
Federal Reserve pledges asset purchases with no limit to support markets - ranadeep
https://www.cnbc.com/2020/03/23/fed-announces-a-slew-of-new-programs-to-help-markets-including-open-ended-asset-purchases.html
======
Danieru
Lots of voices missing the mark: the fed is acting to keep the corporate bond
market from seizing up.

Corporations finance part of their borrowings through bonds. These bonds need
to be paid in full + the interest when the bond matures. Corporations and
banks typically repay some of these from cash, and some by issuing new bonds.

Right now no one is getting to issue new bonds at all. Banks cannot lend
because the risk rating on these bonds has gone up, meaning they in-fact need
to sell said bonds to reduce their risk exposure.

Thus the FED is acting as a lender of last resort directly to major
corporations. Without this last resort said corporations would need to either
fire-sale off assets to pay the principle on these bonds or face a technical
default.

Covenants on their other bonds mean that if the corporation defaults on any of
their bonds, all of the bonds become callable. It is 110% not good to have any
major corporation go into a technical default. We are talking about companies
which have plenty of assets and strong businesses.

Thus the Fed and US Government are/should be acting to avoid any such rapid
deleverage. It took Japan 2 decades to reduce leverage in the corporations.
Without intervention the US could undergo this same deleveraging in a matter
of months. It would throw the American people into such a deep poverty the
likes of which we've not seen since the great depression.

Which is to say: these bailouts are going to happen. No one who understands
what is at stack would choose to "let the house fall".

~~~
derefr
> It is 110% not good to have any major corporation go into a technical
> default.

Q: rather than going into debt, would it be possible for the government to
just... suspend the activation of financial covenants generally for a while?
Enact a law putting a temporary patch on how contract law works vis-a-vis
financial instruments?

Something like... any covenant with triggers written after date X would now be
required to be written to include additional language Y; and any covenant
triggers written _before_ date X would be implicitly interpreted as if they
_did_ contain language Y. Language Y specifies that the activation of the
covenant is suspended when the government says a certain named financial-
market state "Z" pertains; and, when state "Z" is declared as having ended,
only then would the covenant be evaluated for activation, based on the
_present_ state of the debtor, rather than its state during the historical
period during condition "Z". Effectively, the covenant wouldn't be able to
"see into" whatever happened during "Z" to apply its triggering logic to it.

(I'm picturing here how you can, in an RDBMS, create constraints that don't
validate until a transaction is complete, such that you can temporarily put a
table into a constraint-violating state during the TX, and—as long as you fix
things before the end of the TX—everything will be fine, and the trigger won't
run.)

~~~
JumpCrisscross
> _would it be possible for the government to just... suspend the activation
> of financial covenants generally for a while_

Changing the rules of massive bilateral agreements to benefit one party over
another tends to blow confidence in the system. Investors would start trying
to guess which asset class will next be amended, thereby triggering runs
across the market. (We see this when governments start expropriation processes
in previously-stable economies.)

It also does nothing for _e.g._ a company with good receivables that can't
make payroll or interest payments because its good commercial paper isn't
being purchased. It's in a liquidity problem, not a solvency one. But if the
liquidity problem persists, the firm will go insolvent.

~~~
ianai
So instead of bailing out the companies, why not focus on ensuring their
customers have the money to demand their goods and services through direct
stimulus?

~~~
JumpCrisscross
> _why not focus on ensuring their customers have the money to demand their
> goods and services through direct stimulus?_

That's...happening? It's the core of each of the stimulus bills.

The company bailouts are, theoretically, for otherwise-good businesses
unusually impacted by the pandemic. Restaurants and airlines, for example. Of
course, there is the winner-picking that happens when any government spends
money.

------
cs702
Every decade or so, with regularity, the world seems to go through a
significant economic or financial crisis triggered by some or other
"unexpected" shock:

* The current crisis, starting now, in 2020;

* The global financial crisis from 2008 to the early 2010's;

* The dotcom, telecom, and tech bust of the early 2000's;

* The Asian debt crisis of the late 1990's;

* The Latin America debt crisis of the 1980's;

* The oil shock and stagflation crisis of the 1970's;

In each of these crises, a significant swath -- or all -- of the world's
financial infrastructure has _seized up_ , requiring government intervention
to prevent collapse.

A natural question to ask is whether the financial infrastructure we have
today has been well-engineered to be robust to these remarkably regular
shocks.

