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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

#71

Post by 12elephant »

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…

The Fed is also buying corporate bonds as of today: https://www.federalreserve.gov/newsevents/pressreleases/file...

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

#72

Post by 12elephant »

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.

They're already buying corporate bonds: https://www.federalreserve.gov/newsevents/pressreleases/file...

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

#73

Post by nemo44x »

alexmingoia wrote: post #12
stefano wrote: post #10

Earlier quoted context omitted.

I guess the idea is to keep companies solvent so they'll still be there when the quarantine restrictions are lifted.

Why can’t they survive by issuing corporate bonds? And as far as I know this Fed policy isn’t to buy failing stock it’s to inject cash overall through treasury bonds, since the Fed isn’t allowed to buy stock.

Have you looked at the credit market this month? It’s in shambles as yields are soaring. It’s not that higher yields is bad. But moving so quickly is dangerous. Bonds, etc are necessary to maintain supply lines, pay people, etc.

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

#74

Post by toomuchtodo »

Frost1x wrote: post #62
toomuchtodo wrote: post #48

Earlier quoted context omitted.

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 ;)

Judge me by the enemies I’ve made.

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

#75

Post by Frost1x »

roymurdock wrote: post #59
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

Agreed, these actions are to prop up the existing economic system.

It's my opinion our economic system needs a major overhaul, one that is preppered to address real situations like this without setting unrealistic growth expectations across the board and better stabilizing the majority of the workforce/labor market.

This national economic stress businesses are feeling is quite similar to the stresses a large portion of the US workforce/families feel every single day/week in respect to future financial stability, risk valuation, growth, etc. It's about to get even worse for most Americans and may strain mass acceptance economic policy and acceptance of our system. That questioning of the system may be a good thing.

I don't think a knee jerk correction where many are hungry, suffering, rioting, without healthcare, etc. is the way about correcting these problems to be clear.

It doesn't seem like the issuees we're seeing will gradually self-correct (concentrated wealth, increased wealth inequality, massive barriers to entry in markets, declining workforce/labor economic growth, ever consolidated market share to fewer big businesses...)

Perhaps this is the invisible all-knowing hand of the market self-correcting?

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

#76

Post by thefounder »

sharemywin wrote: post #60
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.

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.

I believe the issue with the gov being the employer of last resort is that you end-up with a fat, inefficient government. What politician will dare to fire all the redundant workers once that crisis is over? You can see this issue in ex-communist states.

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

#77

Post by myth_drannon »

no_flags wrote: post #44
myth_drannon wrote: post #18

I'm afraid this is another wealth grab similar to 2008 but x10 bigger. What was an international health emergency turned into another large scale robbery of the common folks.

Could you elaborate on how its a wealth grab?

Last week US Fed bailed out hedge funds that were highly leveraged. $1.5 trillion transfer to save high net worth individuals. https://www.bloomberg.com/news/articles/2020-03-19/before-fe...

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

#78

Post by toomuchtodo »

thefounder wrote: post #76
sharemywin wrote: post #60

Earlier quoted context omitted.

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.

I believe the issue with the gov being the employer of last resort is that you end-up with a fat, inefficient government. What politician will dare to fire all the redundant workers once that crisis is over? You can see this issue in ex-communist states.

https://en.wikipedia.org/wiki/New_Deal

We’ve done it before, and it worked. So much so that they instituted presidential term limits, as FDR served four terms he was so popular.

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

#79

Post by hnaccy »

lukas099 wrote: post #13
chadmeister wrote: post #6

Awful policy. The fed needed to hold off on this and the previous rate cut until Congress finally passed a useful bill. Powell had all the power to force Congress to act and he's blown it again.

The Fed's job is to keep the value of currency steady and support full employment, not to play games with Congress.

How can the Fed support full employment if governments are forcing people to stay inside and business to close?

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

#80

Post by lisper »

dcolkitt wrote: post #63
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…

> 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,…

> would never default in any reasonable scenario

Our reality is about to stray pretty far from any reasonable scenario.

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