Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Federal Reserve pledges asset purchases with no limit to support markets

cnbc.com

Post reply on HN
Print view View original

231–240 of 368 posts

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

#231

Post by woofie11 »

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…

They make sense to do, but there are better bailouts.

https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs...

We need a consistent approach across the board -- small businesses, individuals, etc. Pausing the economy makes much more sense than targeted bailouts to specific industries.

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

#232

Post by trimbo »

tarsinge wrote: post #219
trimbo wrote: post #202

Earlier quoted context omitted.

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.

Who with cash is going to buy all of these businesses and take on their debt? Apple? Microsoft? Some PE firms?

Or is your proposal to default on all the debt for those industries and buy the companies in a firesale? Tourism would actually disappear in that scenario...

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

#233

Post by elamje »

chadmeister wrote: post #6

Awful policy. The fed needed to hold off on this and the previous rate cut until Congress finally passed a useful bill. Powell had all the power to force Congress to act and he's blown it again.

Wrote a thread about a different perspective of the Fed. I want to gently suggest that your concept of what the Fed is, is not correct. It’s complex, and a very unique government/private entity, but it certainly is explicitly not supposed to respond to any sort of political influence.

https://mobile.twitter.com/elamje/status/1242129602040008704

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

#234

Post by johnvanommen »

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…

> rather than going into debt, would it be possible for the government to just... suspend the activation of financial covenants generally for a while?

That's completely unfair to one side of the transaction.

Here's an example:

Let's say that in 2010, I bought a million in bonds from various sources.

Let's say that in 2010, you sold me some bonds.

Let's say that your proposal goes through, and the government just declares that contracts will not be enforced.

That would completely punish ME at YOUR benefit.

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

#235

Post by lifty »

OscarCunningham wrote: post #198
marcrosoft wrote: post #122

Earlier quoted context omitted.

Not for long.

What makes you think that? People said similar things in late 2008 when the Fed greatly expanded its balance sheet, and then inflation went negative for the next year.

There was great inflation in financial assets, for the whole decade leading up to the current crisis. So there is a good chance the same thing will happen again, now that the central banks have taken the big guns out. I keep hearing that the FED (and other CBs) our out of bullets, but I think they have unlimited bullets. If you inject enough liquidity even a dead horse will bounce back; and for an example of that, you can check out the Venezuelan stock market (https://tradingeconomics.com/venezuela/stock-market).

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

#236

Post by OscarCunningham »

lifty wrote: post #235
OscarCunningham wrote: post #198

Earlier quoted context omitted.

What makes you think that? People said similar things in late 2008 when the Fed greatly expanded its balance sheet, and then inflation went negative for the next year.

There was great inflation in financial assets, for the whole decade leading up to the current crisis. So there is a good chance the same thing will happen again, now that the central banks have taken the big guns out. I keep hearing that the FED (and other CBs) our out of bullets, but I think they have unlimited bullets. If you inject enough liquidity even a dead horse will bounce back; and for an example of that, yo…

So you're making the opposite prediction to the person I originally replied to? Investments will gain value faster than the cost of living?

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

#237

Post by elamje »

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…

There is a lot of popular sentiment that misses the mark of the Fed, largely due to most Americans not taking time to study and understand it, but just seeing this large entity that has first-order effects that seem to only benefit banks and investors.

The parent here ^ seems to understand the nuance, that a lot of Fed decisions are for the CREDIT markets, not the stock markets.

I highly recommend reading the Greenspan or Bernanke biographies to hear what, and why, they use the levers that they do. There is simply too much nuance in financial markets and the Fed to play arm-chair politics about whether it is effective or not.

I just wrote a thread [0] responding to a joke going around about our first response to everything being to lower interest rates.

[0] https://mobile.twitter.com/elamje/status/1242129602040008704

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

#238

Post by nocorpwelfare »

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…

This is acceptable as long as the billionaires all take big haircuts this time. In 2008, they paid themselves huge bonuses while Main St. got evicted. Not happening this time!

Pitchforks, torches, and nooses if necessary.

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

#239

Post by nocorpwelfare »

imtringued wrote: post #175
derefr wrote: post #153

Earlier quoted context omitted.

> Trying to "pause" commitments would take years to implement. It would be like trying to go through the world's internet and "suspending" all user requests and server processing. I don't see the parallel. Covenants, ultimately, have to be enacted through the courts. (I mean, presuming debtors' legal departments get the message from the government that they don't have to worry about covenants during this period, what…

You are completely skipping over the basics. If someone doesn't pay then someone else doesn't get paid. You merely shifted the problem to somewhere else. That somewhere else is usually something extremely critical such as the banking system.

Last time, there was a big search for bag holders. Guess who the bag holders were?

You and me and Fed.gov. It fucking sucks.

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

#240

Post by oflannabhra »

JDiculous wrote: post #218
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.

If businesses go insolvent, what happens to _all_ of their employees? The Federal Reserve's job is to a) minimize unemployment and b) target inflation. From what I can tell, they are doing everything in their power to accomplish those goals.

I agree that more needs to be done directly for folks who have already lost their jobs or will soon, but that type of stimulus would require an act of Congress, who apparently can't get their collective heads out of their own asses at the moment.

Post reply on HN