4 ms·

This is the clearest response so far. Thinking about the tech world, we have all this VC money, but all of that is based on the idea that eventually the company

by notJim 6y ago

This is the clearest response so far. Thinking about the tech world, we have all this VC money, but all of that is based on the idea that eventually the company will IPO and the VCs will get huge returns. However, given that both VC valuations, and stock market valuations (like P/E ratios, IIRC) are arguably in bubble territory (many have argued this), it doesn't seem like the Fed buying more of these assets is very efficient.

lisper 6y ago
The Fed buying up assets is a purely political move to prop up the markets, i.e. to protect investors at the expense of everyone else. It's a dick move for a lot of reasons, not least of which is that it effectively says: all rules are off. We, the Fed, will protect you, the shareholders, from all systemic risk by using our fiscal power to as a guarantor of valuations. That in turn causes more people to buy shares, because when all the risk is gone why the hell not? And that in turn disconnects prices from reality. It is welfare for the wealthy. I am a major beneficiary of this policy and I still think it sucks big fat honking weenies, particularly since it has been implemented by people who rail against welfare for the people who actually need it. The brazen hypocrisy makes me want to retch.
- mrep 6y ago
  How is it a political move when basically every central bank in the world is doing the exact same thing? Also, they have not bought any equities. They are almost entirely just buying our own governments debt and mortgage backed securities as you can see in their balance sheet [0]. [0]: https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1 https://www.federalreserve.gov/releases/h41/current/h41.htm#...
  - lisper 6y ago
    > How is it a political move when basically every central bank in the world is doing the exact same thing? Um, because every central bank in the world is controlled by rich people?

by notJim 6y ago

lisper 6y ago

The Fed buying up assets is a purely political move to prop up the markets, i.e. to protect investors at the expense of everyone else. It's a dick move for a lot of reasons, not least of which is that it effectively says: all rules are off. We, the Fed, will protect you, the shareholders, from all systemic risk by using our fiscal power to as a guarantor of valuations. That in turn causes more people to buy shares, because when all the risk is gone why the hell not? And that in turn disconnects prices from reality. It is welfare for the wealthy. I am a major beneficiary of this policy and I still think it sucks big fat honking weenies, particularly since it has been implemented by people who rail against welfare for the people who actually need it. The brazen hypocrisy makes me want to retch.

mrep 6y ago
How is it a political move when basically every central bank in the world is doing the exact same thing? Also, they have not bought any equities. They are almost entirely just buying our own governments debt and mortgage backed securities as you can see in their balance sheet [0]. [0]: https://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab1 https://www.federalreserve.gov/releases/h41/current/h41.htm#...
- lisper 6y ago
  > How is it a political move when basically every central bank in the world is doing the exact same thing? Um, because every central bank in the world is controlled by rich people?