Judging by the regular seize-ups, it doesn't seem to be.

~~~
helen___keller
I mean, actions by the Federal reserve and congress are both part of the
system so it's a little unfair to say the system should work without
government intervention.

Particularly this time around, healthy and well run businesses following
reasonable best practices are being decimated. And why shouldn't they? A large
percentage of our economy was just shut off.

Add in leverage - which isn't inherently a bad thing - and suddenly you have a
recipe for disaster with a system wide increase in debtors needing to default.

We need government intervention because the free market solution to half of
businesses being forced to close, is for those businesses to go under and
their employees to starve and their banks get squeezed and so on

~~~
jkhdigital
> healthy and well run businesses following reasonable best practices

A business with zero debt financing would not go bankrupt during this crisis,
but they would still have to lay off employees in the meantime, and those
employees might "starve" without another source of income.

I really, really don't understand the need to bail out companies here. If the
problem is a loss of income for the employees, then strengthen unemployment
insurance. If the underlying business was sound, then it will start back up
again when the crisis is over. If the owners of the business were leveraged
and cannot sustain debt payments during the crisis, then they can go into
bankruptcy protection and emerge with new ownership.

~~~
helen___keller
> A business with zero debt financing would not go bankrupt during this crisis

There are fixed obligations that can exist outside of debt financing. Rent,
for example, is one that everybody is familiar with.

Anyways, I generally agree that helping the employees is more important than
saving the businesses. If a business does die, it hurts some current investor
or proprietor and benefits some future investor or proprietor after the crisis
is over, with some efficiency lost in between as assets are sold off and
eventually bought back up (and probably you get a better off company in the
long run as a personal opinion).

I'm just saying, it's not necessarily some moral fault that a business doesn't
have the structure to survive the a pandemic. This is outside of normal
recession-preparation.

~~~
toufka
I think the current argument is that the fastest, easiest, simplest way to
help employees, is to make sure they don't get fired. And the easiest way to
do that is to make sure the businesses don't feel the need to fire them (to
either cover those fixed obligations, or to plain shut down). Give the
businesses 8% more cash (by removing payroll tax), you might allow the
business to survive a month-long slump, and not fire anyone.

This would seem a good strategy if the issue was simply a month of lost
productivity, with an otherwise healthy business. And where the game theory
would lend itself towards the business owners knowing this, and so choosing to
not fire anyone. And where the 'lost efficiency' of shuffling around ownership
would be significantly greater than the short term loss. If those are not
true, and the business then fires its employees anyway, it really was just a
gift to the business owners, and would be a failure.

------
alexmingoia
How does injecting money solve a problem that’s not caused by lack of money?
This market downturn isn’t a lack of liquidity, or a lack of money, or toxic
assets like the mortgage backed securities.

People aren’t going to stores, restaurants, and airlines because of SARS-
CoV-2, not a lack of credit or money.

Printing money isn’t going to create customers for businesses effected by this
pandemic.

~~~
CyanLite4
It stops the stock market slide. Which is more valuable than political talking
points. Eventually these bankers are going to start doing some math and see
that with 0% interest rates and unlimited firepower on Treasuries, there’s
going to be massive pent up demand after this medical crisis is solved. Money
will be lent to everyone, including airlines and leisure companies because
there’s simply no where else to put their money. Inflation be damned. Market
is always looking 6+ months ahead. And the moment bankers see a light at the
end of the tunnel, this thing is going to take off like a rocket ship.

~~~
matthewdgreen
I think it's just as likely that the markets will simply stop performing any
sort of useful price discovery function, leading to huge misallocations of
productive resources -- resources we desperately need right now.

~~~
resters
This is actually the goal, to prevent price discovery and to make it less
likely that the political system would require firms to use adequately
cautious levels of underwriting capital.

The perverse incentive for firms is that the more accurately they structure
their financials to be highly vulnerable to systemic risk, the more likely it
will be that the decision to do so will be rewarded by policymakers.

Simply put, capitalism isn't capitalism without firm failure and an very clear
winners and losers when unexpected events occur. The US economy, which people
think is capitalism, is nearly as nationalized and intertwined with government
capital as China's economy.

In my view, if we're not going to have capitalism, then we should have a
system that is _significantly_ more fair and generous to those in need. If
average peoples' life savings are at risk, so too should be banker and
executive bonuses (and even jobs).

One can only imagine how much stronger the US economy would be today if the
2008 crisis had led to the smart decision makers being rewarded and the stupid
ones being bankrupt. Instead, we had the opposite situation, where the stupid
investors got bailed out and the smart ones had their well deserve gains
slashed by government policy.

