11 ms·

If the Fed loses this fight, game over. This isn't the Fed's fight. Monetary policy won't fix this.

onlyrealcuzzo 7y ago
A lot of people seem to think the Fed's job evolved to include preventing recessions. I guess the Fed isn't accountable to the US public, so their job can be whatever they want it to be?
- dcftoapv 7y ago
  The feds mandate is to maximize employment, stabilize prices, and moderate long-term interest rates. A big part of that is trying to avoid the 'bust' part of a boom-bust cycle. As evidenced by your post, the fed should not be accountable to the public because the public cannot be expected to spend anytime trying to understand what they do and their methods of action.
  - deleted 7y ago
    [deleted]
  - cle 7y ago
    Any body holding significant power is at some level accountable to the public, regardless of laws or regulations or how little the public may understand. If the Fed can’t make the case to most citizens that it should exist and retain its power, then it is doomed, and no philosophical arguments could change that.
  - cryptica 7y ago
    The Fed should just hire all citizens in the country as employees. That would be a more efficient way to maximize employment.
    - deleted 7y ago
      [deleted]
  - kds3 7y ago
    > A big part of that is trying to avoid the 'bust' part of a boom-bust cycle. The thing is you can't avoid the bust part, you can only soften it in a way it is not harmful for (some) people.
    - onlyrealcuzzo 7y ago
      You can't avoid the bust unless you avoid the boom. But the Fed makes no effort to avoid the boom.
      - dcftoapv 7y ago
        wtf are you talking about? They were raising interest rates and rolling assets off their balance sheet for the better part of 2018.
        legolas2412 7y ago
        And they kept the interest rates zero from 2008 to 2015, and spent trillions to prop up asset prices via quantitive easing. When they pumped the price to astonishing heights till 2015, what they did in 2018 was too late.
        dcftoapv 7y ago
        Too late for what? This was going to happen no matter what the fed did. If the mkt blew up because of inflation then your argument would make sense. That's not what happened.
        legolas2412 7y ago
        Well if the quantative easing was phased out and interest rates started increasing in 2011, the stock market wouldn't be at all times high, billionaires wouldn't be so rich, but the economy would be better off.
        7y ago
  - ta999999171 7y ago
    So don't educate people, just trust the Pharisees. Got it.
    - dcftoapv 7y ago
      The issue is that the vast majority of people don't want to be educated in economics. They publish the minutes of every signal one of their meetings. You are free to sit down and read absolutely everything they do and the reasoning behind it.
- deleted 7y ago
  [deleted]
ineedasername 7y ago
Precisely. This isn't an issue driven by obscure and multi-layers investment vehicles that can't survive when stressed. This is a decrease in the market driven by actual significantly reduced consumption and demand for a wide variety of services. The Fed keeping things liquid is important, as are things like low interest loans to small businesses. But it doesn't matter how cheap your credit is if you don't actually have any revenue coming in. Monetary policy will (hopefully) help keep the economy from complete disaster while the underlying issue is resolved, but that's the most it can do.
- colechristensen 7y ago
  An option not talked about much yet is cancelling debts. The Romans did it quite a few times. An effective redistribution of wealth from people who own things to people who do things.
  - legolas2412 7y ago
    Effective sure, but surely you could have a fairer way. For example, one of the variant of debt cancellation I hear about is the proposal by Sanders and Warren to cancel all student debt. Isn't that extremely unfair to people who chose to not go to college because tuition is costly? Isn't it unfair to people who put financial prudence in front of needless consumerism, by saving more to pay down their student debt?
    - trent_lott 7y ago
      Isn't it unfair to allow some companies to profit on student loans when others were more prudent and didn't lend to 18 year olds? All finance is done, of course, with pure equality! The people who didn't take student loans haven't had to live with them. They had more years working, with better pay, and without loan interest - they got nothing for their decision! Certainly not a piece of paper that entitles the holder to work in a job unrelated to their studies and without any useful pay bump.
      - 7y ago
simonh 7y ago
This is correct, the financial system is actually fine. Banks are well capitalised and stable. The problems are cash flow for businesses, incomes for low income and hourly wage earners, and health care for huge swathes of Americans. The fed has an important role to play of course, but they’re really a sideshow this time around.
- mindcrash 7y ago
