4 ms·

If that happens, then the government will take money out of circulation. Right now the Fed is printing money to buy assets. When they need to reverse it, they

If that happens, then the government will take money out of circulation. Right now the Fed is printing money to buy assets. When they need to reverse it, they sell the assets, and then remove the money they make from circulation.

sfj 7y ago
I don't think they'll get that much for those sub prime auto loans and over inflated stocks they're accepting now...
- QuesnayJr 7y ago
  The Fed has $4 trillion of assets on their balance sheets right now. They'll find something to sell. Anyway, they're not buying subprime auto loans or overinflated stocks. They're buying long term risk-free debt, and are going to start buying commercial paper (which has some risk, but not much). They really did buy lots of different stuff during the financial crisis, and yet they never lost control of inflation.
  - sfj 7y ago
    > Anyway, they're not buying subprime auto loans or overinflated stocks. They're buying long term risk-free debt, and are going to start buying commercial paper (which has some risk, but not much). From their press release on 3/17: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200317b1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file... Eligible Collateral•Collateral eligible for pledge under the PDCF includes all collateral eligible for pledge in open market operations (OMO); plus investment grade corporate debt securities, international agency securities, commercial paper, municipal securities, mortgage-backed securities, and asset-backed securities; plus equity securities. Foreign currency-denominated securities are not eligible for pledge under the PDCF at this time. -- equity securities == stocks. I admit I was exaggerating about the subprime auto loans, but they also state that: Additional collateral may become eligible at a later date upon further analysis., so who knows? I agree with you they have plenty of stuff old stuff to sell from QE 1-4, but this certainly is a new class of assets from them, and is almost certain to lose money.

sfj 7y ago

I don't think they'll get that much for those sub prime auto loans and over inflated stocks they're accepting now...

QuesnayJr 7y ago
The Fed has $4 trillion of assets on their balance sheets right now. They'll find something to sell. Anyway, they're not buying subprime auto loans or overinflated stocks. They're buying long term risk-free debt, and are going to start buying commercial paper (which has some risk, but not much). They really did buy lots of different stuff during the financial crisis, and yet they never lost control of inflation.
- sfj 7y ago
  > Anyway, they're not buying subprime auto loans or overinflated stocks. They're buying long term risk-free debt, and are going to start buying commercial paper (which has some risk, but not much). From their press release on 3/17: https://www.federalreserve.gov/newsevents/pressreleases/files/monetary20200317b1.pdf https://www.federalreserve.gov/newsevents/pressreleases/file... Eligible Collateral•Collateral eligible for pledge under the PDCF includes all collateral eligible for pledge in open market operations (OMO); plus investment grade corporate debt securities, international agency securities, commercial paper, municipal securities, mortgage-backed securities, and asset-backed securities; plus equity securities. Foreign currency-denominated securities are not eligible for pledge under the PDCF at this time. -- equity securities == stocks. I admit I was exaggerating about the subprime auto loans, but they also state that: Additional collateral may become eligible at a later date upon further analysis., so who knows? I agree with you they have plenty of stuff old stuff to sell from QE 1-4, but this certainly is a new class of assets from them, and is almost certain to lose money.