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The Fed now owns nearly 1/3 of all U.S. mortgages

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Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#31

Post by JMTQp8lwXL »

donmcronald wrote: post #26
throwaway4good wrote: post #17

Earlier quoted context omitted.

The fed can keep interest rates low; it is literally what they are doing by buying the bonds. In principle you should see higher inflation and a falling currency. However this policy (aggressive buying of all kind of bonds) has been persued by the Europeans and Japanese for years and it haven't really caused a collapsing currency or high inflation. Some may argue that it suspends a natural reallocation of resources i…

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

Inflation for luxury goods or the types of things the 10% buys (which has some overlap with everyone else: they too, need food, housing, etc). But most households don't need more than 1 washing machine. So you gift any amount to the top 10%, but washing machine prices aren't going anywhere.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#32

Post by jdm2212 »

donmcronald wrote: post #26
throwaway4good wrote: post #17

Earlier quoted context omitted.

The fed can keep interest rates low; it is literally what they are doing by buying the bonds. In principle you should see higher inflation and a falling currency. However this policy (aggressive buying of all kind of bonds) has been persued by the Europeans and Japanese for years and it haven't really caused a collapsing currency or high inflation. Some may argue that it suspends a natural reallocation of resources i…

If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?

There's no impact because people are sitting on cash rather than spending it.

What the Fed accomplishes by handing out the $1 trillion is this: they kept all the _other_ money circulating. If people wanted to hoard $1 trillion because they're scared about the future, well, now they've hoarded it. They feel safe and they spend the rest of their money, and the economy keeps humming along.

If instead they'd tried to hoard that $1 trillion without Fed intervention, there'd be an economic collapse.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#33

Post by adventured »

dternyak wrote: post #24
JackFr wrote: post #14

Earlier quoted context omitted.

The rest of the world buys US treasuries cause we buy their goods. China buys treasuries because we buy goods with dollars. China has to do something with the dollars. They can buy goods or they can buy assets. They aren’t that interested in our goods, so they buy bonds. If they wanted to unload the dollars they certainly could, but that would weaken the dollar and strengthen the yuan and make it unattractive for the…

> The rest of the world buys US treasuries cause we buy their goods. China buys treasuries because we buy goods with dollars. China has to do something with the dollars. It strikes me as extremely odd that it's become so normalized that the U.S.'s role in trade is simply as a buyer of goods. In any transaction, both parties are typically better off after having made the transaction, else one party would refuse. The U…

> It strikes me as extremely odd that it's become so normalized that the U.S.'s role in trade is simply as a buyer of goods.

It should strike you as odd, what you're saying is wrong.

The US exports $2.5 trillion worth of goods and services, including $1.7 trillion of goods.

The US is the world's #2 exporter of goods. With services included, the US is nearly the world's #1 exporter. In 2018, the US was behind China by only about $80 billion in total exports. That's nearly three times the #4 export country, Japan.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#34

Post by scrumbledober »

JMTQp8lwXL wrote: post #18

I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.

well as a 30 year old looking for my first home who grew up in the bay area... yeah that's exactly what I feel.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#36

Post by adventured »

remote_phone wrote: post #8
hn_throwaway_99 wrote: post #7

I keep thinking of all the huge amount of asset purchases by the Fed, especially legally dubious purchases like corporate bonds, that "this won't end well". That said, I don't really know what "not ending well" would look like. Would it just be total runaway inflation? Can anyone more knowledgeable comment on what possible endgames are for these asset purchases?

The worst case scenario is the rest of the world dumping US treasuries, and causing interest rates to skyrocket and USD to plummet.

The ECB has 2x the portfolio size as a share of GDP as what the Fed does. The Bank of Japan's portfolio is about 4x the Fed on that metric.

Why isn't the Eurozone collapsing, with interest rates skyrocketing and the Euro imploding?

Somehow Japan is still managing - despite a public debt & budget situation several times worse than the US - with a GDP per capita still on par with Britain, France, and just below Germany. And yet all the armchair experts endlessly predict the demise of the US.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#37

Post by wyre_ »

scrumbledober wrote: post #34
JMTQp8lwXL wrote: post #18

I would be curious to see analysis for what home prices would be with 0 Fed intervention. Also, I don't understand how millennials aren't supposed to see this figure and immediately feel a sense of rejection, that the housing market is some form of a pyramid scheme, where you had to get in early to have a chance.

well as a 30 year old looking for my first home who grew up in the bay area... yeah that's exactly what I feel.

As a 26 year old the feels stuck working minimum wage jobs I feel the same way. Similar to the college industry as well.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#39

Post by gaukes »

renewiltord wrote: post #15
vermilingua wrote: post #12

Earlier quoted context omitted.

IANAE(conomist), but my naive interpretation is this: let’s say the pandemic causes 25% of mortgage holders to become delinquent, a number I don’t think is unreasonable. If the Fed owns a third of all mortgages (and their ownership is a normal distribution of all mortgages, I have no idea if this is true), that’s 25% of $2T that is suddenly at risk. If the total Fed balance sheet is $7T, that’s 7% of their total asse…

Yeah but the Fed can just make 7.5% more money and we're back at even and it won't even be bad because they're trying to increase inflation not decrease it.

The money they’re printing isn’t being circulated because people are keeping it in their bank accounts and reducing spending. I think we’re in for something when things return to normal.

Re: The Fed now owns nearly 1/3 of all U.S. mortgages

#40

Post by the-dude »

remote_phone wrote: post #5

I just refinanced my 30-year fixed mortgage for 2.5%. The rate is utterly ridiculous now. If we get even a modicum of inflation over the next few years, I will be paying negative real interest rates.

I was paying 0.6% for the last years ( Euribor mortage ). Some people in North West Europe actually had negative rates already.
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