  >the financial system is actually fine. Banks are well capitalised and stable. No they are not. Most big European banks are technically bankrupt. Most big American banks are technically bankrupt too. The only reason people in general do not know about this is because they used a lot of financial tricks to make it look like they are healthy. In fact, Deutsche Bank very likely had to announce that they are bankrupt this very month due to the fact they never learned from the former crisis -- causing a shockwave throughout the entire financial market worldwide, if not for COVID. Now they can just blame COVID when the entire financial system tanks. Here's a video explaining what has been going on in Europe all these years. It will not be different for the United States (or certain parts of Asia for that matter) -> https://www.youtube.com/watch?v=Cu6Em4a4pG4 https://www.youtube.com/watch?v=Cu6Em4a4pG4
  - toomuchtodo 7y ago
    https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Interesting time to be waiving reserve requirements of banks.
    - bluGill 7y ago
      If a bank had reserves before now is the time to use them. In a few months they need to rebuild those reserves for whatever is next.
taiwanboy 7y ago
Game over is an exaggeration. There’s 3.4 trillion sideline cash. China’s economy collapsed 80-90% in the last month and will take months to recover, on top of exploding debts. Japan and Germany was in recession before coronavirus hit. On the other hand, US was growing a steady 2% and had record low unemployment before this. If US can flatten the curve, with only ~3000 cases thus far, US will recover quickly and come out way ahead. And the sideline cash will rush into US
- deelowe 7y ago
  What are we doing to flatten the curve? I keep seeing the us getting compared to Italy.
  - taiwanboy 7y ago
    Closing down schools, banning large gatherings, setting up drive thru testing, ramping up test kits next week, letting employees to work from home, closing borders to China and Europe (25k cases), etc
    - deelowe 7y ago
      Does that stuff help? Did Italy do that? Im seeing tons of people on IG using this time as a means to take vacations.
      - Goladus 7y ago
        Does that stuff help? Yes, if practiced as intended, which there is no guarantee. Did Italy do that? Perhaps not as quickly as they should have. The rest of the world is learning from Italy's experience (they should have been paying closer attention to China, but that's another story) Another thing to realize is that these numbers you are seeing are WITH CONTROLS. Sure, "only" 3,000 Chinese have died. Maybe it's more than that, it's hard to trust Chinese numbers. But even at 2x or 3x, that's far cry from the millions it could have been, had China not both imposed extreme controls to limit the spread of the disease AND allocated emergency resources to healthcare. Some models show realistic scenarios where 5 million Americans die within a year, if the virus is allowed to spread at its maximum rate.
jfoutz 7y ago
I'm sort of surprised they didn't try to push the issue from the bottom. give every tax filer some amount of money say, $200. A bonus for each dependent, say, $100. pulled numbers absolutely out of thin air. I thought the issue was money sloshing around at the bottom, a couple hundred bucks can be a big deal when you're out of work. Ah well, I'm sure the experts have it well in hand.
- miohtama 7y ago
  It's called helicopter money. Australia and Hong Kong already announced going down this route. https://en.m.wikipedia.org/wiki/Helicopter_money https://en.m.wikipedia.org/wiki/Helicopter_money It is very last measure as in that point you are basically admitting that capitalism has failed.
  - snidane 7y ago
    > It is very last measure as in that point you are basically admitting that capitalism has failed. 1. it might be better to prevent a situation of people unable to pay rents and mortgages and have the entire banking system collapse on this enormous liquidity trap. That could mean end of capitalism for sure 2. from capitalist point of ciew, you can look at helicopter money as a dividend. Companies 'give out' money to shareholders and Alaska and Saudi Arabia give out oil money to citizens too.
  - chrispeel 7y ago
    Maybe in some sense this would be admitting that capitalism failed, but not in some bad sense. Any monetary policy at all is acknowledging that we want a closed-loop to keep the economy stable; this closed loop is an acknowledgement that anarcho-capitalism (without any feedback loop) is not stable. Helicopter money seems reasonable to me. Depending on how it's delivered, it could act like a temporary UBI.
  - gentleman11 7y ago
    Alberta did this with a surplus once. It was great. It doesn’t need to be a last resort at all
stjohnswarts 7y ago
The fed is there to stabilize markets and banking, monetary policy absolutely can alleviate stress on people which makes them more sane and predictable. Top reasons for divorce: money (economics) and cheating.

