Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Stocks are down due to the corona virus. The Fed can use some monetary policy to help offset that effect.
This is quite interesting. So profit making corporations aren't a risk anymore because if they don't go UP, the Government injects borrowed money into them???
I agree that this happens...but whether it is right or sustainable is a bigger question. It's one thing to help get out of the Great Depression and Recession, quite another to constantly prop up business.
Banks no longer need customer deposits to make loans. Loans create deposits.
Since the 2008 crash banks have gross excess reserves secondary to QE's. And they get paid a bit to hold those reserves.
That's exactly what I'm talking about, stated in a different way.
Most people have no clue about any of this; some people who know better don't perceive a problem with it while fewer of them do.
In any case, we all have to deal with it on one way or another.
This is quite interesting. So profit making corporations aren't a risk anymore because if they don't go UP, the Government injects borrowed money into them???
I agree that this happens...but whether it is right or sustainable is a bigger question. It's one thing to help get out of the Great Depression and Recession, quite another to constantly prop up business.
The Fed money here is not taxpayer, US Gov't or borrowed money.
IMO the Fed action is appropriate for the gravity of the corona situation, and can be stepped back if and when the terror passes.
The Fed creates real/fiat money. They might swap that money for gov't debt, as in QE.
Gov't does pay them interest as guaranteed.
The difference here is that almost all of that interest is swept back to the Treasury, as if almost all of that debt does not exist.
So looking from afar much of this might appear as pretending.
An increase in reserves does not necessarily gear into money as, say, earned wages from real production and real deposits do.
But reserves do cushion banks and help prop up the payments system, crucial for everybody.
As for today's rate cut, the shape of the yield curve does matter for bank (and insurance company) financial results, I suppose; it is still inverted out to 10 years and more or less flat after that.
Seems to reflect expectations of stagnant consumption for a long time - certainly not helped in the short-run by a scary virus - and possible deflation, and so expectations of a further 50 basis points in rate cuts over the next year or two to help keep the banks and payments system afloat and stave off deflation.
1 month US treas = 1.40% yield
2 year US treas = 0.84% yield
10 year US treas = 1.10%
Investors are parking tons of money buying up treasuries in the 2 to 3 year time frame. Betting on a recession, basically.
Elliott, Elliott, Elliott...........
The relationship between the 2 and 10 is what matters vis a vis predicting recessions. Your numbers - which were correct as of COB yesterday - do not show a 2 v. 10 inversion. For sure 10 yr. yields have taken a beating lately due to coronavirus fears and the spread between the 2 and 10 isn't great.........still the curve is not inverted.
I don't like the 1mo. being higher than other yields but in this case it's telling us about fear and consternation in the short run.
Read the history of the 1929 crash. Right now, central banks are doing what the titans of business did during the 1929 crash. They're trying to shore up the market by injecting cash, so that more money will go into the market.
Is that some kind of fantasy alternative history?
Because that's not what happened.
The Federal Reserve never put a penny in the stock markets in 1929.
Not only did the Federal Reserve not do any anything very slowly for the stock markets, it did absolutely nothing for the banks.
There were massive numbers of bank failures each month starting in late 1930 and continuing through early 1933, yet the Federal Reserve did nothing.
By the time the Federal Reserve thought it might be a good idea to help banks, it was already too late , because FDR had already declared a "bank holiday" in 1933 and what they offered was too little, because there were about 900 failures a year through 1939.
Quote:
Originally Posted by bale002
This has nothing to do with the stock market.
Not everyone understands Economics in spite of the many attempts by many knowledgeable posters to help them.
Quote:
Originally Posted by Hoonose
The Fed isn't giving money to investors, it is using money policy to help inflate stocks.
Show us the paper trail.
Quote:
Originally Posted by Hoonose
The Fed can create money from thin air, usually used to swap for debt paper. (QE's)
But so far the Fed is not creating money for the purpose of paying off National Debt.
That's because the Federal Reserve cannot create money out of thin air.
It's known as holding cash in the face of an uncertain future.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
