
Fed to inject $1.5T to prevent ‘unusual disruptions’ in markets - aazaa
https://www.cnbc.com/2020/03/12/fed-to-pump-more-than-500-billion-into-short-term-bank-funding-expand-types-of-security-purchases.html
======
gdubs
As the joke goes, a trillion here a trillion there and pretty soon you're
talking about some real money!

But in seriousness, the next week is a critical time in the world. I remember
sitting in an airport when news of Lehman Brothers collapse was flashing on
the TV screens. I'm reminded of that time.

We learned later about how Hank Paulson got down on one knee and begged Nancy
Pelosi to go along with is plan to save the economy. In retelling of that
period, it's clear that the world's top economists felt we were perilously
close to a full-blown disaster – trucks not bringing goods into cities, things
grinding to a halt, etc.

Remember that when you see bold proposals in the coming days.

As I've commented over the past few weeks, I think we've missed critical steps
in fighting coronavirus. The lack of testing will maybe turn out to be one of
the biggest scandals of my lifetime.

My personal belief is that – at least in the United States – we did everything
we could to prevent a short-term economic slowdown and instead we're on the
verge of something much longer, much deeper.

But if there were ever a time for us not to be partisan and tribal, it's now.
We blew the past few weeks. We can't afford to blow any more. We really do
need to come together, globally, but particularly here in the US to try and
agree on the right next steps. We need to act boldly, _now_.

~~~
tw04
>But if there were ever a time for us not to be partisan and tribal, it's now.

You say that like both parties are trying to deny testing and are refusing to
provide the social safety net for workers to stay home when they're sick. This
is very much not a "both sides" discussion. This is: the GOP needs to stop
trying to pretend like nothing is wrong and actually DO SOMETHING to prevent
this from becoming an even bigger disaster.

Ahh, the old cowardly downvote without comment because you don't like the
reality of the situation that there is one party that's very much to blame.

[https://thehill.com/homenews/senate/487258-senate-
republican...](https://thehill.com/homenews/senate/487258-senate-republicans-
poised-to-reject-house-coronavirus-relief-bill)

~~~
altec3
I think what gdubs was trying to get across is that sure, there are problems,
people to blame, etc. but now is not the time. We have to get our act together
and handle the situation. We can't have petty fighting betweeen parties.

Now is the time to unite and act. We can fight, argue and point fingers once
this is all behind us.

~~~
aaomidi
They're literally blocking COVID emergency budget bills getting passed in the
Senate

This is time to fall in line or be thrown out of your job.

~~~
breakyerself
Why don't Republicans need to fall in line when Democrats pass much needed
relief for coronavirus?

~~~
wonderwonder
That's who he is talking about, the republicans are blocking it.

------
asickness231
"inject 1.5t" by that do they mean a 1.5t panic bailout for wall street? how
can we find 1.5t in the budget but no money for universal healthcare, student
loan forgiveness, ubi etc.

The markets wouldn't be so important if there were a safety net.

</soapbox>

~~~
ipnon
The Fed isn't printing 1.5 trillion greenbacks and handing out fat sacks on
Wall St. They are providing short-term loans to increase the amount of money
in circulation (liquidity). The intent is to increase the total amount of
trading occurring so that the market can return to equilibrium sooner than
later. The Fed wants to prevent firms from not making trades solely for lack
of liquidity in the market.

edit: "from making profitable trades" -> "from not making trades"

~~~
mamon
>> They are providing short-term loans

If I want to give my friend a loan, I need to earn that money first by working
hard. FED does not conduct any profitable activity that would earn them any
money, they DO PRINT that money from thin air.

~~~
kylebenzle
Why do people keep telling the lie that the FED "does not print money"? As you
say, these "loans" are the FED printing $1.5t, no other way to look at it.

~~~
34679
There is at least one other way to look at it. These loans will primarily, if
not exclusively, go to large financial institutions. Due to the wonders of
fractional reserve lending, those institutions will get to loan out several
multiples of the original $1.5T. Another way to look at it is that they've
probably "printed" closer to $15T.