A lot of people seem to think the Fed's job evolved to include preventing recessions. I guess the Fed isn't accountable to the US public, so their job can be whatever they want it to be?

dcftoapv 7y ago
The feds mandate is to maximize employment, stabilize prices, and moderate long-term interest rates. A big part of that is trying to avoid the 'bust' part of a boom-bust cycle. As evidenced by your post, the fed should not be accountable to the public because the public cannot be expected to spend anytime trying to understand what they do and their methods of action.
- deleted 7y ago
  [deleted]
- cle 7y ago
  Any body holding significant power is at some level accountable to the public, regardless of laws or regulations or how little the public may understand. If the Fed can’t make the case to most citizens that it should exist and retain its power, then it is doomed, and no philosophical arguments could change that.
- cryptica 7y ago
  The Fed should just hire all citizens in the country as employees. That would be a more efficient way to maximize employment.
  - deleted 7y ago
    [deleted]
- kds3 7y ago
  > A big part of that is trying to avoid the 'bust' part of a boom-bust cycle. The thing is you can't avoid the bust part, you can only soften it in a way it is not harmful for (some) people.
  - onlyrealcuzzo 7y ago
    You can't avoid the bust unless you avoid the boom. But the Fed makes no effort to avoid the boom.
    - dcftoapv 7y ago
      wtf are you talking about? They were raising interest rates and rolling assets off their balance sheet for the better part of 2018.
      - legolas2412 7y ago
        And they kept the interest rates zero from 2008 to 2015, and spent trillions to prop up asset prices via quantitive easing. When they pumped the price to astonishing heights till 2015, what they did in 2018 was too late.
        dcftoapv 7y ago
        Too late for what? This was going to happen no matter what the fed did. If the mkt blew up because of inflation then your argument would make sense. That's not what happened.
        legolas2412 7y ago
        Well if the quantative easing was phased out and interest rates started increasing in 2011, the stock market wouldn't be at all times high, billionaires wouldn't be so rich, but the economy would be better off.
        7y ago
- ta999999171 7y ago
  So don't educate people, just trust the Pharisees. Got it.
  - dcftoapv 7y ago
    The issue is that the vast majority of people don't want to be educated in economics. They publish the minutes of every signal one of their meetings. You are free to sit down and read absolutely everything they do and the reasoning behind it.
deleted 7y ago
[deleted]

ineedasername 7y ago

Precisely. This isn't an issue driven by obscure and multi-layers investment vehicles that can't survive when stressed. This is a decrease in the market driven by actual significantly reduced consumption and demand for a wide variety of services. The Fed keeping things liquid is important, as are things like low interest loans to small businesses. But it doesn't matter how cheap your credit is if you don't actually have any revenue coming in. Monetary policy will (hopefully) help keep the economy from complete disaster while the underlying issue is resolved, but that's the most it can do.

colechristensen 7y ago
An option not talked about much yet is cancelling debts. The Romans did it quite a few times. An effective redistribution of wealth from people who own things to people who do things.
- legolas2412 7y ago
  Effective sure, but surely you could have a fairer way. For example, one of the variant of debt cancellation I hear about is the proposal by Sanders and Warren to cancel all student debt. Isn't that extremely unfair to people who chose to not go to college because tuition is costly? Isn't it unfair to people who put financial prudence in front of needless consumerism, by saving more to pay down their student debt?
  - trent_lott 7y ago
    Isn't it unfair to allow some companies to profit on student loans when others were more prudent and didn't lend to 18 year olds? All finance is done, of course, with pure equality! The people who didn't take student loans haven't had to live with them. They had more years working, with better pay, and without loan interest - they got nothing for their decision! Certainly not a piece of paper that entitles the holder to work in a job unrelated to their studies and without any useful pay bump.
    - 7y ago

simonh 7y ago

This is correct, the financial system is actually fine. Banks are well capitalised and stable. The problems are cash flow for businesses, incomes for low income and hourly wage earners, and health care for huge swathes of Americans. The fed has an important role to play of course, but they’re really a sideshow this time around.

