7 ms·

3.85 million more Americans filed for unemployment last week and the stock market barely moved. Its because your Fed is printing money to buy up assets and corp

3.85 million more Americans filed for unemployment last week and the stock market barely moved. Its because your Fed is printing money to buy up assets and corporate junk bonds. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... This is also the sign of the kind of plumbing that is baked into the US system - protect capital when things go belly up and allow labor to hit the reset button through unemployment and wage cuts. Flood the market with cheap credit and then eventually growth comes back. It’s a rehash of the financial crisis response because it’s the only sort of response the USA is configured for.

kortilla 6y ago
The Feds mandate is to maintain low unemployment. They keep the credit markets flowing to keep the unemployment from becoming 10x worse than it already is.
- DrAwdeOccarim 6y ago
  That's a funny thing to say since you can't get 10x worse than it is--we're already at 25% unemployment. Maybe you can say 2x?
  - darkerside 6y ago
    Depending how you calculate it, that's not necessarily true. Reported unemployment numbers are calculated as a percentage of people who are actively working or seeking work. It's possible for the denominator to increase for some reason (like more people needing to find work due to state and federal aid drying up). Said another way, the current workforce is 25% unemployed. If that corresponds to 5m out of a potential workforce of 25m, but the workforce increased to 100m, unemployment could increase 10x to 50m, while only doubling as a percentage. And I just looked it up and these numbers are totally detached from reality, but I've written too much to delete now, so I'm just going to publish it! (And besides, I think it's still useful to question what's behind statistics)
    - ARandumGuy 6y ago
      Part of the issue is that the Bureau of Labor Statistics reports six unemployment numbers, all with different standards for what constitutes 'unemployment.' All of these numbers are useful, but often people throw around different numbers without explaining which unemployment number they're actually talking about, which can result in seeing wildly different numbers. Source: https://www.bls.gov/lau/stalt.htm https://www.bls.gov/lau/stalt.htm
  - autosharp 6y ago
    75% is working right now but if it gets 10x worse then 7.5% will be working.
    - quickthrowman 6y ago
      Uh, if 7.5% of people have jobs, there will have been riots and civil disturbances for months, food shortages, utility failures, limited medical care, and so on as the employment rate plummets. It’s not possible to have 7.5% employment without total chaos, might as well be 0% in your (impossible) example.
  - koheripbal 6y ago
    2x more unemployment might be 10x worse, economically. It's not linear.
gridlockd 6y ago
It's not just the US, it's every major nation. Companies are massively overleveraged across the board. Not being overleveraged a competitive disadvantage. It's the new normal.
- petrocrat 6y ago
  > it's every major nation No, Countries in Europe are providing fiscally sourced replacement to wages/salaries. For example Denmark is paying 80% of an employees salary if the company does not lay them off. This is a drastically different intervention than what the US is doing.
  - gridlockd 6y ago
    I am talking about what happened for the past decade, not just the response to the crisis right now. Europe is doing everything the US is doing - and more.
  - sudosysgen 6y ago
    That's because a ton of European countries already have unemployment so generous that it's essentially the same or better than what the US is doing without having to do any changes.
rayiner 6y ago
How many of those people are really “unemployed” though? (Not a rhetorical question.) Lots of people are furloughed so they can collect unemployment, and both they and their employers expect them to return to work when the shelter orders are lifted.
- koheripbal 6y ago
  That's a good distinction to make - but it's also unclear. Will people go back on cruises in the same amounts? Will they pack a small enclosed bar or nightclub this winter? Will companies that automate more functions today, re-hire those workers when this is over? Some portion of those jobs may never return. It's very very hard to tell how many.
api 6y ago
When all you have is a hammer... The Fed has a twin mandate (price stability, maximum employment) and two tools to satisfy it with: rate adjustments and liquidity injection (QE). That's just about it. They aren't allowed or configured to do much of anything else. If those two tools stop working or produce distorted results, they can't switch tools. They have to keep banging the hammer or choose to do nothing. What we are seeing here is a failure of Congress and the Presidency, not the Fed. The Fed is doing the only thing it can possibly do in this situation. It has no more tools.
- ryndbfsrw 6y ago
  Completely agree. The Fed is one of the few institutions that has bipartisan support so its allowed to fulfil its mandate and the 'plumbing' so to speak works well when its trying to pump money into markets. But as we've seen getting money into people's pockets is more challenging in the USA as that bit of infrastructure wasn't seen as needing investment due to the way USA normally reacts to market shocks. (And by infrastructure I think of benefit systems running 50 year old bits of cobol, sending benefit payments via cheques, patchworks of state benefits instead of universal coverage etc.)
  - camelite 6y ago
    Nonsense. Money isn't getting into people's pockets because the political will isn't there. If it was an influential Bloc screaming for assistance, they would get it, and the details would be worked out later. Where there's a will there's a way, and where there's no will there are a bunch of phony excuses.
    - Red_Leaves_Flyy 6y ago
      If the people protesting the lockdowns instead protested to demand immediate, and sustained benefits, and supporting policy, until the lockdowns are lifted under we may see different results. Of course, for that to work the protests must end entirely if demands are met. Instead we get more reality TV. I keep going to bed every night wondering when I'll wake up from bassackwards nightmare.
anthonypasq 6y ago
The stock market barely moved because every investor with a brain already knew that more people would be unemployed this week, 3 weeks ago.
- koheripbal 6y ago
  bingo. Stocks are forward looking - by 10 to 20 years, depending on the valuation model. The idea that companies should be worth half of what they were last year because of a 18-month long pandemic is kind of idiotic, which is why the liquidations in mid-march were a great buying opportunity. ...the only exception being companies that might be forced into bankruptcy - such as retail, restaurants, travel, etc. Tech (NASDAQ) has almost entirely recovered... which is reasonable. I think a lot of commentators are angry that many shareholders are not experiencing the same pain they are, and therefor attribute it to some sort of social evil. Misery loves company.
  - Paradigma11 6y ago
    How come the stock market is not pricing in the catastrophic pandemic that will hit us 2039. Or the massive earthquake of 2027. That's just BS, you can make up any number on that timeframe.
    - RestlessMind 6y ago
      As an investor, I am obviously baking in those events in my decision making. I am also assuming an all-in-with-all-the-bazooka-firing response - Fed printing money, Congress enacting stimuli, smart people coming up with vaccines etc - which will recover the asset prices (at least in nominal terms) within 2-3 years.
  - blaser-waffle 6y ago
    20 year forward looking? Maybe across the market and across broad indexes & ETFs, but there is no way you can tell me that they're looking that far ahead intelligently -- one only needs to look at 2008, or the huge volatility over the last couple months. Oil futures, for example, are only going out about 2-5 years. We knew there was going to be wicked unemployment down the line in Feb/March. Now it's here and no one is surprised -- and that was baked into the stock price, on top of Federal cash bailouts that make the unemployment numbers less relevant.
RestlessMind 6y ago
A sincere question - do you see any other country handling this crisis in a demonstrably superior way? If so, can you please share the details?

