Federal Reserve pledges asset purchases with no limit to support markets • Hacker News Board

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

#81

Post by roymurdock » Mon, Mar 23, 2020, 2:06 PM UTC

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,…

bill gates saw this coming in 2015 [1] and proposed many solutions so we could better prepare including assembling a medical reserve corps, simulated "germ games", and investments in medical R&D along with increased investment in 3rd world health infrastructure to stop the infections before they spread

also many asian countries were better prepared due to their exposure to mers/sars [2]. so there was a precedent and influential people calling for change

but investing health infrastructure is not the Fed's job, that is congress/government's job - AKA the job of corporations through lobbyists who have no incentive to do any type of preparation, just perpetuate the consumption cycle

the fed is just responding to an economic crisis by trying to bail water out of a sinking boat, but they don't have the power to actually rebuild/fix that boat

[1] https://www.ted.com/talks/bill_gates_the_next_outbreak_we_re...

[2] https://www.ft.com/content/e015e096-6532-11ea-a6cd-df28cc3c6...

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

#82

Post by jdhn » Mon, Mar 23, 2020, 2:10 PM UTC

myth_drannon wrote: post #77

no_flags wrote: post #44

Earlier quoted context omitted.

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...

Thank you for posting this, it's both informative and highly infuriating

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

#83

Post by sharemywin » Mon, Mar 23, 2020, 2:11 PM UTC

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.

Why fire people? wouldn't companies be able to lure workers away from the government with better pay and benefits? The government could offer some kind of incentive to companies where the government pays the person for some length of time and they work for a private company for free as long as the companies keeps that person on for 1 year or something like that.

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

#84

Post by eyeinthepyramid » Mon, Mar 23, 2020, 2:14 PM UTC

myth_drannon wrote: post #77

no_flags wrote: post #44

Earlier quoted context omitted.

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...

The $1.5 trillion was a fund of one day fully collateralized loans, of which only ~$100 billion was actually used. There was no wealth transfer, just the fed following its mandate to keep interest rates on short-term loans within an acceptable band.

Here's the daily totals of repo loans:

https://apps.newyorkfed.org/markets/autorates/tomo-results-d...

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

#85

Post by davidgh » Mon, Mar 23, 2020, 2:15 PM UTC

Anon1096 wrote: post #67

rubber_duck wrote: post #21

Earlier quoted context omitted.

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.

By controlling the amount of loans made to banks, the Fed controls the money supply. Money is created out of thin air (without a printing press) by issuing new loans, which is what the Fed does.

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

#86

Post by [deleted] » Mon, Mar 23, 2020, 2:19 PM UTC

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,…

[deleted]

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

#87

Post by Ididntdothis » Mon, Mar 23, 2020, 2:20 PM UTC

roymurdock wrote: post #81

dcolkitt wrote: post #63

Earlier quoted context omitted.

> 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,…

bill gates saw this coming in 2015 [1] and proposed many solutions so we could better prepare including assembling a medical reserve corps, simulated "germ games", and investments in medical R&D along with increased investment in 3rd world health infrastructure to stop the infections before they spread also many asian countries were better prepared due to their exposure to mers/sars [2]. so there was a precedent and…

“bill gates saw this coming in 2015“

Let’s not make Gates the hero here. Most people working on infectious diseases knew about these problems.

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

#88

Post by whatshisface » Mon, Mar 23, 2020, 2:22 PM UTC

owenmarshall wrote: post #47

janandonly wrote: post #36

The USA just went Zimbabwe

Absolutely terrible comparison. The Zimbabwean dollar is not the world's reserve currency. Zimbabwe cannot park a naval fleet off the coast of any country that tries to move away from the Zimbabwean dollar, or direct the worlds largest banks to freeze assets, or apply crushing economic sanctions. The US is probably the only country in the world that can print money without runaway inflation, and I don't doubt that we…

Yeah, the US is the only country in the world whose debt is dominated in its own currency. Want to sell me some goods and services in exchange for an IOU of one whathisface buck? Countries around the world have been answering "yes" for a century and now the inflation tax will be levied against everybody, not just Americans.

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

#89

Post by OscarCunningham » Mon, Mar 23, 2020, 2:22 PM UTC

take_a_breath wrote: post #26

alexmingoia wrote: post #12

Earlier quoted context omitted.

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.

If companies don’t have customers, as you noted in your prior comment, how will they secure debt financing at a reasonable rate?

Because the lenders know that they will be profitable after the virus has passed.

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

#90

Post by brenden2 » Mon, Mar 23, 2020, 2:23 PM UTC

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,…

Yes, you're right. The guys at the top collect all the benefit, and everyone at the bottom absorbs all the risk.