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Federal Reserve pledges asset purchases with no limit to support markets

cnbc.com

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

#51

Post by mrfusion »

brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

Regarding the zombie companies. A high stock price wouldn’t keep a company from going bankrupt. They could try to do a capital raise but that’s going to raise a lot of eyebrows if the fed is buying your newly released stock. I’d be curious how that works.

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

#52

Post by jdpigeon »

kragen wrote: post #31

> Several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.[9] The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. > With the bankers' financial resource…

...On October 28, "Black Monday,"[10] more investors facing margin calls decided to get out of the market, and the slide continued with a record loss in the Dow for the day of 38.33 points, or 12.82%

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

#53

Post by mrfusion »

dntbnmpls wrote: post #16
brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

> Keep in mind they're only able to buy US treasuries and mortgage backed securities. They announced they will buy municiple bonds also. https://www.cnbc.com/2020/03/20/the-federal-reserve-is-expan... > If Congress changes the rules to allow the Fed to purchase stocks Corporate bonds first. If that fails, then stocks. Baby steps.

Why didn’t congress have to approve the munis?

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

#54

Post by tonyhb »

alexmingoia wrote: post #7

How does injecting money solve a problem that’s not caused by lack of money? This market downturn isn’t a lack of liquidity, or a lack of money, or toxic assets like the mortgage backed securities. People aren’t going to stores, restaurants, and airlines because of SARS-CoV-2, not a lack of credit or money. Printing money isn’t going to create customers for businesses effected by this pandemic.

Current problem is that money right now will be evaporating when loans default.

The financial system is built on itself so that loans create money. It does not expect to come to a grinding halt. If it does, loans aren't repaid, and money literally disappears. Deleveraging occurs. Wealth disappears.

I think the aim is that we don't lose money from defaults over the short term.

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

#55

Post by [deleted] »

QuesnayJr wrote: post #45
toomuchtodo wrote: post #38

Earlier quoted context omitted.

A foreshadowing of all developed country central banks’ actions. It’s only a matter of time before the Fed, BOE, and the ECB do so at similar scale. Incredibly disappointing as an educated investor that you must be judicious about asset acquisitions and allocations, and yet central banks just make the money printer go brrrrr when they deem it necessary (something, somewhere is always “too big to fail”).

What would you prefer? 20% unemployment? Anyway, central banks don't really do asset allocation -- they buy the least risky assets they can. Their real goal is to keep the currency from deflating.

[deleted]

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

#56

Post by [deleted] »

dredmorbius wrote: post #35

Additional coverage: https://www.washingtonpost.com/business/2020/03/23/fed-unlim... https://www.nytimes.com/2020/03/23/world/coronavirus-news.ht... https://www.wsj.com/articles/federal-reserve-announces-major... https://www.foxbusiness.com/business-leaders/fed-takes-actio... https://www.ft.com/content/b71f0c32-6cfb-11ea-89df-41bea0557... https://www.theguardian.com/business/live/2020/mar/23/market... https://www.reu…

[deleted]

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

#58

Post by QuesnayJr »

toomuchtodo wrote: post #48
QuesnayJr wrote: post #45

Earlier quoted context omitted.

What would you prefer? 20% unemployment? Anyway, central banks don't really do asset allocation -- they buy the least risky assets they can. Their real goal is to keep the currency from deflating.

Whoa there with the false equivalency. Helicopter money would be more helpful than propping up the wealth of the top wealth brackets using price floors through broad scale asset purchases. Literally give away hundreds of billions of dollars to citizens who will spend it right this minute . Have the government be economic demand of last resort to steady the ship until people can actually move about again. There will b…

What do you think helicopter money looks like? The Treasury borrows a bunch of money from the Fed, and then sends it out. The Fed ends up owning large amounts of Treasuries. The only difference is that the Fed isn't waiting for the Treasury. If the Treasury starts writing checks tomorrow, it's effectively helicopter money.

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

#59

Post by roymurdock »

brenden2 wrote: post #9

Keep in mind they're only able to buy US treasuries and mortgage backed securities. If Congress changes the rules to allow the Fed to purchase stocks, we'll be in for some very interesting times. It could be that we get an economy of zombie companies, or valuations soar beyond what we've come to expect as normal. In any case, this is unprecedented and in my opinion not the right move. They're sacrificing our future i…

it's not so our current president can get re-elected (Fed is largely independent of executive branch) but to prevent massive riots, social unrest, and ultimately a large amount of human suffering now at the cost of pushing it down the road

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

#60

Post by sharemywin »

QuesnayJr wrote: post #45
toomuchtodo wrote: post #38

Earlier quoted context omitted.

A foreshadowing of all developed country central banks’ actions. It’s only a matter of time before the Fed, BOE, and the ECB do so at similar scale. Incredibly disappointing as an educated investor that you must be judicious about asset acquisitions and allocations, and yet central banks just make the money printer go brrrrr when they deem it necessary (something, somewhere is always “too big to fail”).

What would you prefer? 20% unemployment? Anyway, central banks don't really do asset allocation -- they buy the least risky assets they can. Their real goal is to keep the currency from deflating.

I'd rather see the government become employer of last resort, than investor of last resort. With some kind of 30 hrs of work and 10 hrs of skills/education training. And a couple hours week of mental health/addiction services optionally. With some kind of medical and other benefits.
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