~~~
kamaal
How does this work? Like any government can just print their way to
prosperity?

I mean you just magically put $15T into circulation?

Won't this lead to inflation?

~~~
34679
Yes it will absolutely lead to inflation. But for the well connected banks who
are first to benefit, and coincidentally, I'm sure, the ones who run the
Federal Reserve, the money will get to be spent/loaned before it causes much
or any inflation. For the rest of us with value stored as US currency, we get
fucked.

------
oxymoran
The point here is not where did the money come from, it’s why is it needed?
And the answer is because there isn’t enough liquidity to cover the
institutional sell off. Which means that they HAD to do this to prevent a run
on the bank. That’s more alarming than the virus I think. Hospitals run on
money. No money, no doctors.

This article is much less PR: [https://www.forexlive.com/centralbank/!/new-
york-fed-to-cond...](https://www.forexlive.com/centralbank/!/new-york-fed-to-
conduct-purchases-across-a-range-of-maturities-20200312)

------
tmpynews
I honestly don't think this is going to work. Markets and investors are
notoriously greedy and have a very short memory. This infusion will lift the
market for a day (if at all) and institutions will make money and the next day
the news cycle will take over and the selling will continue. We are in the
early phases of negative news so not sure effective this will be.

~~~
daxfohl
No idea how you get downvoted. Market has already sold off the gains from the
stimulus. Lasted a few minutes. Not very well spent money IMO.

~~~
chasd00
it's not a stimulus it's loans to prevent a liquidity crisis and the credit
markets from freezing up. It was the credit markets in 2008 that nearly killed
the world economy. They dwarf the stock market.

~~~
daxfohl
Still, given the market was like Meh, seems like nobody thought it was very
useful.

That said, yeah I see how you are right. Lots of businesses run month to
month. When they run out of cash they go bankrupt. Once enough companies do
so, the economy takes much longer to recover.

~~~
6gvONxR4sf7o
Maybe keeping the market from doing something much worse than "meh" was the
point, and this was a success?

------
dev-ns8
Speculation on my part as I still don’t fully grok repo markets and only have
a vague sense of how the treasuries market impacts equities but I’ll continue.

I see some people saying this should alleviate some of the losses incurred by
the recent market crash. I however, don’t see how that is the case. To me this
seems like a move from the fed to make sure we don’t enter into a liquidity
crisis which doesn’t necessarily do anything to signify substantial move
upwards in equities. Sure, the fact that investors and traders can now be
fairly confident we won’t hit a liquidity crunch and therefore kill some fear
in the market, but was that the biggest factor causing the fear and selling in
the first place?

My understanding was the selling, and rightfully so, comes from the affects of
CoVid. Travel bans, event bans, trade bans, lower consumer activity, etc. I
don’t see how injecting capital into the treasuries market alleviates any of
these factors.

If anything I think this would cause equity markets to sell off more in the
mid to long term knowing that the fed had to do this to keep shops open and
liquidity available to those that need it (I'm talking to you banks). On top
of this factor, this move by the fed surely will push inflation higher and I
would assume production would slow given all the virus affects mentioned
above. This puts our economy in stagflation which has a lot of the hallmarks
of a recession...

~~~
jaywalk
Like you said, this is to make sure we don't enter a liquidity crisis. The
market will stay down for a while, but this will allow businesses to weather
the storm instead of going under.

~~~
dev-ns8
I agree. I think I'll be adding to my shorts here. I'd still be very
interested in hearing a real experts opinion on what this QE move does to
inflation.

------
vijaybritto
Nobody is asking anything about funds now. But so many seems to be angry about
healthcare for all. A universal health care can survive this pandemic and also
others. This is unbelievable

~~~
munk-a
But don't worry! Joe Biden has guaranteed he'd veto such an act even if it got
through the house and senate.

~~~
dhosek
Not according to his latest statement.

