3 ms·
> They're sacrificing our future in order to inflate stock prices now You're trivializing the issue. It's not just "inflating stock prices". Credit markets tha
by dcolkitt 7y ago
> They're sacrificing our future in order to inflate stock prices now
You're trivializing the issue. It's not just "inflating stock prices". Credit markets that are required for the basic functioning of the economy have completely frozen up.
Companies that are completely solvent can't meet short-term obligations because the commercial paper market has frozen. Money market funds, which are basically savings accounts, have fallen below par despite only containing short-term high-quality bonds that would never default in any reasonably scenario. Repo markets are forcing mortgage providers to de-leverage positions (which will in turn lead to foreclosures) based on the fact that there's no liquidity for the collateral. International trade for basic and necessary goods in the supply chain has grinder to a halt because banks are no longer extending trade finance.
Whether you like it or not our economy is completely dependent on having a well-functioning "money market", where short-term bonds, notes, and IOUs from high-quality issuers are used interchangeably with cash. And it's been this way for at least 150 years. Once the money market stops functioning economic activity grinds to a halt.
At least in 2008, there was maybe some moral hazard argument against the Fed intervening. From 2001-2007 banks and other financial institutions were playing fast and loose with their risk. Maybe in 2008 it might have made sense to let banks stew in the financial crisis they created to teach them a lesson.
But in this crisis what would be the point? This is a pandemic that came out of nowhere, that nobody could have possibly been prepared for. "You guys should have really had a contingency plan for global quarantine" doesn't make sense. I'm not even that big a fan of the Fed, but if there's any time ever to print money to prop up the economy, it's in the middle of a literal global pandemic when the government can already borrow money at zero percent interest.
- lisper 7y ago> would never default in any reasonable scenario Our reality is about to stray pretty far from any reasonable scenario.
- roymurdock 7y agobill gates saw this coming in 2015 [1] and proposed many solutions so we could better prepare including assembling a medical reserve corps, simulated "germ games", and investments in medical R&D along with increased investment in 3rd world health infrastructure to stop the infections before they spread also many asian countries were better prepared due to their exposure to mers/sars [2]. so there was a precedent and influential people calling for change but investing health infrastructure is not the Fed's job, that is congress/government's job - AKA the job of corporations through lobbyists who have no incentive to do any type of preparation, just perpetuate the consumption cycle the fed is just responding to an economic crisis by trying to bail water out of a sinking boat, but they don't have the power to actually rebuild/fix that boat [1] https://www.ted.com/talks/bill_gates_the_next_outbreak_we_re_not_ready?language=en#t-500682 https://www.ted.com/talks/bill_gates_the_next_outbreak_we_re... [2] https://www.ft.com/content/e015e096-6532-11ea-a6cd-df28cc3c6a68 https://www.ft.com/content/e015e096-6532-11ea-a6cd-df28cc3c6...
- Ididntdothis 7y ago“bill gates saw this coming in 2015“ Let’s not make Gates the hero here. Most people working on infectious diseases knew about these problems.
- saiya-jin 7y agoMost people in general. Every time ebola started in Africa, there were information campaigns. But as long as you don't touch and it doesn't mutate, nobody cared much for some poor uneducated africans. Everybody just thought it won't happen during their life/term, like some big asteroid impact. Well, not anymore
- deleted 7y ago[deleted]
- brenden2 7y agoYes, you're right. The guys at the top collect all the benefit, and everyone at the bottom absorbs all the risk.
- mindslight 7y ago> the commercial paper market has frozen This is similar to when companies continually complain about a "talent shortage" from not able to hire people, when the real reason is that they just don't want to pay market rates. There is an easy answer to obtaining business credit - pay the current interest rates, which have gone up due to uncertainty. Instead, the Fed is telling everyone that interest rates are even lower because they want to perpetuate the stock market bubble.
- dcolkitt 7y agoNo, it's not. There's literally no bid on some issues of commercial paper and MBS. Literally nobody is offering to buy these securities at any price. And we're not even talking about speculative assets here. We're talking about things like 30-day collateralized notes from Microsoft. Do you really think the market is "pricing" that Microsoft is likely to go bankrupt in the next 30 days? Or is it more likely that there's a huge shortage of money relative to the liquidity demands imposed by the dislocations.
- mindslight 7y agoDespite their destructiveness in earlier decades, I'm willing to loan Microsoft cash for 30 days for double my money back. Where do I buy?