~~~
andrekandre
i don’t disagree with your points at all, but just want to point out something
i think a lot of people may not be thinking about in these scenarios:

maybe govts are looking at their economies not just as systems of production
but literally matters of national security, i.e if an economy looses its
largest producers of certain products and industries, it looses a huge amount
of economic leverage and hegemony... by bailing out companies temporarily they
can be saved, and at least in theory recover faster without becoming
vulnerable in the __short term __

letting companies that are over leveraged or inefficient die may be more
“capitalist” (and lead to stronger economy __long term __) but practically
speaking it would most likely be unacceptable damage to a sovereign nation
like the u.s

just imagine the u.s without general motors or chrysler or ford for example...

(just to note, i’m not qualified to opine on whether this is good policy, just
stating my understanding)

~~~
resters
I'll admit that I think national security justifications used by politicians
are often quite lacking in substance.

From an economic perspective, we need to think about what our economy is "good
at". Generally speaking, when there is demand for something, the economy
successfully figures out how to supply it.

With bailouts, there is very little demand for the expertise needed to package
and re-sell parts of failed companies to the highest bidder. If Ford had been
allowed to fail, perhaps Tesla could have purchased crucial IP or hired entire
teams.

The legacy of Henry Ford's entrepreneurship is not the Ford name, it's in the
firm's unique business acumen and many years of experience creating
excellence. If the larger business (effectively a holding company) called
"Ford" fails, the sub-units still have significant value, and the world is
better off if that value can be utilized by more capable managers in other
firms.

The bailout of Ford effectively punished Tesla, punished consumers, and even
punished employees, since their lot is largely a function of the wisdom of
those formulating the strategy, something that Ford did poorly enough that it
deserved to fail.

~~~
andrekandre
> The bailout of Ford effectively punished Tesla

that’s a good point, and well taken

i guess the other side of it is, if it’s easy for people to find another job,
and/or there is a sufficient safety net, then it’s also probably easier to
“just let the companies die”... but i think our system is basically run by
those with the money to direct resources in the other direction
unfortunately....

------
burroisolator
I fail to understand why any economist would prefer QE over helicopter money.
Give everyone a check. If they need it to purchase everyday goods and
services, great. If their everyday needs are fulfilled already, they will
invest that money into stocks, bonds, treasuries, etc, adding the needed
liquidity to the market.

I understand if you're against the idea of giving people money. But this is
just giving money to mostly the rich. Neo-trickle down economics.

~~~
JumpCrisscross
> _Give everyone a check_

The Fed doesn’t have the legal authority to do this. That’s why the Congress
is passing stimulus bills.

The Fed is focussing on our liquidity problem. That keeps solvent companies
from going under due to illiquidity.

Congress, and helicopter money, are needed to solve the solvency problem
prompted by demand destruction.

~~~
burroisolator
Why wouldn't helicopter money solve the liquidity problem? Imagine you're a
rich investor and you get a check from the government. You see a Company X
that is suffering from liquidity issues but otherwise is doing great. Company
X's stock is now plummeting because of fears of its insolvency. You, along
with other investors who also received checks from the government as part of
this helicopter money policy, decide to buy Company X stock. Company X is now
better able to do an equity capital raise thanks to the money that you have
injected.

Is the argument that the Fed is better than private households in being a
distressed investor? Or that wealthy households would decide to cash in the
check from the government and literally store it under their mattresses
instead of investing it (directly or indirectly) and add to the liquidity?

~~~
JumpCrisscross
> _Why wouldn 't helicopter money solve the liquidity problem?_

One, it is not targeted. The Fed can pump vast quantities of liquidity into
the heart of the credit markets in a way private actors aren't set up to.

Two, it is not fast enough. Companies will go bust while waiting for
politicians to authorize a cheque, the Treasury to cut it, investors to cash
it and then to identify and decide upon an investment.

Three, it isn't reliable. Investors trust the Fed's discount window will be
open in a crisis. That knowledge, itself, stops many runs before they start.

Four, it's riskier. Helicopter money cuts cheques. Once it's done, the money
is out the door. The government is never getting it back. If they sent out too
much, we'll have inflation. Monetary policy involves collateralized loans. The
collateral limits downside. And unwinding a loan is easier than raising taxes
to drag surplus cash out of the economy.

