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Federal Reserve pledges asset purchases with no limit to support markets

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

#211

Post by cryptica »

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 are talking about companies which have plenty of assets and strong businesses.

If their businesses were so strong, they shouldn't have taken a loan that would jeopardize them so easily. The Fed should let them default and take all their cronies down with them. Give the system a good clean by wiping out the parasites.

A lot of these so-called 'strong' companies had been using debt as a way to evade taxes... And now that their highly unethical schemes are about to crumble, we bail them out?

The Fed are aggravating the 'too-big-to-fail' problem. They're turning every corporation into 'too-big-to-fail'. If we continue down this path, we'll end up with communism. It will be the worst, most perverse form of communism ever invented.

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

#212

Post by kaffeemitsahne »

cs702 wrote: post #186

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 oi…

If there is government intervention every time, naturally there is no reason for anyone to implement robustness measures.

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

#213

Post by dollar »

AsyncAwait wrote: post #181

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 d…

You labor under the delusion that we have capitalism. We don't. We have socialism, and have for over 70 years.

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

#214

Post by JumpCrisscross »

ianai wrote: post #205
JumpCrisscross wrote: post #176

Earlier quoted context omitted.

> would it be possible for the government to just... suspend the activation of financial covenants generally for a while Changing the rules of massive bilateral agreements to benefit one party over another tends to blow confidence in the system. Investors would start trying to guess which asset class will next be amended, thereby triggering runs across the market. (We see this when governments start expropriation pro…

So instead of bailing out the companies, why not focus on ensuring their customers have the money to demand their goods and services through direct stimulus?

> why not focus on ensuring their customers have the money to demand their goods and services through direct stimulus?

That's...happening? It's the core of each of the stimulus bills.

The company bailouts are, theoretically, for otherwise-good businesses unusually impacted by the pandemic. Restaurants and airlines, for example. Of course, there is the winner-picking that happens when any government spends money.

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

#215

Post by hamiltont »

airstrike wrote: post #158
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…

Also want to point out that if companies can't afford their expenses, they'll stop paying rent (usually a huge expense and one that is fairly easy to stop paying while still occupying the real estate) Then landlords can't pay their expenses, and will default on their own payments This trickles up all the way to the banks and could result in their insolvency, which is what the Fed is (rightfully) trying to prevent

In my industry (software), rent is typically peanuts compared to payroll

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

#216

Post by mobilefriendly »

derefr wrote: post #134
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…

> 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…

It is unconstitutional in spirit and practice in the United States for lawmakers to meddle in existing contracts. https://en.wikipedia.org/wiki/Contract_Clause

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

#217

Post by hn_throwaway_99 »

cryptica wrote: post #211
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 are talking about companies which have plenty of assets and strong businesses. If their businesses were so strong, they shouldn't have taken a loan that would jeopardize them so easily. The Fed should let them default and take all their cronies down with them. Give the system a good clean by wiping out the parasites. A lot of these so-called 'strong' companies had been using debt as a way to evade taxes... And…

This line of thinking is so much in fantasy land. Here is what would really happen:

1. Lots of businesses would fail, and we would experience another great depression. 2. You don't like populism now? The risks of outright fascism (beyond what you could say we already are experiencing) would go up exponentially.

The main problem with the Ron Paul acolytes is they think that society wouldn't have a massive breakdown in the face of an extremely deep depression - it would just be "the smart entrepreneurs would buy up the assets and build something better!" - but they never talk about how they would deal with the breakdown in democracy and basic government systems that would be a likely result.

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

#218

Post by JDiculous »

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…

I don't disagree with this, but it's a shame we don't address the suffering of humans who've lost their jobs, or small businesses having to go bankrupt due to this crisis, with the same degree of urgency. I get that the Fed doesn't have the power to provide "liquidity" directly to the people right now, but they should. This is socialism/welfare for the rich, free markets for the poor.

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

#219

Post by tarsinge »

trimbo wrote: post #202
tarsinge wrote: post #195

Earlier quoted context omitted.

But Japan did not let the banks and corporations fail, then they got zombie economy. Instead let entrepreneurs buy defaulting corporations with all their assets for $1 and see what can happen with fresh blood and creativity. No value is destroyed, assets and personnel stays, and hopefully consumer demand will go back after the pandemic. Edit: ah yes shareholders lose money but that's the game. Retirement pensions? If…

It's not just one or two companies. At minimum: all retail, all airlines, all hotels, all cruise ship companies are at risk.

Apart from paying people to stay at home during the pandemic what's the issue? Why would tourism disappear? Buy the failed airline/hotel, change the name, personnel returns to work, business as usual.

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

#220

Post by vkou »

mobilefriendly wrote: post #216
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…

It is unconstitutional in spirit and practice in the United States for lawmakers to meddle in existing contracts. https://en.wikipedia.org/wiki/Contract_Clause

This happens all the time when things like tenancy law get adjusted.
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