7 ms·

The stimuls mode is a permanent regime now. It's good in the short term, but I do not know if anybody understood mid- and long-term consequences of this new pe

by cft 11y ago

The stimuls mode is a permanent regime now. It's good in the short term, but I do not know if anybody understood mid- and long-term consequences of this new permanent mode.

wuliwong 11y ago
There is nothing mysterious about the short, mid or long term effects of artificially low interest rates and quantitative easing. edit Here's a link to read about it. https://mises.org/library/unseen-consequences-zero-interest-rate-policy https://mises.org/library/unseen-consequences-zero-interest-...
criley2 11y ago
"The stimulus mode is a permanent regime now" As a general FYI to those reading -- please fact check before commenting. The Federal Reserve's quantitative easing program ended on Oct 29th, 2014 (538 days ago!) It is difficult to assert that a program which ended over 500 days ago is permanent. Additionally, one may be willing to assert that "ZIRP is permanent regime now" too, to tack onto the culture that central banking has entered a new era. For anyone who did not see that news, ZIRP (zero interest rate policy) ended on Dec 15, 2015 with a rise, and is currently believed to rise again at the next meeting.
- cft 11y ago
  Just take things in in a perspective, not just based on the latest quarter news: http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-states-interest-rate.png http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-s... http://moneymorning.com/wp-content/blogs.dir/1/files/2015/09/9-16-15-u-s-interest-rate-history.png http://moneymorning.com/wp-content/blogs.dir/1/files/2015/09... http://www.naic.org/images/capital_markets_archive/2013/130521_graph1.png http://www.naic.org/images/capital_markets_archive/2013/1305... whether they do a token 0.5% hike (they probably won't), it's obvious that something very basic has changed, and quite likely irreversibly.
  - bduerst 11y ago
    Why did you link three pictures of the same graph? They also don't support your hypothesis that something has changed irreversibly. Raising the interest rate more than 0.5% would have likely had a negative impact. It's very likely the Fed will raise it again later this year.
- tma-1 11y ago
  Yes it's permanent. Interest rates are still super low, meaning companies can still take on debt to buy back their stock. The effect of quantitive easing remains until interest rates start going up and the Fed start buying government bonds from the banks.
  - dgemm 11y ago
    Interest rates have already started going up.
    - turnip1979 11y ago
      They went up once and the fed is signaling a lot of caution. The earlier analyst consensus was 4 hikes this year .. it is down to 2. The latest commentary I'm hearing says normal rates by 2019 .. which is psycho IMHO.
  - forgetsusername 11y ago
    >meaning companies can still take on debt to buy back their stock Please explain the problem here. You're acting like there's some big deception imposed on the public due to companies choosing to return capital to shareholders via one specific mechanism. As if somehow they're buying back stock and "fooling" people into thinking they're making more money or something, and stock prices are irrationally rising. The buybacks, earnings, financials are all open for everyone to read. It's evident by some of your commentary that you can't be bothered. If you don't agree with the price that other people are willing to sell for shares in this market, you are more than welcome to take the other side of that trade and sell into every buyer on the planet. I'm sure you're not doing that.
    - tostitos1979 11y ago
      Shorting a stock isn't always practical. Stock buybacks can be deceptive if a company buys back stocks with debt and doesn't have proper cashflow to pay it off. Non-technical investors see the stock going up and keep piling more cash in. If you think markets are perfect, you have a lot to learn my friend.
- ekianjo 11y ago
  Its not because interest rate is just slightly above zero that its not cheap anymore.
- YZF 11y ago
  What they ended is increasing their balance sheet. They are still rotating into new debt as old debt is maturing so they have not actually rolled back their old QE programs- they just have not increased them.

by cft 11y ago

The stimuls mode is a permanent regime now. It's good in the short term, but I do not know if anybody understood mid- and long-term consequences of this new permanent mode.

wuliwong 11y ago

There is nothing mysterious about the short, mid or long term effects of artificially low interest rates and quantitative easing. edit Here's a link to read about it. https://mises.org/library/unseen-consequences-zero-interest-rate-policy https://mises.org/library/unseen-consequences-zero-interest-...

criley2 11y ago

"The stimulus mode is a permanent regime now" As a general FYI to those reading -- please fact check before commenting. The Federal Reserve's quantitative easing program ended on Oct 29th, 2014 (538 days ago!) It is difficult to assert that a program which ended over 500 days ago is permanent. Additionally, one may be willing to assert that "ZIRP is permanent regime now" too, to tack onto the culture that central banking has entered a new era. For anyone who did not see that news, ZIRP (zero interest rate policy) ended on Dec 15, 2015 with a rise, and is currently believed to rise again at the next meeting.

cft 11y ago
Just take things in in a perspective, not just based on the latest quarter news: http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-states-interest-rate.png http://b-i.forbesimg.com/jessecolombo/files/2014/01/united-s... http://moneymorning.com/wp-content/blogs.dir/1/files/2015/09/9-16-15-u-s-interest-rate-history.png http://moneymorning.com/wp-content/blogs.dir/1/files/2015/09... http://www.naic.org/images/capital_markets_archive/2013/130521_graph1.png http://www.naic.org/images/capital_markets_archive/2013/1305... whether they do a token 0.5% hike (they probably won't), it's obvious that something very basic has changed, and quite likely irreversibly.
- bduerst 11y ago
  Why did you link three pictures of the same graph? They also don't support your hypothesis that something has changed irreversibly. Raising the interest rate more than 0.5% would have likely had a negative impact. It's very likely the Fed will raise it again later this year.
tma-1 11y ago
Yes it's permanent. Interest rates are still super low, meaning companies can still take on debt to buy back their stock. The effect of quantitive easing remains until interest rates start going up and the Fed start buying government bonds from the banks.
- dgemm 11y ago
  Interest rates have already started going up.
  - turnip1979 11y ago
    They went up once and the fed is signaling a lot of caution. The earlier analyst consensus was 4 hikes this year .. it is down to 2. The latest commentary I'm hearing says normal rates by 2019 .. which is psycho IMHO.
- forgetsusername 11y ago
  >meaning companies can still take on debt to buy back their stock Please explain the problem here. You're acting like there's some big deception imposed on the public due to companies choosing to return capital to shareholders via one specific mechanism. As if somehow they're buying back stock and "fooling" people into thinking they're making more money or something, and stock prices are irrationally rising. The buybacks, earnings, financials are all open for everyone to read. It's evident by some of your commentary that you can't be bothered. If you don't agree with the price that other people are willing to sell for shares in this market, you are more than welcome to take the other side of that trade and sell into every buyer on the planet. I'm sure you're not doing that.
  - tostitos1979 11y ago
    Shorting a stock isn't always practical. Stock buybacks can be deceptive if a company buys back stocks with debt and doesn't have proper cashflow to pay it off. Non-technical investors see the stock going up and keep piling more cash in. If you think markets are perfect, you have a lot to learn my friend.
ekianjo 11y ago
Its not because interest rate is just slightly above zero that its not cheap anymore.
YZF 11y ago
What they ended is increasing their balance sheet. They are still rotating into new debt as old debt is maturing so they have not actually rolled back their old QE programs- they just have not increased them.