~~~
burroisolator
I think if there was proper planning in place, you could have money sent out
to people in a day, especially the demographic that would most likely be
investing the extra cash. People already electronically pay their tax returns.
Payments are taken up by the next day if you so specify; there is no reason to
believe the same thing can't be done in the reverse direction. You don't need
to physically cut checks for everyone, only those who specify or can't be
reached with other means. Betting against investors to be able to quickly find
investments is almost like betting against capitalism itself. If you're slow
to invest, then you'll lose out on making money. Additionally most people
while thinking of something more specific to invest in will probably be
depositing this money into a generic savings accounts at first: while this
happens, banks will be able to reallocate this capital to fit their needs.

If I knew that the policy was going to be that every time there is a liquidity
crisis people will be getting checks (or electronic payments), then I wouldn't
be scared of any runs in the same way. Again, is the argument that the Fed is
better than private households in being a distressed investor?

Helicopter money can be taxed back. I know that is unlikely but so is the
probability that the Fed's balance sheet going to zero:
[https://fred.stlouisfed.org/series/WALCL](https://fred.stlouisfed.org/series/WALCL).

------
koolba
So the Federal Reserve is admitting to a Martingale strategy. Interestingly
they’re the one entity on the planet that can pull it off at scale.

[https://en.wikipedia.org/wiki/Martingale_(betting_system)](https://en.wikipedia.org/wiki/Martingale_\(betting_system\))

~~~
resters
It's not going to work much longer. We've already seen the Fed make moves that
are significantly beyond what it did in 2008, and since 2008 firms have been
aware this would happen and have been less risk-averse as a result.

Creative destruction is nearly absent as an engine for growth in the US
economy, and we are all suffering from the lack of innovation that would
otherwise occur.

------
kragen
> Several leading Wall Street bankers met to find a solution to the panic and
> chaos on the trading floor.[9] The meeting included Thomas W. Lamont, acting
> head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and
> Charles E. Mitchell, president of the National City Bank of New York. They
> chose Richard Whitney, vice president of the Exchange, to act on their
> behalf.

> With the bankers' financial resources behind him, Whitney placed a bid to
> purchase a large block of shares in U.S. Steel at a price well above the
> current market. As traders watched, Whitney then placed similar bids on
> other "blue chip" stocks. The tactic was similar to one that had ended the
> Panic of 1907, and succeeded in halting the slide. The Dow Jones Industrial
> Average recovered, closing with it down only 6.38 points for the day.

—
[https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929](https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929)

~~~
jdpigeon
...On October 28, "Black Monday,"[10] more investors facing margin calls
decided to get out of the market, and the slide continued with a record loss
in the Dow for the day of 38.33 points, or 12.82%

------
chadmeister
Awful policy. The fed needed to hold off on this and the previous rate cut
until Congress finally passed a useful bill. Powell had all the power to force
Congress to act and he's blown it again.

~~~
lukas099
The Fed's job is to keep the value of currency steady and support full
employment, not to play games with Congress.

~~~
hnaccy
How can the Fed support full employment if governments are forcing people to
stay inside and business to close?

~~~
OscarCunningham
By making lending to the closed businesses so attractive that they can stay
open over the course of the quarantine. (Likewise people can stay fed.)

~~~
onlyrealcuzzo
But that's not what this is doing at all. This is keeping existing corporate
debt artificially priced.

Unless they lower rates to negative, new debt isn't getting any cheaper.

------
dredmorbius
Additional coverage:

[https://www.washingtonpost.com/business/2020/03/23/fed-
unlim...](https://www.washingtonpost.com/business/2020/03/23/fed-unlimited-
credit-coronavirus/)

[https://www.nytimes.com/2020/03/23/world/coronavirus-
news.ht...](https://www.nytimes.com/2020/03/23/world/coronavirus-news.html)

[https://www.wsj.com/articles/federal-reserve-announces-
major...](https://www.wsj.com/articles/federal-reserve-announces-major-
expansion-of-market-supports-11584964844)

[https://www.foxbusiness.com/business-leaders/fed-takes-
actio...](https://www.foxbusiness.com/business-leaders/fed-takes-action-
provide-credit-consumers-businesses-coronavirus-economy)

[https://www.ft.com/content/b71f0c32-6cfb-11ea-89df-41bea0557...](https://www.ft.com/content/b71f0c32-6cfb-11ea-89df-41bea055720b)

[https://www.theguardian.com/business/live/2020/mar/23/market...](https://www.theguardian.com/business/live/2020/mar/23/markets-
slump-us-senate-covid-19-ftse-dax-shares-recession-stimulus-business-live)

[https://www.reuters.com/article/us-health-coronavirus-usa-
fe...](https://www.reuters.com/article/us-health-coronavirus-usa-fed/fed-
mounts-aggressive-new-steps-to-combat-coronavirus-hit-to-economy-
idUSKBN21A1U2)

(Feel free to add others here.)