~~~
mrfusion
Source?

~~~
dhosek
My bad, I misread the relevant portion of this article:
[https://www.npr.org/2020/03/12/814717480/sanders-offers-
bide...](https://www.npr.org/2020/03/12/814717480/sanders-offers-biden-a-path-
to-win-over-his-movement)

------
inetknght
Can someone tell me, with a straight face, how this won't cause inflation at
one of the worst points to have such?

~~~
bryanlarsen
The answer would be something like "Increasing the money supply has been very
successful at mitigating previous recessions without causing inflation."

Unfortunately, previous recessions were caused by demand-side shocks. So
increasing the money supply increases demand and mitigates the deflation that
usually accompanies a demand driven recession.

It's not clear whether the upcoming recession is supply or demand driven.
Shutting down factories in China causes supply shocks; laying people off
because of social isolating will cause demand shocks.

If it's a supply shock recession, they usually come with significant inflation
and more money will make it a lot worse.

~~~
yumraj
> If it's a supply shock recession, they usually come with significant
> inflation and more money will make it a lot worse.

Surely in the beginning, with just China impacted, that was the case. But
right now with a global pandemic it's not clear if its a supply shock, or
both.

Curious, if supply is lower and the demand lowers more, then what does it
mean. A depression??

------
nie100sowny
Coronavirus is not a cause, but it is just an igniter.

The true cause of a crisis is pumping money into institutions which should
bankrupt years ago. Pumping because we were too much afraid of normal crisis
back then and now we get that crisis, but multiplied by 10 in terms of impact
and time period.

Crisis is good in economy. It let big, old and damaged trees to fall and to
give more sun light to small healthy trees which may start to grow.

Instead of pumping money into stock market which only feeds the richest ones,
we should let them bankrupt to make a space for more healthy businesses.
Unfortunately people on average do not understand it and still elect
interventionists. It postpones crisis, increases income gap and make crisis at
the end much more damaging.

We are very close to see a bankruptcy of Italy. Then banks which bought their
bonds will follow. With the Deutche Bank on top.

~~~
HSO
Finally.

I agree with you!

Need to see wood not just trees.

That's also why I'm so triggered all the time when some bozo talks about
"recession risk" again as if that was the problem.

This is a systemic crisis (in fact, my bet is on system collapse) and it's
been years in fact decades in the making. If it hadn't been "coronavirus"
hysteria it would have been something else to ignite the tinderbox.

Good riddance. It's kind of inconvenient for me personally but I think the
system is stupid, evil and not accessible to reason or even pleading for
change. As long as some portion of people can happily profit from status quo,
they ride roughshod over everybody else and compensate their conscience with
meaningless social wokeness and virtue signaling on IG/Fakebook.

Let the system burn down, maybe then people will listen to reason.

------
jacquesm
That worked for about 45 minutes and then the market dropped right back down
again. Incredible. At this rate there won't be enough liquidity to cover these
sell-offs if they continue. I don't think that's ever happened before.

~~~
nine_zeros
This isn't and will never be a liquidity problem. This is a real crises.
Economic activity is going down to 1980s levels

------
bushido
Reminds me of the legends of the Plunge Protection Team (PPT)[0]. A group of
people who report directly to the POTUS who're attributed responsibility by
pro traders to do large buy orders when the markets are dropping sharply.

[https://www.investopedia.com/terms/p/plunge-protection-
team....](https://www.investopedia.com/terms/p/plunge-protection-team.asp)

------
lend000
In times of panic, remember that in the worst likely scenario, this virus will
slow consumer spending, increase demand for hospitals, stagnate productivity
for about 12 months, and kill about 0.4% of the world's population (using
Spanish flu infection patterns for reference, which infected ~25% of the world
population). At that point, there will be sufficient herd immunity (and likely
effective treatments or vaccines) to allow the virus to decay into obscurity.

Then the economy will pick up the pieces again, with actual technology, hard
capital, and active workers in the workforce still existing after the hard
times. I expect this market crash to look most like 1987, which saw new highs
2 years later.

The long term consequences, besides loss of life, are that most market
interventions will protect interest rates for large businesses with huge
credit lines and existing debt, while small businesses go under, furthering
consolidating income inequality.

Would a crash be worse without intervention? Perhaps. But the long term
consequences would also be more natural and redistribute resources more
fairly, in my opinion.