mindcrash 7y ago
>the financial system is actually fine. Banks are well capitalised and stable. No they are not. Most big European banks are technically bankrupt. Most big American banks are technically bankrupt too. The only reason people in general do not know about this is because they used a lot of financial tricks to make it look like they are healthy. In fact, Deutsche Bank very likely had to announce that they are bankrupt this very month due to the fact they never learned from the former crisis -- causing a shockwave throughout the entire financial market worldwide, if not for COVID. Now they can just blame COVID when the entire financial system tanks. Here's a video explaining what has been going on in Europe all these years. It will not be different for the United States (or certain parts of Asia for that matter) -> https://www.youtube.com/watch?v=Cu6Em4a4pG4 https://www.youtube.com/watch?v=Cu6Em4a4pG4
- toomuchtodo 7y ago
  https://www.federalreserve.gov/newsevents/pressreleases/monetary20200315b.htm https://www.federalreserve.gov/newsevents/pressreleases/mone... > In light of the shift to an ample reserves regime, the Board has reduced reserve requirement ratios to zero percent effective on March 26, the beginning of the next reserve maintenance period. This action eliminates reserve requirements for thousands of depository institutions and will help to support lending to households and businesses. Interesting time to be waiving reserve requirements of banks.
  - bluGill 7y ago
    If a bank had reserves before now is the time to use them. In a few months they need to rebuild those reserves for whatever is next.

taiwanboy 7y ago

Game over is an exaggeration. There’s 3.4 trillion sideline cash. China’s economy collapsed 80-90% in the last month and will take months to recover, on top of exploding debts. Japan and Germany was in recession before coronavirus hit. On the other hand, US was growing a steady 2% and had record low unemployment before this. If US can flatten the curve, with only ~3000 cases thus far, US will recover quickly and come out way ahead. And the sideline cash will rush into US

deelowe 7y ago
What are we doing to flatten the curve? I keep seeing the us getting compared to Italy.
- taiwanboy 7y ago
  Closing down schools, banning large gatherings, setting up drive thru testing, ramping up test kits next week, letting employees to work from home, closing borders to China and Europe (25k cases), etc
  - deelowe 7y ago
    Does that stuff help? Did Italy do that? Im seeing tons of people on IG using this time as a means to take vacations.
    - Goladus 7y ago
      Does that stuff help? Yes, if practiced as intended, which there is no guarantee. Did Italy do that? Perhaps not as quickly as they should have. The rest of the world is learning from Italy's experience (they should have been paying closer attention to China, but that's another story) Another thing to realize is that these numbers you are seeing are WITH CONTROLS. Sure, "only" 3,000 Chinese have died. Maybe it's more than that, it's hard to trust Chinese numbers. But even at 2x or 3x, that's far cry from the millions it could have been, had China not both imposed extreme controls to limit the spread of the disease AND allocated emergency resources to healthcare. Some models show realistic scenarios where 5 million Americans die within a year, if the virus is allowed to spread at its maximum rate.

jfoutz 7y ago

I'm sort of surprised they didn't try to push the issue from the bottom. give every tax filer some amount of money say, $200. A bonus for each dependent, say, $100. pulled numbers absolutely out of thin air. I thought the issue was money sloshing around at the bottom, a couple hundred bucks can be a big deal when you're out of work. Ah well, I'm sure the experts have it well in hand.

miohtama 7y ago
It's called helicopter money. Australia and Hong Kong already announced going down this route. https://en.m.wikipedia.org/wiki/Helicopter_money https://en.m.wikipedia.org/wiki/Helicopter_money It is very last measure as in that point you are basically admitting that capitalism has failed.
- snidane 7y ago
  > It is very last measure as in that point you are basically admitting that capitalism has failed. 1. it might be better to prevent a situation of people unable to pay rents and mortgages and have the entire banking system collapse on this enormous liquidity trap. That could mean end of capitalism for sure 2. from capitalist point of ciew, you can look at helicopter money as a dividend. Companies 'give out' money to shareholders and Alaska and Saudi Arabia give out oil money to citizens too.
- chrispeel 7y ago
  Maybe in some sense this would be admitting that capitalism failed, but not in some bad sense. Any monetary policy at all is acknowledging that we want a closed-loop to keep the economy stable; this closed loop is an acknowledgement that anarcho-capitalism (without any feedback loop) is not stable. Helicopter money seems reasonable to me. Depending on how it's delivered, it could act like a temporary UBI.
- gentleman11 7y ago
  Alberta did this with a surplus once. It was great. It doesn’t need to be a last resort at all

stjohnswarts 7y ago

The fed is there to stabilize markets and banking, monetary policy absolutely can alleviate stress on people which makes them more sane and predictable. Top reasons for divorce: money (economics) and cheating.