------
aazaa
> The Fed will be moving for the first time into corporate bonds, purchasing
> the investment-grade securities in primary and secondary markets and through
> exchange-traded funds.

The only step remaining is for the Fed to begin buying stocks. The Bank of
Japan has been doing this (by buying ETFs) for some time now. That bank now
owns ~80% of the Japanese ETF market.

------
psim1
So: my investments remain in very bad shape, inflation skyrockets, meaning my
current net worth as well as future earnings are far lower. What does this
help someone in personal terms?

~~~
OscarCunningham
Market inflation expectations are currently _below_ the Fed's 2% target.

~~~
marcrosoft
Not for long.

~~~
OscarCunningham
What makes you think that? People said similar things in late 2008 when the
Fed greatly expanded its balance sheet, and then inflation went _negative_ for
the next year.

~~~
lifty
There was great inflation in financial assets, for the whole decade leading up
to the current crisis. So there is a good chance the same thing will happen
again, now that the central banks have taken the big guns out. I keep hearing
that the FED (and other CBs) our out of bullets, but I think they have
unlimited bullets. If you inject enough liquidity even a dead horse will
bounce back; and for an example of that, you can check out the Venezuelan
stock market ([https://tradingeconomics.com/venezuela/stock-
market](https://tradingeconomics.com/venezuela/stock-market)).

~~~
OscarCunningham
So you're making the opposite prediction to the person I originally replied
to? Investments will gain value faster than the cost of living?

~~~
lifty
Inflation is a loaded term, so I replied to mention that asset inflation was
high, even though that is not reflected in the reported inflation numbers. As
for you second question, I think the answer is yes, because for now I see CBs
injecting money through the financial system. If the CBs start handing out
checks directly to people, then we might see the CPI going high as well, in a
more correlated manner with investments.

------
glass_of_water
How does the fed determine which corporate bonds to buy and how much it's
willing to pay for those bonds?

------
enlyth
Unlimited money cheat activated

------
djohnston
It seems like at some point you have to let a wound bleed. If we keep bailing
out bad investments every black swan event, you're never allowing for a
correction. Eventually the accumulated amount of bad business would be too
much for the gov't to save. To borrow from biology, it seems like we're
constantly interfering in the process of autophagy.

Unfortunately there's no political capital to be saved with such a decision.

------
eternalny1
I was watching the Dow futures.

They literally went from -700 to +400 in 30 seconds.

~~~
techdevangelist
And somehow the Dow opened lower still, it’s like lighting an unlimited pile
of money on fire does nothing good, almost like there is a health crisis
instead of a monetary one..

------
ijidak
This warning is from the Bible, written well over 2,000 years ago.

"Woe to him who accumulates what is not his—For how long?—And who makes even
greater his own debt! Will not your creditors rise up suddenly? They will wake
up and violently shake you, And you will become something for them to plunder"
Habakuk 2:6,7

Every financial crisis in recent memory is caused by excessive debt by some
party.

\- Consumers \- Homeowners \- Financial institutions \- Corporate institutions
\- Governments

It's stunning how poorly this problem of excessive reliance & use of debt has
been tackled by governments and regulators.

That, despite debt being well known as a source of financial meltdown for
centuries!

Even with all the research, regulations, and rules on the book, this well-
known problem of recurring debt crises has remained unsolvable by world
leaders.

[https://wol.jw.org/en/wol/d/r1/lp-e/101989322#h=8](https://wol.jw.org/en/wol/d/r1/lp-e/101989322#h=8)

------
api
A major change that's gone at least partly unreported: since 2008 we have made
the final steps toward a fully backstopped market. The market before was
always somewhat backstopped, but now I think it's safe to say that everything
big is backstopped.

That means we've moved toward a financial system with one single point of
failure at the top. It's got quite a lot of mass and weight, but if it fails
everything else does. This is not dissimilar from the Chinese model, which
means America is now (perhaps unintentionally) copying China.

This also means short sellers should beware: even if you are nominally
correct, the market may defy your logic because something else is backstopping
everything.

------
chrisjarvis
Spend 11 years buying back stock instead of saving anything then immediately
bailed out at first sign of trouble.

Private profit, public risk. 'Tis lame.

------
meddlepal
Let's add another floor to the house of cards!

------
brenden2
Keep in mind they're only able to buy US treasuries and mortgage backed
securities. If Congress changes the rules to allow the Fed to purchase stocks,
we'll be in for some very interesting times. It could be that we get an
economy of zombie companies, or valuations soar beyond what we've come to
expect as normal. In any case, this is unprecedented and in my opinion not the
right move. They're sacrificing our future in order to inflate stock prices
now so that the current president can get re-elected.

