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This is not solving the problem which is 1) the US is drastically behind in testing the population 2) it will not fix disrupted international supply chains 3) i

This is not solving the problem which is 1) the US is drastically behind in testing the population 2) it will not fix disrupted international supply chains 3) it will not fix liquidity crises at health insurers, hospitals, and life insurers and 4) it will not fix demand if people do not want to go shopping at any price because of non-financial concerns. I presume the Fed knows this, and what worse is this seems to be due to political pressure. Finally, when this does not work, it will reduce peoples' faith in the Fed.

scarmig 7y ago
Hey now! SPY is up 0.01% at the news!
snarf21 7y ago
People have faith in the Fed? You are right though, this is political to slow a market correction to where it actually should be. We just keep spinning more plates. What we really need if fiscal policy plans, not monetary. We have so many zombie companies that are on life support and we need to let them die but it won't happen with 0% rates.
- seganddr 7y ago
  The US federal reserve are the best in the world at what they do IMO.
ajross 7y ago
It won't fix any of those, but it will smooth the impact of 1, 2, and 4 over a longer period, which has value. And it absolutely does treat 3 directly, though obviously there is a balance sheet problem with insurers (not the same thing as a liquidity problem!) that will need to be treated by some kind of a bailout eventually. People are being too rigid here: this isn't a perfect policy but it's not an inherently bad idea. You use monentary policy to buffer shocks to the economy, and in that regime it's best used early and with agility. I think the Fed is fine here, though I agree that this is a very minor side plot in a much larger story.
- throwaway5752 7y ago
  Yeah, I didn't want to seem alarmist and talk about solvency crises in the insurance market. But I would be interested what impact this might have on life/health/related reinsurers. I feel like targeted intervention in that sector similar to the auto manufacturers is a better thing to plan for and I'm not sure that a 50 basis point cut is going to help as much as you do in 1/2/4 and will be insufficient in 3. One thing that bothers me and I don't see discussed here is how much the market moved ahead of the announcement. It is very alarming that this sort of information leaked ahead of the announcement as much as it did. I would be interested to know how that reached the market.
jcfrei 7y ago
I agree with 1,2 and 4. However why shouldn't this help with liquidity problems for insurers?

scarmig 7y ago

Hey now! SPY is up 0.01% at the news!

snarf21 7y ago

People have faith in the Fed? You are right though, this is political to slow a market correction to where it actually should be. We just keep spinning more plates. What we really need if fiscal policy plans, not monetary. We have so many zombie companies that are on life support and we need to let them die but it won't happen with 0% rates.

seganddr 7y ago
The US federal reserve are the best in the world at what they do IMO.

ajross 7y ago

It won't fix any of those, but it will smooth the impact of 1, 2, and 4 over a longer period, which has value. And it absolutely does treat 3 directly, though obviously there is a balance sheet problem with insurers (not the same thing as a liquidity problem!) that will need to be treated by some kind of a bailout eventually. People are being too rigid here: this isn't a perfect policy but it's not an inherently bad idea. You use monentary policy to buffer shocks to the economy, and in that regime it's best used early and with agility. I think the Fed is fine here, though I agree that this is a very minor side plot in a much larger story.

throwaway5752 7y ago
Yeah, I didn't want to seem alarmist and talk about solvency crises in the insurance market. But I would be interested what impact this might have on life/health/related reinsurers. I feel like targeted intervention in that sector similar to the auto manufacturers is a better thing to plan for and I'm not sure that a 50 basis point cut is going to help as much as you do in 1/2/4 and will be insufficient in 3. One thing that bothers me and I don't see discussed here is how much the market moved ahead of the announcement. It is very alarming that this sort of information leaked ahead of the announcement as much as it did. I would be interested to know how that reached the market.

jcfrei 7y ago

I agree with 1,2 and 4. However why shouldn't this help with liquidity problems for insurers?