QE4 begun 2 weeks ago as FED buys bonds

Discussion in 'Economics & Trade' started by Quadhole, Sep 3, 2019.

  1. Quadhole

    Quadhole Well-Known Member

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    Here we go again ! https://www.zerohedge.com/news/2019-09-03/fed-back-bond-buying-business
    Corruption at it's best. The FED buying bonds pumping money into Trumps hands. No wonder he has not tweeted about rate cuts for the past week. Now he can spend all the money he wants.
    Unemployment, real unemployment is at 21%
    Inflation - Real inflation has been running at 7% on average YoY for past 20 years.

    2008 financial debacle which they said cost 800B cost 17 Trillion un accounted for $$$$
    The FED tried to unwind balance sheet and raise rates, that lasted all of 1.5 years and now we go back to the same old money printing.
    Gold and Silver will go off the charts, Bonds will be worthless and so will your 401k, savings, etc.

    Housing will collapse and even CASH will be a poor investment because Stagflation will take off. World is headed into a Depression based on poor handling of Fiat currency. A few million got extremely rich, everyone else lost.
    Going to last 10 -20 years and many people will suffer.
     
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  2. wgabrie

    wgabrie Well-Known Member Donor

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    So, you think that the Fed has found bonds to be profitable? Now likes that better?
     
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  3. Quadhole

    Quadhole Well-Known Member

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    Of course to the FED they are Profitable. They print the money and give it to themselves. Then they charge the fess to do so, all put on the back of the citizens. Plus, it funds all the MEGA banks they have around the country packed full of family employee.
    This is only the tip of the DEEP seeded FED Corruption.
     
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  4. Quadhole

    Quadhole Well-Known Member

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    Then they give it to the district banks after getting it for free. Send it out thru the other banks who charge the consumer 20% on credit card....
    Anyone can see the past 35 years we have changed from an industrial power house to a fictionalized Financial Bozo economy that helps the filthy rich, no one here included get extremely wealthy and powerful.
    Jobs have not changed wage since 1995... Benefits for working class taken away...

    Glad I seen it years ago, people are gullible to think the politicians care, bankers care, trump cares, about them... Hillary and the DEMS too... What they dont want is for things to go back to helping the working class. Thus they allow BS news to dominate the headlines. The Zionist elite own the media, thus, you get what they want you to watch. Never about real inflation, real job loss, 21% unemployment... they tell you it is GREAT....
    Then they show you the one off guy that broke out and became a millionaire... That is your example to do the SAME...

    Further more, they pay hundreds if not thousands of right wing neocon... working for think tanks to post drivel online... This supports their tyranny
     
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  5. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    It's unbelievable the Fed is continuing with more "quantitative easing" (i.e. turning more government debt into money so the government can continue to run a budget deficit, practically like "printing money").
     
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  6. jdog

    jdog Banned

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    If the economy is truly doing as well as Government reports say with 2% increases in GDP then why would the Fed see the need for more stimulus?
    This is not a move the Fed would do unless they felt it was needed.
     
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  7. Quadhole

    Quadhole Well-Known Member

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    Yesterday 65B was announced in Corporate Bond sales. These are the Zombie corps who show profit because they borrow money dirt cheap, us that money to do buy backs driving down the amount of outstanding stocks. This shows an improvement in Earnings per Share (eps). That allows the board to give big bonuses to themselves, grow the corporate debt, hire no new people, make no real investments in the company.
    A Zombie type of economy with zombie businesses.
    All to collapse... Problem lies in the working class who are losing everyday. That wont play out well, just a matter of time. 60M plus people are not working, all the numbers are rigged to look good, when they get out of bounds, they just change data.
     
  8. jdog

    jdog Banned

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    IMO the upper classes know the end is near, and they are simply attempting to make as much as possible before the SHTF.
     
  9. Socratica

    Socratica Well-Known Member

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    There is no QE4... Bond purchases just a tool in conventional monetary policy. QE is also conducted when short-term interest rates are already near zero...
     
    Last edited: Sep 6, 2019
  10. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    With all this QE, the Fed is basically pumping money into the stock market, either intentionally or not.