~~~
dcolkitt
> 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.

~~~
roymurdock
bill 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...](https://www.ted.com/talks/bill_gates_the_next_outbreak_we_re_not_ready?language=en#t-500682)

[2] [https://www.ft.com/content/e015e096-6532-11ea-a6cd-
df28cc3c6...](https://www.ft.com/content/e015e096-6532-11ea-a6cd-df28cc3c6a68)

~~~
Ididntdothis
“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
Most 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

------
fallingfrog
”When there is pressure for leaders to respond to problems or crises, they
often simply intensify their efforts in their particular defined sphere of
activity – even if that’s not relevant to the real problem. To do otherwise
requires taking on entrenched practices and asserting power in areas where it
often will not be well received. And leaders tend to see major crises more as
threats to their own position rather than as systemic challenges for the
societies that they govern or the institutions that they manage.

Frenzied grand constructions, wars and great rituals are among the common
responses of ancient leaders to crises. These demonstrate powerful responses
by the leaders (enhancing their threatened hold on power), but almost never
really address the problems themselves. A cynic might characterize the giant
U.S. stimulus bill of 2009 as such an effort.” -Arthur Demarest

------
fallingfrog
After the crisis is over, they’ll just do the same thing again, inflate a new
bubble, faster this time, which will once again explode, and bail it out again
on the backs of working Americans. There’s no learning curve at all. They
think the problem is that they didn’t inflate the bubble fast enough and with
enough leverage. But, this is probably what we should expect. It’s a repeated
pattern throughout history that when things go wrong, leaders usually don’t
try new approaches- instead they just keep doubling down on what they were
doing before, thinking that the problem was that they just need to do whatever
they were doing before, but more. It takes a total collapse, historically, for
true behavioral change to occur. The whole society, like a drug addict, has to
hit rock bottom.

------
myth_drannon
I'm afraid this is another wealth grab similar to 2008 but x10 bigger. What
was an international health emergency turned into another large scale robbery
of the common folks.

~~~
no_flags
Could you elaborate on how its a wealth grab?

~~~
myth_drannon
Last week US Fed bailed out hedge funds that were highly leveraged. $1.5
trillion transfer to save high net worth individuals.
[https://www.bloomberg.com/news/articles/2020-03-19/before-
fe...](https://www.bloomberg.com/news/articles/2020-03-19/before-fed-acted-
leverage-burned-hedge-funds-in-treasury-trade)

~~~
eyeinthepyramid
The $1.5 trillion was a fund of one day fully collateralized loans, of which
only ~$100 billion was actually used. There was no wealth transfer, just the
fed following its mandate to keep interest rates on short-term loans within an
acceptable band.

Here's the daily totals of repo loans:

[https://apps.newyorkfed.org/markets/autorates/tomo-
results-d...](https://apps.newyorkfed.org/markets/autorates/tomo-results-
display?SHOWMORE=TRUE&startDate=01/01/2000&enddate=01/01/2000)

------
ohiovr
Is the fed going to buy up the BBB- debt from firms about to be downgraded?

------
lend000
This is a recipe for stagflation -- economic slowdown (inevitable, and by
choice, in response to the circumstances) with excessive liquidity in the
market. The capital injections aren't going to open up restaurants until
shutdown orders have been lifted, and even then, you're kidding if you think
small businesses will materially benefit from Fed actions.

------
JackMcMack
I'm reminded of this story of the Federal Reserve on 9/11:
[https://www.dailykos.com/stories/2014/09/10/1328813/-The-
Ast...](https://www.dailykos.com/stories/2014/09/10/1328813/-The-Astonishing-
Story-of-the-Federal-Reserve-on-9-11)

~~~
throwawayForMe2
I worked for the FRBNY for 24 years. They always took disaster recovery and
business continuity very seriously. We planned (and practiced several times a
year) for NYC to be gone, the northeast to be gone, and for the whole east
coast to be gone.

