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Fed cuts half point in emergency move amid spreading virus

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

#361

Post by woeirua »

HenryKissinger wrote: post #348
woeirua wrote: post #340

This is the start of the next Global Financial Crisis folks. It's not hard to see the pieces in motion now: 1 - The Q1 supply shock is going to be a temporary thing. They'll recover alright after causing some companies to miss their Q1 earnings. If this was the only effect, we would recover just fine here later this year, but... 2 - Coronavirus is just getting started in the US and Europe. If it spreads widely, and u…

At some point between steps 4 and 5, shouldn't the government say, "maybe y'all shouldn't have leveraged yourselves so much; debt is inherently bad, and we won't bail you out this time; figure this out; and don't rack up so much debt next time"? This addiction to debt has got to stop, and unfortunately it sometimes takes cold, hard pain for some to learn a lesson.

It should, but the system is not designed to handle the bankruptcies of many companies simultaneously.

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

#362

Post by seanmcdirmid »

throw0101a wrote: post #319
QuesnayJr wrote: post #280

Earlier quoted context omitted.

It has real effects until the economy is at full employment, after which it only causes inflation.

At which point rates are generally raised to cool things down.

Which should have happened along time ago in the current economy but haven’t, you can’t cut rates in bad times if you don’t raise them enough in good.

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

#363

Post by samvher »

NicoJuicy wrote: post #241
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-…

I was bearish yesterday, but looking at the raw data seems more reasonable ( spent a lot of time reading and analyzing). The statistic influencers currently are China, South Korea and Iran. Then it seems to help that people are more aware and numbers seem to be dropping. I'm short-term bearish, although it could change with an extreme outlier within the EU. It also helps that I can see what a big corporation ( where…

I don't know, Italy is doing pretty poorly with 79 dead on 160 recovered (2502 total cases). Only the numbers in China really seem to be dropping, and I wonder how that will hold up when people get back to work.

This is not going to be the end of the world as we know it but I think it will take quite some more time before it's behind us.

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

#364

Post by Fjolsvith »

hurricanetc wrote: post #345
kickopotomus wrote: post #315

Earlier quoted context omitted.

No, we know quite a bit about it at this point. The incubation period can range from 1-14 days but is 5 days on average[1][2]. The virus spreads through physical contact with commonly touched surfaces and through the air via droplets of saliva or mucus[2]. The deadliness of the disease is also becoming clear as time progresses. The current fatality rate is ~3% (likely overestimated) and most (almost all) deaths are e…

Your links don't say what you think they say. Did you even read them? It's mostly ambiguous language and uncertainty. We think this, it's not certain that. It changes day to day. Case in point the incubation period from your own link. "Most estimates of the incubation period range from 1-14 days, most commonly around five days. These estimates are updated as more information becomes available." How long does it remai…

After a month there are still fewer US COVID-19 deaths than Tennessee tornado deaths from one day.

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

#365

Post by AnthonyMouse »

lottin wrote: post #153
JumpCrisscross wrote: post #68

Earlier quoted context omitted.

> fiscal policy can't really affect the real economy Fiscal policy ( e.g. the government buying tanks) absolutely affects the real economy. The central bank doesn't control fiscal policy. It controls monetary policy. Monetary policy also affects the real economy, just indirectly.

Monetary policy is about increasing or decreasing the money supply. The argument is that it cannot have long-term real effects because if it did we would all be incredibly rich, since it costs nothing to increase the money supply by whatever amount. Every underdeveloped nation would simply increase their money supply and poverty would be a thing of the past.

> The argument is that it cannot have long-term real effects because if it did we would all be incredibly rich, since it costs nothing to increase the money supply by whatever amount.

Increasing the money supply is effectively a transfer of wealth from people who own/lend currency to people who owe/borrow it. It doesn't come without cost. It's effectively taxing one group and giving the money to another.

As for stimulating the economy, it works as long as the borrowers are making better use of the money than the lenders would have. In a time when you may need to e.g. build new factories somewhere else because existing ones are unavailable, that becomes more true than it was the day before, because the people who want to build new factories need money to do it and now that money is cheaper to get.

What it does is increase borrowing. All borrowing is really borrowing from the future, because at some point the money has to paid back. (Or have interest paid on it forever, which is effectively the same thing.) So what you get now you have to give back later, but that may be a beneficial transaction if you need it more now when some disruption is occurring than you would years from now after things have calmed down.

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

#366

Post by heartbeats »

A4ET8a8uTh0 wrote: post #149
heartbeats wrote: post #138

Earlier quoted context omitted.

Prudent move? It's the only move. If it's either that or a recession, then they will do it, consequences be damned.

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?

Sure, but it's also a matter of when. If you can delay it for a few decades, that's going to be enough for a lot of people to retire.

The US could just cut interest rates whenever the stock market goes down. There's no real limit to how low they can go, and as long as the investors understand that the Fed is backstopping them they'll contribute in pumping it up.

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

#367

Post by wpietri »

lawrenceyan wrote: post #263
chrsm wrote: post #251

Earlier quoted context omitted.

How about you take his apology and move on?

My response was to /u/wpietri who asked for a clarification.

I was actually pointing out the contradiction between your supposed standard and your behavior. But fair enough, it was phrased as a question. Which, it turns out, you did not actually answer, so if you were trying to clarify things I don't think you succeeded.

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

#369

Post by wonderwonder »

katmannthree wrote: post #359
muttled wrote: post #121

Earlier quoted context omitted.

The fallout will either fall on a second term or during someone else's first term. Either way the administration doesn't care.

November is still more than six months away. Given how quickly COVID-19 spreads I think our economy will likely be feeling the pain long before the election.

You are not wrong, and I do think that on the individual level, company employees will feel it. Unemployment may go up. This administration though uses the stock market as their barometer so if they are able claim that the S&P and DJIA are up they can claim victory. There are a lot of things they can do to keep stocks artificially inflated such as more rate cuts, corp. tax cuts, removing regulations, reducing the capital banks are required to keep on hand, etc. All of these can work towards keeping stocks high for a limited time but do essentially nothing for the normal person. At that point then its just a race between when the election occurs and when the market no longer responds to the artificial scaffolding.

I have no doubt this administration will hesitate for even a second if they are able to implement a feature that results in short term (through November) gains at the cost of long term ruin.

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

#370

Post by pbourke »

skybrian wrote: post #146
pbrb wrote: post #38

Earlier quoted context omitted.

I'm pretty worried about this. I don't think this rate cut makes any sense. You can't stimulus away a virus.

Yes but it could avoid some bad effects. If a company temporarily can't manufacture something due to supply chain disruption, they could lose a lot of money and might need to borrow some. Getting by until things recover just got cheaper. I'd guess there are probably similar issues for restaurants, the tourist industry, maybe construction? But that assumes they're credit-worthy. It wouldn't help a company that can't b…

Somehow I don’t think the ability to borrow money 0.5% cheaper than yesterday is going to make a material difference to a lot of firms.
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