~~~
chillacy
Past performance is no guarantee of future success. Using the worst case
scenario so far as meaning "worst possible scenario" is a fallacy (consider
that the past "worst case" was already surprising to people back then because
it was worse than the "past's past").

Not to imply we should panic over a low probability event, just pointing out
that we should be careful about Kurtosis.

~~~
lend000
Note that I wrote "worst likely scenario" not "worst possible scenario."

Worst possible scenario is not really useful for short to mid term planning in
an unconstrained event space (gamma ray burst or massive meteor hits Earth,
etc.).

------
sytelus
So here's the thing: 80% of the population doesn't own stock. When fed pumps
such massive money to prep the stocks, where does that money end up? I guess
the idea is that then we pump the stock so companies continue to hire people
so unemployment remains low. Considering the vast majority of jobs are low
paying, if not outright minimum wage jobs, this means these trillions of
dollars of fed charity is basically meant for nothing but making sure people
gets paid minimum wage for next couple of months. On the other hand, if US
government equally distributed 1.5T to each citizen then each person would get
$5000 which is about 1/3rd of minimum wage income for a year. That seems like
far better deal than trying to keep pumping the stock.

~~~
jovial_cavalier
The fed doesn't pump stocks. It buys bonds and gives good deals on loans. It
merely increases liquidity. It doesn't just give money to people.

~~~
strbean
Giving Person A a "good deal" on loans so they can loan that money to Person B
at a great profit isn't so different from just giving money to Person A.

~~~
jovial_cavalier
Yes it is, because they have to pay the money back...

The money they make isn't "fake" in some sense, like you're making it out to
be. It's real utility that they have generated by providing liquidity. Loaning
money is not a get rich quick scheme. There is risk involved.

~~~
strbean
Fair point that the interest accrued is coming out of the pre-existing money
supply. Doesn't really change the thrust of my comment that you quoted though
- they are being handed the ability to accrue capital.

Also, this is getting a little into the weeds philosophically, but injecting
large amounts of capital in this way increases the money supply (and by much
more than the amount of capital injected). In a sense, this is a tax on
everyone who was not a recipient of that capital via a reduction in the
purchasing power of their capital. Generally, consumer prices aren't going to
go up in this case... but tons of people who had no investments have been
looking at this crash as an opportunity to get in the game, and these efforts
to prop up the markets with monetary policy in the face of an honest-to-
goodness crisis can feel a little gatekeeper-ish.

------
LatteLazy
When the problem is confidence, an injection of cash fixed the issue.

When the problem is the a bleak economic outlook because of coronavirus, oil
prices, trade wars and structural issues, you're just spending money to make a
number look good for a few more weeks.

------
natch
Can someone do an ELI5 on this?

Questions:

Is this the same as printing money?

Long or medium term, could this lead to inflation?

Where is this money injected into? “The economy” is too vague. Who
specifically gets it or gets access to it? Why them and not others?

Ridiculous question but wondering what the rules are based on: Can a DAO get
some of it?

Could the money (or liquidity) instead be targeted differently, either say as
a one-shot stimulus given to individual taxpayers or as a short-term sample of
UBI? or alternatively toward some beneficial area such as the sustainable
energy sector?

Are insiders and old boys networks pocketing a windfall here?

Are they going to sabotage my long awaited opportunity to buy low?

Need a refresher on basic macroeconomics I guess.

------
marcrosoft
This is direct inflation. How is Gold not soaring right now?

------
anthony_doan
We could prevent this by actually have universal healthcare, better funding to
CDC, and better sick leave.

Yes, unfortunately, it have to be political. There is no escaping it, when it
comes to healthcare.

It is much more urgent when country keeps on creating new viruses and we
become more globally connected.

~~~
missedthecue
Better sick leave and CDC funding would not do anything to alleviate
volatility in the repurchase operations markets.

This is providing loans to banks so they can more easily capitalize themselves
during this period of severe volatility. It is the specific purpose of the
reserve banking system. It's not about stopping the virus.