------
thoughtstheseus
Look out for TLTROs and dual interest rate policies next.

------
rkx1
Can anyone with a better economic understanding share their thoughts on how
viable this is? From a layman's point of view, it seems like the FED are using
up a lot of their arsenal very quickly.

~~~
Anon1096
The only action from the Fed "arsenal" that is used up is lowering the Fed
funds rate. And even then, going negative is an option. The Fed still has
numerous things it can do, including helicopter money, massive expansion of
QE, buying new types of assets like stock, and making loans to non-bank
businesses.

------
AsyncAwait
I like how socialism's used to save capitalism, yet you'll still have people
claiming capitalism its the only system that "works".

Yes, it "works" because it has to, i.e. there's no defined scenario of it not
working, apparently nor the Great Depression, nor 2008, nor measures like
these still don't mean anything as far as it not working, so it works because
it apparently never does not work, no matter what.

P.S. I don't mean to claim capitalism 100% does not work and socialism does,
merely that maybe we need a healthy mix of both?

~~~
dollar
You labor under the delusion that we have capitalism. We don't. We have
socialism, and have for over 70 years.

~~~
AsyncAwait
We do indeed, but only for bailing out megacorporations.

------
pacamara619
Haha, money printer go brrr.

------
CyanLite4
About friggin’ time...

------
athaht
Hope this works

~~~
chewz
Define "it works" and for whom...

~~~
athaht
The economy of the entire world is at stake and you ask me to define ‘it
works’ and for whom...

------
janandonly
The USA just went Zimbabwe

~~~
owenmarshall
Absolutely terrible comparison.

The Zimbabwean dollar is not the world's reserve currency. Zimbabwe cannot
park a naval fleet off the coast of any country that tries to move away from
the Zimbabwean dollar, or direct the worlds largest banks to freeze assets, or
apply crushing economic sanctions.

The US is probably _the_ only country in the world that can print money
without runaway inflation, and I don't doubt that we will maintain dollar
hegemony with force if needed.

~~~
stephen_g
The US is absolutely not not the only country that can use monetary expansion
without causing excess inflation. Basically any country with its own central
bank, fully flexible exchange rates, with all Government bonds denominated in
its own currency, with a decently large and productive economy, and federal
taxing and spending can do it. There are at least several who meet that
criteria (even New Zealand, for example).

Once you satisfy all that, high inflation just means you’re either spending
too much, or not taxing enough.

A big part of what happened in Zimbabwe, by the way, was that land reforms
caused a massive collapse in food production (a major part of their economy)
and unemployment skyrocketed. They spent a lot in response (also having
foreign denominated debt I believe), but mostly not focused on policy that
would increase capacity. At the same time, they were having to spend much of
their foreign reserves on food because of the supply collapse. So the spending
and hyperinflation were inevitably consequences of previous mismanagement.

~~~
daxorid
> A big part of what happened in Zimbabwe, by the way, was that land reforms
> caused a massive collapse in food production (a major part of their economy)
> and unemployment skyrocketed. They spent a lot in response

Okay.

Fed officials are predicting 30% unemployment, and we're seeing a massive
collapse in goods and services production (not food, but it may as well be in
a 70% services based economy) as cities go into lockdown. To respond to this,
we intend to spend a lot.

I'm a bit confused as to how the current situation doesn't mirror, nearly
perfectly, the Zimbabwe example. We are literally printing and spending into a
severe supply (yes, services follow supply curves just as much as goods do)
and unemployment shock.

~~~
vonmoltke
> Fed officials are predicting 30% unemployment

 _One_ official said it _may_ happen:
[https://www.bloomberg.com/news/articles/2020-03-22/fed-s-
bul...](https://www.bloomberg.com/news/articles/2020-03-22/fed-s-bullard-says-
u-s-jobless-rate-may-soar-to-30-in-2q)

------
fallingfrog
If a meteor was headed for the earth tomorrow, the president would get up in
front of the nation and say, “my fellow Americans, we have created 100
trillion dollars of imaginary money in a database in upper Manhattan, so
everything will be fine..”