    In some sense it's like the Fed is printing money to grab up equity in the market, which inflates asset prices and thus drives yields down. (i.e. your share of stock will still pay the same dividends as before but now the selling price of that stock will be higher)
     
    Last edited: Sep 6, 2019
  11. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Why? Wouldn't that tend to push interest rates even lower?
     
  12. Socratica

    Socratica Well-Known Member

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    The point of QE is not to lower interest rates; it's purpose is to provide liquidity to financial markets by purchasing large quantities of financial assets that are risker and longer duration, other than short-term treasuries.

    If the Fed wanted to lower interest rates, it already has the tools available to accomplish this through more conventional forms of monetary policy (Reserve Requirements, Open Market Operations, Discount Rate). QE acts as a last resort when conventional forms of monetary policy proves ineffective.
     
  13. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Your description of "providing liquidity" is too vague/ambiguous for me to really understand what you mean.

    Doesn't that assume the Fed knows the real inherent worth of those assets better than the market?

    Or are you claiming there's a lack of enough money in the market? If that's the case than we know that "expanding the money supply" doesn't help, it's just moving wealth around or creating inflation.

    What's the point of "providing liquidity" ?
     
  14. Socratica

    Socratica Well-Known Member

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    There are no assumptions. The Fed engages in open market operations without any "assumptions" of what market participants will do. It merely fills a void in order to meet it's necessary mandate.

    Where do I begin? When financial markets are "frozen," financial institutions become more cautious and risk adverse. They don't lend to consumers. More importantly, they don't lend to one another, which may make it difficult for some institutions to conduct regular operations. With a lack of liquidity, a number of things happen, which are not limited to the follow:
    1. Direct transaction cost for investors rise
    2. Bond prices fall due to investors demanding higher liquidity risk premiums.
    3. Capital raising becoming more expensive.
    4. Dealers are stuck with supply levels that they are unable to reduce
    All of which can lead to bank runs and financial recessions. Providing liquidity is very important, especially in our very advanced, complex economy. It's almost considered the Fed implicit third mandate.
     
  15. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    "Providing liquidity" to investors is not one of the stated official mandates of the Fed.

    If there's "a void", maybe that void should be there.

    So far I agree with you.

    Yes, too bad for them.
    If financial institutions are "frozen", aren't they frozen for good reason?
    Maybe those consumers shouldn't get that money so easily.
    Still not seeing any role for the Fed here.

    Too bad for them. If they go out of business, why shouldn't they go out of business?
    If they can't find a financial institution to lend to them, isn't it because no financial institution thinks the risk is worth it.

    You are STILL not explaining why the Fed should step in.


    Somebody has to be compensated for that increased risk. Why shouldn't transaction costs rise?

    The Fed providing the money doesn't solve the underlying problem. Now you're just putting the risk on the Fed.
    You haven't explained how that eliminates any of the risks.


    That's not a justification for the Fed providing more liquidity.
    If that's really the core issue then the Fed should deal with that directly.
    Not waste resources pumping "liquidity" into the entire market.

    Don't you realize the Fed can't provide more liquidity to the overall economy.
    It's just paper printing, moving things around. If the Fed provides that liquidity it's just going to take liquidity away from somewhere else. (Probably in the form of inflation)

    Maybe I'm not grasping something, but I'm not seeing how your logic ultimately connects at all.

    And maybe the issue isn't really you, but the policies of hairbrained economists that don't really know what they're doing.

    Can you show some semblance of logical reasoning why the benefits of providing more liquidity would outweigh the costs?
    (other than the run on the banks concept)
     
    Last edited: Sep 6, 2019
  16. Socratica

    Socratica Well-Known Member

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    If you have a ton of buyers with no sellers (and vice versa), aIt's an "implicit" mandate. We've long learned since LTCM and Lehman that there are severe consequences when we fail to stabilize financial markets. It's all about macro-prudential risk. We've seen what happens when just one major financial institution runs into trouble.

    Whatever the reason is, it's not good for credit markets to suddenly freeze. Yes, consumers will not obtain access to credit so easily; but that is irrelevant. Financial institutions are capital constraint; not reserve constraint They lend when they find credit-worthy borrowers; not simply because they have reserves to lend.

    When capital markets freeze up, indeed, bad economic activities will not be funded. But it is also true that good economic activities will also fail to acquire funding. There is no reason why institutions would want to inhibit this.

