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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

#91

Post by skybrian »

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.

There actually is a lack of money because the usual lenders got scared.

Also, there is no situation so bad that it can't be made worse, and companies laying people off makes it worse. There are bills to pay and people still need to buy food.

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

#92

Post by im3w1l »

Anon1096 wrote: post #69
matthewdgreen wrote: post #42

Earlier quoted context omitted.

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.

I'm really curious how startups are positioning themselves for the availability of such loans. Might the terms be so favorable that it drives out the VCs?

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

#93

Post by OscarCunningham »

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.

> Why can’t they survive by issuing corporate bonds?

The purpose of the Fed policy is to make coporate bonds (and other lending/borrowing) more attractive.

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

#94

Post by whatshisface »

OscarCunningham wrote: post #89
take_a_breath wrote: post #26

Earlier quoted context omitted.

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.

I'm not sure if I agree. Restaurants are low margin businesses to begin with and they might not be able to sustain a high interest loan even in the best of times.

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

#95

Post by brenden2 »

burroisolator wrote: post #70

I 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 mos…

This is about making sure rich people don't lose money. It's not about helping people at the bottom.

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

#96

Post by QuesnayJr »

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 find it funny that while I am actual economist, whenever I comment on my actual area of expertise, I get voted down. Random topics where I know nothing, I get upvoted. Actual expertise, voted down.

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

#97

Post by xiphias2 »

nemo44x wrote: post #73
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.

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.

Where are yields soaring?

Here it looks like they are going down:

https://www.treasury.gov/resource-center/data-chart-center/i...

It wouldn't surprise me if the 80 year bond bubble popped this year, but I don't see that happening yet.

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

#98

Post by OscarCunningham »

burroisolator wrote: post #70

I 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 mos…

I asked a similar question in a similar thread recently. The answer that made the most sense was that the Fed feared future inflation. If you've done QE then you can just sell the stocks again when you want to limit inflation. But if you've done helicopter money then you're stuck.

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

#100

Post by throwaway55554 »

burroisolator wrote: post #70

I 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 mos…

Right. And I don't believe any "stock buyback exclusion" the President and/or Congress would ask for would have any teeth at all. We're definitely going to see the money being used for bonuses and buybacks. The rich can't help but use any opportunity to get themselves richer.
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