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Additionally, the Fed is sticking to its mission: support the currency within a reasonable inflation band while also supporting a target unemployment rate. Deba

by ttul 7y ago

Additionally, the Fed is sticking to its mission: support the currency within a reasonable inflation band while also supporting a target unemployment rate. Debasing the currency right now is exactly the right thing to do. Later, the Fed will unwind these supports as it did long after the great recession ended.

toomuchtodo 7y ago
The Fed only unwound about $600B of $5T in support they provided before this event occurred (post GFC to pre pandemic response). It’s in the same FRED citation in this subthread [1]. I don’t think there’s any merit to the idea the Fed will be able to unwind this support in the future, if that’s as far as they got in one of the longest expansionary periods in history. EDIT: /u/adventured has an excellent comment [2] down thread you must read that explains the situation succintly; TLDR The Fed is incinerating 1-3% of total wealth (through devaluation) to keep the economy pilot light on until we can start the economic engine back up, monetary policy be damned. Whether these efforts can be "unwound" seems to be immaterial. [1] https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL [2] https://news.ycombinator.com/item?id=22827276 https://news.ycombinator.com/item?id=22827276
- thoughtstheseus 7y ago
  The Fed did end the short-term targeted lending programs once markets stabilized and alternative financing become more available. Not really enough to dent the balance sheet though due to the size of the govt. bond and MBS purchases from QE.
- dragonwriter 7y ago
  It doesn't actually need to unwind absolutely (though if monetary policy conditions allow/demand it, it could), unwinding in effect can come just through aggregate economic growth. > monetary policy be damned. No, this is monetary policy, aimed directly at what the Fed is chartered to aim monetary policy at.
  - deleted 7y ago
    [deleted]
dmix 7y ago
> Later, the Fed will unwind these supports as it did long after the great recession ended. That was the idea at least.
weirdstuff 7y ago
The Fed never unwound, at least beyond an initial and failed attempt. When the Fed started unwinding a little over a year ago, they had to suddenly stop when markets tanked—hard. After the Fed ceased, stability returned. I'm not sure there will ever be an unwinding, at least in the traditional sense. Topping it off, starting last September, the Fed began emergency "not-QE" liquidity injections, which have unexpectedly grown over time. And now, this black swan event. Nobody knows what's going on.
- bogomipz 7y ago
  >'Topping it off, starting last September, the Fed began emergency "not-QE" liquidity injections, which have unexpectedly grown over time.' What were those "not-QE" liquidity injections exactly? What other lever were they pushing on a year ago?
  - fny 7y ago
    The Fed pumped /tons/ of money into the repo market.
barney54 7y ago
But the Fed never unwound after the great recession...

by ttul 7y ago

toomuchtodo 7y ago

The Fed only unwound about $600B of $5T in support they provided before this event occurred (post GFC to pre pandemic response). It’s in the same FRED citation in this subthread [1]. I don’t think there’s any merit to the idea the Fed will be able to unwind this support in the future, if that’s as far as they got in one of the longest expansionary periods in history. EDIT: /u/adventured has an excellent comment [2] down thread you must read that explains the situation succintly; TLDR The Fed is incinerating 1-3% of total wealth (through devaluation) to keep the economy pilot light on until we can start the economic engine back up, monetary policy be damned. Whether these efforts can be "unwound" seems to be immaterial. [1] https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL [2] https://news.ycombinator.com/item?id=22827276 https://news.ycombinator.com/item?id=22827276

thoughtstheseus 7y ago
The Fed did end the short-term targeted lending programs once markets stabilized and alternative financing become more available. Not really enough to dent the balance sheet though due to the size of the govt. bond and MBS purchases from QE.
dragonwriter 7y ago
It doesn't actually need to unwind absolutely (though if monetary policy conditions allow/demand it, it could), unwinding in effect can come just through aggregate economic growth. > monetary policy be damned. No, this is monetary policy, aimed directly at what the Fed is chartered to aim monetary policy at.
- deleted 7y ago
  [deleted]

dmix 7y ago

> Later, the Fed will unwind these supports as it did long after the great recession ended. That was the idea at least.

weirdstuff 7y ago

The Fed never unwound, at least beyond an initial and failed attempt. When the Fed started unwinding a little over a year ago, they had to suddenly stop when markets tanked—hard. After the Fed ceased, stability returned. I'm not sure there will ever be an unwinding, at least in the traditional sense. Topping it off, starting last September, the Fed began emergency "not-QE" liquidity injections, which have unexpectedly grown over time. And now, this black swan event. Nobody knows what's going on.

bogomipz 7y ago
>'Topping it off, starting last September, the Fed began emergency "not-QE" liquidity injections, which have unexpectedly grown over time.' What were those "not-QE" liquidity injections exactly? What other lever were they pushing on a year ago?
- fny 7y ago
  The Fed pumped /tons/ of money into the repo market.

barney54 7y ago

But the Fed never unwound after the great recession...