I was watching the Dow futures. They literally went from -700 to +400 in 30 seconds.
Opened -400 on the Dow anyway
Federal Reserve pledges asset purchases with no limit to support markets
61–70 of 368 posts
Re: Federal Reserve pledges asset purchases with no limit to support markets
#62Earlier 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…
> The stock market isn’t the economy, people producing, consuming, and exchanging fiat in the process are.
You might get tarred-and-feathered if you keep speaking like that. Be careful ;)
Re: Federal Reserve pledges asset purchases with no limit to support markets
#63Keep 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…
> They're sacrificing our future in order to inflate stock prices now
You're trivializing the issue. It's not just "inflating stock prices". Credit markets that are required for the basic functioning of the economy have completely frozen up.
Companies that are completely solvent can't meet short-term obligations because the commercial paper market has frozen. Money market funds, which are basically savings accounts, have fallen below par despite only containing short-term high-quality bonds that would never default in any reasonably scenario. Repo markets are forcing mortgage providers to de-leverage positions (which will in turn lead to foreclosures) based on the fact that there's no liquidity for the collateral. International trade for basic and necessary goods in the supply chain has grinder to a halt because banks are no longer extending trade finance.
Whether you like it or not our economy is completely dependent on having a well-functioning "money market", where short-term bonds, notes, and IOUs from high-quality issuers are used interchangeably with cash. And it's been this way for at least 150 years. Once the money market stops functioning economic activity grinds to a halt.
At least in 2008, there was maybe some moral hazard argument against the Fed intervening. From 2001-2007 banks and other financial institutions were playing fast and loose with their risk. Maybe in 2008 it might have made sense to let banks stew in the financial crisis they created to teach them a lesson.
But in this crisis what would be the point? This is a pandemic that came out of nowhere, that nobody could have possibly been prepared for. "You guys should have really had a contingency plan for global quarantine" doesn't make sense. I'm not even that big a fan of the Fed, but if there's any time ever to print money to prop up the economy, it's in the middle of a literal global pandemic when the government can already borrow money at zero percent interest.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#64Earlier 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…
This.
Can someone with some financial background refute this? Why is buying assets a better idea? In concrete, non-abstract, non-hand-wavey, laymen terms, how is it going to make the Average Joe get through this crisis? How is it going to help him pay for his rent/food/etc in the next 2-3 months, and potentially longer when he possibly will have no job?
Re: Federal Reserve pledges asset purchases with no limit to support markets
#65I was watching the Dow futures. They literally went from -700 to +400 in 30 seconds.
This feels like we're watching bitcoin.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#66I was watching the Dow futures. They literally went from -700 to +400 in 30 seconds.
And somehow the Dow opened lower still, it’s like lighting an unlimited pile of money on fire does nothing good, almost like there is a health crisis instead of a monetary one..
Re: Federal Reserve pledges asset purchases with no limit to support markets
#67Keep 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…
Wouldn't this mean that FED, which already has the control over the money supply, can now go and buy companies with the money it creates ? If you define FED as a private entity - this sounds like theft. If you define it as a part of the government then you are transitioning to socialism (government ownership of means of production). Neither of these sounds like something that would be acceptable in the US political s…
The Fed doesn't control the money supply. That's the job of the Treasury.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#68[deleted]
Re: Federal Reserve pledges asset purchases with no limit to support markets
#69Earlier quoted context omitted.
Because: 1. Nobody would buy them. 2. Small biz doesn't have access to corporate paper markets, even in the best of times.
How does the current Fed strategy help small business right now? If anything, it seems like this strategy will leave larger companies in a position to soak up those small businesses' market share when this is all over.
The Fed is set to announce small business loans very soon. This is just part of a larger plan.
Re: Federal Reserve pledges asset purchases with no limit to support markets
#70I fail to understand why any economist would prefer QE over helicopter money. Give everyone a check. If they need it to purchase everyday goods and services, great. If their everyday needs are fulfilled already, they will invest that money into stocks, bonds, treasuries, etc, adding the needed liquidity to the market.
I understand if you're against the idea of giving people money. But this is just giving money to mostly the rich. Neo-trickle down economics.