kortilla 6y ago

The Feds mandate is to maintain low unemployment. They keep the credit markets flowing to keep the unemployment from becoming 10x worse than it already is.

DrAwdeOccarim 6y ago
That's a funny thing to say since you can't get 10x worse than it is--we're already at 25% unemployment. Maybe you can say 2x?
- darkerside 6y ago
  Depending how you calculate it, that's not necessarily true. Reported unemployment numbers are calculated as a percentage of people who are actively working or seeking work. It's possible for the denominator to increase for some reason (like more people needing to find work due to state and federal aid drying up). Said another way, the current workforce is 25% unemployed. If that corresponds to 5m out of a potential workforce of 25m, but the workforce increased to 100m, unemployment could increase 10x to 50m, while only doubling as a percentage. And I just looked it up and these numbers are totally detached from reality, but I've written too much to delete now, so I'm just going to publish it! (And besides, I think it's still useful to question what's behind statistics)
  - ARandumGuy 6y ago
    Part of the issue is that the Bureau of Labor Statistics reports six unemployment numbers, all with different standards for what constitutes 'unemployment.' All of these numbers are useful, but often people throw around different numbers without explaining which unemployment number they're actually talking about, which can result in seeing wildly different numbers. Source: https://www.bls.gov/lau/stalt.htm https://www.bls.gov/lau/stalt.htm
- autosharp 6y ago
  75% is working right now but if it gets 10x worse then 7.5% will be working.
  - quickthrowman 6y ago
    Uh, if 7.5% of people have jobs, there will have been riots and civil disturbances for months, food shortages, utility failures, limited medical care, and so on as the employment rate plummets. It’s not possible to have 7.5% employment without total chaos, might as well be 0% in your (impossible) example.
- koheripbal 6y ago
  2x more unemployment might be 10x worse, economically. It's not linear.

gridlockd 6y ago

It's not just the US, it's every major nation. Companies are massively overleveraged across the board. Not being overleveraged a competitive disadvantage. It's the new normal.

