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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

#491

Post by webninja »

heartbeats wrote: post #138
A4ET8a8uTh0 wrote: post #134

Earlier quoted context omitted.

It is weird for me to read this. On the surface, it is factually correct, but I am not absolutely certain the conclusions drawn are valid. Your initial paragraph seeks to address point raised by others that FED is running out of ammunition and you list of Japan as an example with other pointing out the price Japan paid for that pollicy. I suppose FED could buy all US equities on national credit card ( and if you thin…

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

Recessions are not caused by stocks going down in value. Stocks going down in value is an indicator or symptom of a recession. In the same manner, a Coronavirus infection is not caused by a fever.

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

#492

Post by cm2187 »

RobertoG wrote: post #230
misja111 wrote: post #45

Earlier quoted context omitted.

Well that's not what the former ECB chairman Mario Draghi thought about it. According to him they were a success .. See e.g. http://www.ekathimerini.com/245837/article/ekathimerini/busi... But even mr. Draghi might agree that right now the ECB is pretty powerless, given that it's rates are already below zero.

That's because it's not a monetary policy problem, but a fiscal policy problem. If you insist in fixing your home with your car jack, don't complain about the results.

Worthwhile read:

https://www.business-standard.com/article/finance/can-banks-...

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

#493

Post by speedplane »

cm2187 wrote: post #492
RobertoG wrote: post #230

Earlier quoted context omitted.

That's because it's not a monetary policy problem, but a fiscal policy problem. If you insist in fixing your home with your car jack, don't complain about the results.

Worthwhile read: https://www.business-standard.com/article/finance/can-banks-...

When we design policy around increasing the value of the stock market, we effectively give stock-holders power. Good policy should create efficient markets, not "high value" ones.

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

#494

Post by Brain_Thief »

toomuchtodo wrote: post #383
Brain_Thief wrote: post #379

Earlier quoted context omitted.

I agree with those points but I have not seen evidence for the idea that the availability of social safety nets is not also a significant factor in fertility rate trend, which I took to be the thrust of your original post.

Conversely, I haven't seen evidence that the availability of social safety nets is a significant factor. More data is required, but I still believe my theory is on sound footing based on existing fertility data.

You didn't state a theory; to the extent that you implied a theory similar to the one I described the available data does not support it at all...

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

#495

Post by OCASM »

atq2119 wrote: post #459
OCASM wrote: post #441

Earlier quoted context omitted.

Indeed, real investment requires market interest, something the government is pretty bad at discerning Saving goes hand in hand with investment since by putting money in the bank it can be borrowed by entrepreneurs and they can hopefully do something productive with it. Merely spending it doesn't have that effect.

I feel like you are not replying to the core of the argument: Spending is crucial because that's what signals where investment is needed / desirable. Furthermore, spending is what gives companies profits that can then be reinvested for sustained development. If there is no spending, then investment is simply pointless. If investment happens in a vacuum, without regard for where the demand (which is nearly a synonym f…

The government would be creating a market distortion by not allowing companies to spend their money how they see fit and instead redistributing to another sector (the general public).

There would be no growth because the money the people would be spending is the same the government took from the companies in the first place. It's like taking the fat out of a man and feeding it back to him.

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

#496

Post by nybble41 »

dragonwriter wrote: post #487
nybble41 wrote: post #438

Earlier quoted context omitted.

> What it does is increase borrowing. But only in the short term, since lenders will catch on and increase their interest rates to offset the inflation. As you said, you're transferring wealth from lenders to borrowers, which means a larger incentive will be needed to induce anyone (other than the Fed) to lend money. To maintain the effect you would not only need to maintain the inflation but also continually increas…

> But only in the short term, since lenders will catch on and increase their interest rates to offset the inflation. No, because the reason you lower interest rate targets are exactly the conditions which provide lower returns on alternative investments besides lending. You can only afford to raise rates for lending if you've got something better to do with the money.

> You can only afford to raise rates for lending if you've got something better to do with the money.

A borrower can only afford to pay higher rates if they have something better to do with the money. Lenders can always afford to raise rates, as doing so increases their profit margin. The limiting factor there is competition from other lenders, but a factor like inflation affects all lenders equally. What they can't afford is lower profits in real, fixed-dollar terms due to inflation. Lower profits on lending => less money available for lending => higher prices (interest rates) for the remaining supply.

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

#497

Post by atq2119 »

OCASM wrote: post #495
atq2119 wrote: post #459

Earlier quoted context omitted.

I feel like you are not replying to the core of the argument: Spending is crucial because that's what signals where investment is needed / desirable. Furthermore, spending is what gives companies profits that can then be reinvested for sustained development. If there is no spending, then investment is simply pointless. If investment happens in a vacuum, without regard for where the demand (which is nearly a synonym f…

The government would be creating a market distortion by not allowing companies to spend their money how they see fit and instead redistributing to another sector (the general public). There would be no growth because the money the people would be spending is the same the government took from the companies in the first place. It's like taking the fat out of a man and feeding it back to him.

I'd point out that nobody (except for you) said anything about preventing companies from spending their money as they see fit. I don't understand where you even get that from.

The discussion was about fiscal stimulus.

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

#498

Post by OCASM »

atq2119 wrote: post #497
OCASM wrote: post #495

Earlier quoted context omitted.

The government would be creating a market distortion by not allowing companies to spend their money how they see fit and instead redistributing to another sector (the general public). There would be no growth because the money the people would be spending is the same the government took from the companies in the first place. It's like taking the fat out of a man and feeding it back to him.

I'd point out that nobody (except for you) said anything about preventing companies from spending their money as they see fit. I don't understand where you even get that from. The discussion was about fiscal stimulus.

How does the government acquire the money for that stimulus? By taking it from the companies through taxation. Government spending is always less efficient than by private entities.

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

#499

Post by unhashable »

kart23 wrote: post #320
unhashable wrote: post #41

Earlier quoted context omitted.

It can grow larger than people realize. As long as other countries do business in USD and keep buying US debt, the party keeps going. With fiat, you can spend as much as the combined purchasing power of all your citizens through money printing. When you’re the reserve currency, that pool is extended to the purchasing power of many many countries. That’s probably why, from a strategic POV, the US must remain the large…

Yeah the party keeps going, but the crash will be worse. Worse crashes means more time to recover, more americans lose their jobs, and so on.

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