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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

#341

Post by perl4ever »

mistermann wrote: post #280
DamnYuppie wrote: post #269

Earlier quoted context omitted.

Do you have some data to back up the theory that they all paid themselves huge bonuses? Most billionaires lost huge amounts of money as their wealth was in the market and in real estate so when that crashed so did their net worth. The ones who paid themselves bonuses were the wall street bankers who received bailouts from TARP. To be clear less then 20% of the worlds billionaires made their fortunes via finance.

https://www.nytimes.com/2009/07/31/business/31pay.html > Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year, even as their employers were battered by the financial crisis. > Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008, accor…

If a million, a billion, and a trillion are all equal, or equal to whatever big number you want them to be at any given moment, then what's the point of discussing anything?

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

#342

Post by perl4ever »

bjourne wrote: post #310
spikels wrote: post #224

Earlier quoted context omitted.

The biggest problem at the moment is the debt markets have almost completely stopped functioning. Let me repeat what the other poster said: “We are talking about companies with plenty of assets and strong businesses”. And they still can’t get needed short term financing. Should we let clearly creditworthy companies go bankrupt because the credit markets are temporarily closed?

If the companies are clearly creditworthy how come no one wants to lend them any money? It appears that whoever has the money doesn't think these companies are clearly creditworthy.

It's circular reasoning. Why aren't you buying stocks or bonds? Presumably because nobody is offering you a large amount of extra money to do so, like with a 0% loan. Everybody who can get cash or has cash wants to prepare for zombies.

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

#343

Post by perl4ever »

SilasX wrote: post #262
spikels wrote: post #224

Earlier quoted context omitted.

The biggest problem at the moment is the debt markets have almost completely stopped functioning. Let me repeat what the other poster said: “We are talking about companies with plenty of assets and strong businesses”. And they still can’t get needed short term financing. Should we let clearly creditworthy companies go bankrupt because the credit markets are temporarily closed?

Well, yes, if you define "appropriately pessimistic bond markets" as "non-functioning", sure. These aren't sound businesses, because the current virus is going to screw them.

This is circular reasoning, but it's also counter to the facts, which are that markets aren't yet pricing securities for an apocalypse.

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

#344

Post by perl4ever »

SilasX wrote: post #340
perl4ever wrote: post #338

Earlier quoted context omitted.

"then that means they aren't (currently) sound businesses, and the market is correctly marking down their value." There is definitely an unsound premise here - the market hasn't marked down public companies as if they are generally unsound...yet. All the "crash" so far has done is take us back to the levels of 3-4 years ago. Your point about buying bonds not changing "fundamental soundness" is like saying keeping som…

>There is definitely an unsound premise here - the market hasn't marked down public companies as if they are generally unsound...yet. All the "crash" so far has done is take us back to the levels of 3-4 years ago. Yes, because maybe it hasn't accepted the gravity of what's going to happen to their ability to deliver value, or anticipates free money. >Your point about buying bonds not changing "fundamental soundness"…

If someone has an acute problem with low blood sugar, do you let them die right now because increasing their blood sugar won't cure diabetes? This is how insane people sound to me right now.

And from what I've read, this is how the great depression was created - people said "oh, the banks that are failing are weak, so they should fail".

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

#345

Post by Nasrudith »

ForHackernews wrote: post #318
jkhdigital wrote: post #243

Earlier quoted context omitted.

> We are talking about companies which have plenty of assets and strong businesses. We are also talking about companies that are leveraged to the tits to juice their return on equity. What is glossed over in all of these discussions about bailouts is that the managers of these corporations respond directly to financial incentives, and the existence of a "lender of last resort" such as the Fed ensures that corporation…

> the holders of U.S. dollars, whose currency is devalued as money is printed I know that's what the macroeconomics 101 textbook says, but is there any empirical evidence this actually drives higher inflation? We've had historically low inflation for over a decade now[0], a decade during which the Fed has undertaken successive rounds of QE to the tune of $40-$85 billion per month.[1] [0] https://www.usinflationcalcul…

Printing money in itself doesn't - it is how the supply meets the demand. Devaluation requires a relative increase vs the economy. Distribution of money also affects how much inflation would take place.

Driving inflation up from low is a nominal goal of QE but the magnitude varies.

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

#346

Post by akiselev »

ahelwer wrote: post #324
RealityVoid wrote: post #320

Earlier quoted context omitted.

My feeling is that the answer to this is because these companies (arguably) produce something of value to the world. Letting them become bankrupt would mean they do not produce that something of value so that would be bad economics. And a case of not seeing the forest for the trees. The role of economy is to sustain a certain confort to the population, an people should forget that at their own peril.

Bankruptcy doesn't mean the company's assets are thrown in the trash. It just means the current equity & bond holders get rinsed. Other presumably smarter people can then come in and run the company.

Isn't the nature of a bankruptcy largely at the discretion of a judge?

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

#348

Post by SilasX »

perl4ever wrote: post #343
SilasX wrote: post #262

Earlier quoted context omitted.

Well, yes, if you define "appropriately pessimistic bond markets" as "non-functioning", sure. These aren't sound businesses, because the current virus is going to screw them.

This is circular reasoning, but it's also counter to the facts, which are that markets aren't yet pricing securities for an apocalypse.

No, you're the one assuming they're functioning companies to prove that the deserve to be saved. That's itself circular.

And if you think the market is correctly pricing the equity, you can't turn around and say it's mispricing the bonds so the Fed has to "correct it".

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

#349

Post by SilasX »

perl4ever wrote: post #344
SilasX wrote: post #340

Earlier quoted context omitted.

>There is definitely an unsound premise here - the market hasn't marked down public companies as if they are generally unsound...yet. All the "crash" so far has done is take us back to the levels of 3-4 years ago. Yes, because maybe it hasn't accepted the gravity of what's going to happen to their ability to deliver value, or anticipates free money. >Your point about buying bonds not changing "fundamental soundness"…

If someone has an acute problem with low blood sugar, do you let them die right now because increasing their blood sugar won't cure diabetes? This is how insane people sound to me right now. And from what I've read, this is how the great depression was created - people said "oh, the banks that are failing are weak, so they should fail".

Except the patient we're trying to save is the market, not any one business, and malignant businesses are like cancer. It's important for the cancer to die so the patient can live.

I mean, if you want to debate this thing entirely in analogies.

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

#350

Post by mistermann »

perl4ever wrote: post #341
mistermann wrote: post #280

Earlier quoted context omitted.

https://www.nytimes.com/2009/07/31/business/31pay.html > Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year, even as their employers were battered by the financial crisis. > Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008, accor…

If a million, a billion, and a trillion are all equal, or equal to whatever big number you want them to be at any given moment, then what's the point of discussing anything?

Is this in reference to my comment? If so, I'm not seeing what you're getting at...
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