petrocrat 6y ago
> it's every major nation No, Countries in Europe are providing fiscally sourced replacement to wages/salaries. For example Denmark is paying 80% of an employees salary if the company does not lay them off. This is a drastically different intervention than what the US is doing.
- gridlockd 6y ago
  I am talking about what happened for the past decade, not just the response to the crisis right now. Europe is doing everything the US is doing - and more.
- sudosysgen 6y ago
  That's because a ton of European countries already have unemployment so generous that it's essentially the same or better than what the US is doing without having to do any changes.

rayiner 6y ago

How many of those people are really “unemployed” though? (Not a rhetorical question.) Lots of people are furloughed so they can collect unemployment, and both they and their employers expect them to return to work when the shelter orders are lifted.

koheripbal 6y ago
That's a good distinction to make - but it's also unclear. Will people go back on cruises in the same amounts? Will they pack a small enclosed bar or nightclub this winter? Will companies that automate more functions today, re-hire those workers when this is over? Some portion of those jobs may never return. It's very very hard to tell how many.

api 6y ago

When all you have is a hammer... The Fed has a twin mandate (price stability, maximum employment) and two tools to satisfy it with: rate adjustments and liquidity injection (QE). That's just about it. They aren't allowed or configured to do much of anything else. If those two tools stop working or produce distorted results, they can't switch tools. They have to keep banging the hammer or choose to do nothing. What we are seeing here is a failure of Congress and the Presidency, not the Fed. The Fed is doing the only thing it can possibly do in this situation. It has no more tools.

ryndbfsrw 6y ago
Completely agree. The Fed is one of the few institutions that has bipartisan support so its allowed to fulfil its mandate and the 'plumbing' so to speak works well when its trying to pump money into markets. But as we've seen getting money into people's pockets is more challenging in the USA as that bit of infrastructure wasn't seen as needing investment due to the way USA normally reacts to market shocks. (And by infrastructure I think of benefit systems running 50 year old bits of cobol, sending benefit payments via cheques, patchworks of state benefits instead of universal coverage etc.)
- camelite 6y ago
  Nonsense. Money isn't getting into people's pockets because the political will isn't there. If it was an influential Bloc screaming for assistance, they would get it, and the details would be worked out later. Where there's a will there's a way, and where there's no will there are a bunch of phony excuses.
  - Red_Leaves_Flyy 6y ago
    If the people protesting the lockdowns instead protested to demand immediate, and sustained benefits, and supporting policy, until the lockdowns are lifted under we may see different results. Of course, for that to work the protests must end entirely if demands are met. Instead we get more reality TV. I keep going to bed every night wondering when I'll wake up from bassackwards nightmare.

anthonypasq 6y ago

The stock market barely moved because every investor with a brain already knew that more people would be unemployed this week, 3 weeks ago.

koheripbal 6y ago
bingo. Stocks are forward looking - by 10 to 20 years, depending on the valuation model. The idea that companies should be worth half of what they were last year because of a 18-month long pandemic is kind of idiotic, which is why the liquidations in mid-march were a great buying opportunity. ...the only exception being companies that might be forced into bankruptcy - such as retail, restaurants, travel, etc. Tech (NASDAQ) has almost entirely recovered... which is reasonable. I think a lot of commentators are angry that many shareholders are not experiencing the same pain they are, and therefor attribute it to some sort of social evil. Misery loves company.
- Paradigma11 6y ago
  How come the stock market is not pricing in the catastrophic pandemic that will hit us 2039. Or the massive earthquake of 2027. That's just BS, you can make up any number on that timeframe.
  - RestlessMind 6y ago
    As an investor, I am obviously baking in those events in my decision making. I am also assuming an all-in-with-all-the-bazooka-firing response - Fed printing money, Congress enacting stimuli, smart people coming up with vaccines etc - which will recover the asset prices (at least in nominal terms) within 2-3 years.
- blaser-waffle 6y ago
  20 year forward looking? Maybe across the market and across broad indexes & ETFs, but there is no way you can tell me that they're looking that far ahead intelligently -- one only needs to look at 2008, or the huge volatility over the last couple months. Oil futures, for example, are only going out about 2-5 years. We knew there was going to be wicked unemployment down the line in Feb/March. Now it's here and no one is surprised -- and that was baked into the stock price, on top of Federal cash bailouts that make the unemployment numbers less relevant.

RestlessMind 6y ago

A sincere question - do you see any other country handling this crisis in a demonstrably superior way? If so, can you please share the details?