy low sell high. Got it. ;)

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

#213

Post by interlocutor »

This abrupt move by the Fed betrays lack of knowledge of stock market psychology. Looking at how stocks are doing today you would not think that anything of interest has happened (no pun intended).

The stock market psychology works on "buy on rumor, sell on news" principle. This is the reason there was a significant rally yesterday, and stocks are in negative territory today.

What the Fed should have done is give signals that they are about to cut interest rates, then give stronger signals, then even stronger signals, then cut interest rate by 0.25% then repeat for the next 0.25%. Markets would have rallied multiple times for each good news signal.

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

#214

Post by coliveira »

psadri wrote: post #174
A4ET8a8uTh0 wrote: post #149

Earlier quoted context omitted.

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?

Not in an election year.

Trump will not let the recession occur, because he's so afraid of losing.

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

#216

Post by quotemstr »

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…

If housing prices are too high, it's because there are too many dollars chasing too few houses. Fix one or the other. The easiest and most humane option is to just let people build more housing and stop with the stasis-producing process you see in places like San Francisco

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

#217

Post by carlsborg »

airstrike wrote: post #133
rsync wrote: post #97

Earlier quoted context omitted.

" ... I'm still slightly bearish on the whole situation due to the combination of the virus' absurdly high infection rate[0] and its ridiculous ~25-30 day incubation period ..." You're right to highlight those aspects of the virus and I find them noteworthy as well. However, the statistics I am most interested in is mortality rate and rate of asymptomatic infections. I note with interest that among the 700+ infected…

According to my fancy math based on numbers from Johns Hopkins COVID-19 dashboard[0][1], we're closer to a 7% mortality rate [0] direct link: https://www.arcgis.com/apps/opsdashboard/index.html#/bda7594... [1] posted to HN: https://news.ycombinator.com/item?id=22475060

Same data, nicer dashboard and breaking news: https://coronastats.net

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

#218

Post by beamatronic »

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-…

There’s one thing the virus cannot beat: social distancing.

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

#219

Post by nemo44x »

landryraccoon wrote: post #95
airstrike wrote: post #49

Earlier quoted context omitted.

This reduces the interest on your mortgage

If you already own a home. Otherwise housing is just more expensive. Lower interest rates mean houses can be sold at higher prices for exactly the reason you gave.

It comes down to what people that want to live in a particular area can afford to pay monthly for housing and taxes. As interest rates go down, bidding will increase on homes as people consider the monthly cost which is generally mortgage + interest + taxes.

The only real effect it has on first time buyers is coming up with a percentage based down payment. But 20% isn't a real requirement nowadays, but you will incur a PMI payment until you get to 20% equity.

But housing isn't more expensive, unless you want to pay cash for the home. Then yes, low interest rates aren't nice. But when interest rates are low, what's the point in paying cash? Someone offering you money below what you could make on that money in the open market is something you should take. Put enough down to give you a comfortable monthly payment (or get to 20% to avoid PMI) and diversify the rest of your money.

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

#220

Post by MrPowers »

coliveira wrote: post #185

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…

I am always surprised when software engineers have such strong opinions on monetary policy. Black and white statements like "There is nothing the Fed can do revive the economy from the Corona virus" aren't the best for macroeconomics discussions that rely on imperfect information and multiple related variables. Your wording makes it sound like you know more about macro than the best minds in monetary policy.
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