    You're going in circles. It's literally the Fed's job to step in when what I have described occurs. They are, after all, the lenders of last resort.

    If you have a ton of buyers with no sellers (and vice versa), you don't have a market anymore. Stable financial cost ensures that markets continue to be... markets. The Federal Reserve acts as a market maker which eliminates liquidity risk. It's not putting risk on the Fed; the Fed is a market maker like many other participants in the marketplace.


    Again, that is the job of the Fed. It's not the entire market; it's merely institutions that need liquidity. It's not a waste of resources. The Fed was created for this purpose.

    How would it take liquidity away from somewhere else?

    The cost are everything I have just outlined, including exacerbating financial crisis. Market liquidity is essential for financial and economic growth.
     
    Last edited: Sep 7, 2019
  17. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    There are all sorts of borrowers who financial institutions will not lend to. That doesn't mean the Fed should lend to them.

    I don't think we're getting anywhere in our conversation. You keep talking about stability and liquidity but are unable to explain exactly, in more quantifiable terms, how that additional stability and liquidity created by the Fed lending outweighs the cost and inherent risk of that lending.

    I believe the problem in our communication (and I've seen this before) comes down to the semantic meaning of words. Economics is really a more mathematical consideration, and simple economic terminology words do not convey the mathematical meaning so easily.
     
    Last edited: Sep 7, 2019
  18. Quadhole

    Quadhole Well-Known Member

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    US per capita income at 67K without borrowing and credit would be - 5k Like a joke on the people that they still cant see because today they dont have to claim bankruptcy and thus, all is good.

    Check out this article : https://www.libertynation.com/the-american-debt-behemoth-looms/
    Right from one of the hated right wing neocon. sites.
    None the less, when it comes to the economy the writers are usually honest until fired.

    OUR fed went around the world last year stating they wanted MORE TOOLS and specifically said BUYING STOCKS. Give them that and we turn into Japan. In that article it shows you what happens when we do. The economy can chug along. Difference is we are the reserve currency and Japan is not. Japan also uses this money to build their country and take care of their people, we use the money to make billionaires into Trillionaires. It wont end well, just depends how gullible the American is going forward.
    Stagflation should hit, really it has, but at 1$ a day, americans dont really feel it.
     
  19. Socratica

    Socratica Well-Known Member

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    Then the Fed isn't doing its job. You keep using the word "should;" the word "should" (in this context) is irrelevant. The Discount Window is available for all depository institutions that need it; under Federal Reserve supervision.

    This is just a primer of how Central Banks function within their given roles; there is nothing to quantify. Financial stability is an implicit mandate for the Federal Reserve. As such, they get to define for themselves what "financial stability," is. They also determine what the "risk" are for failing to provide liquidity, as they've done during the late 90s the Fed coordinated private lenders to provide emergency funding in order to avoid the large losses policymakers feared would have spread through the financial system had LTCM failed

    LTCM wasn't a bank; had no federal/national banking charter; and therefore, had no access to the Fed's discount window. The Fed still bailed them out anyway.

    Well, I've studied mathematics, and I can tell you that what you're saying is incorrect. Economics applies mathematics to certain concepts, but there are no mathematical proofs required for these concepts. I'm not sure what your background is, but the terminology being use is already common knowledge. There is nothing semantical about it.
     
    Last edited: Sep 8, 2019
  20. jdog

    jdog Banned

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    I think it is more that they see increased risk in MBS. They are currently reducing their holdings of MBS and re balancing into short term bonds.
    Their actions would suggest, despite what they say, that they see increasing likelihood of recession.
     
  21. wgabrie

    wgabrie Well-Known Member Donor

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    What is MBS?
     
    Last edited: Sep 9, 2019
  22. jdog

    jdog Banned

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    Mortgaged backed security.
     
  23. Socratica

    Socratica Well-Known Member

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    Mortgage defaults are near historic lows; prepayments are also near lows (which are normally tied to a increased interest rates) are also near historic lows. I'm not sure what risk you are referring to.
     
  24. jdog

    jdog Banned

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    Just wait a few months and you will....
     
  25. Socratica

    Socratica Well-Known Member

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    Is that supposed to be a prediction? Are you aware of what risk are inherent with structured securities?
     

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