------
0xcafecafe
As I understand, they stepped in to bridge the bid/ask spread and act as a
temporary market maker to solve a liquidity crunch. Can someone more
knowledgeable tell me why the bid ask spread is so wide to begin with?

~~~
rjbwork
Probably because the people wanting to loan the money don't think the people
wanting to borrow the money are going to be able to pay it back, so they're
charging larger interest rates to compensate them for the risk. That's really
all the interest rate is.

------
intopieces
I thought that the US never really unwound QE and the risk there was that when
another financial crisis hit there wouldn't be any more tools in the kit to
fix the economy. Is that where we are now?

~~~
beefman
They never unwound. The two main tools of monetary policy are the federal
funds rate (FFR) and the assets side of the Fed's balance sheet.

The FFR started to rise in 2016 but never reached 'normal' levels before
declining again in July of last year.[1][2]

The balance sheet started shrinking in 2018 but only managed to reach 2013
levels before expanding again in Q4 last year.[3]

All the while, the FOMC has been talking about "policy normalization", but
they've punted on it again and again.[4][5]

It's not clear what kind of event we're seeing now or how much they'll be able
to help. It's not even clear how much they helped last time. Counterfactuals
are hard.

Edit: There's also the IORR rate, which Bernanke created in the last
crisis.[6] As such, there's no historical 'normal' for it (other than zero,
perhaps). I've never seen an economist even claim to understand what's going
on with IORR -- and not claiming to understand something is a big deal for
economists.

[1]
[https://fred.stlouisfed.org/graph/?g=qkTu](https://fred.stlouisfed.org/graph/?g=qkTu)

[2]
[https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)

[3]
[https://www.federalreserve.gov/monetarypolicy/bst_recenttren...](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm)

[4] [https://www.federalreserve.gov/monetarypolicy/policy-
normali...](https://www.federalreserve.gov/monetarypolicy/policy-
normalization-discussions-communications-history.htm)

[5] [https://www.federalreserve.gov/monetarypolicy/policy-
normali...](https://www.federalreserve.gov/monetarypolicy/policy-
normalization-qa.htm)

[6]
[https://fred.stlouisfed.org/series/IORR](https://fred.stlouisfed.org/series/IORR)

------
catacombs
Amazing how this relief just materializes. Student loan debt in the United
States, a financial catastrophe waiting to happen, is at about $1.5 trillion.

~~~
postalrat
Apparently college students wait till after they pay off their debts to vote.

------
newyankee
What can a retail investor really do ? Is this even a free market. Cannot even
do passive investing safely enough.

~~~
taiwanboy
This is to help an otherwise very healthy US economy (low unemployment rate,
solid gdp growth, income increases) from being taken down by an one time
external, expiring event and panic that flows from it.

What is the point not supporting crucial companies in the stock market? Are
you really better off if target or chevron or Hilton goes under? And tons of
people have no jobs and there no access to staples?

~~~
munk-a
Unfortunately the US economy isn't very healthy - it's over-leveraged on debt
and has been artificially propped up by cash injections into the market. In
actuality this recession may be caused by corvid-19 but it was ready to go at
the first serious economic hiccup.

~~~
cryptica
I think if anything, the Fed was probably overjoyed about COVID-19; they were
just waiting for an excuse to do a massive cash injection without sparking
massive backlash and protests.

The new rules against gathering in large crowds are an added bonus; the Fed is
not only excused, they are legally protected from any possible backlash.

------
neonate
[https://archive.md/DFXnu](https://archive.md/DFXnu)

------
sadfev
Is this really required?

Markets were really inflated before the virus crisis now they are
overreacting, let the markets settle before announcing any stimulus.

I think this is premature and frankly too much of an interference from the Fed

------
glofish
If you print $100 in your basement it is counterfeiting, punishable with 25
years in prison.

If you print 1 trillion as a banker it is called" "a bold initiative to calm
market tumult".

~~~
RobRivera
This is a misrepresentation of the complexities of financial services,
monetary, and fiscal policy.

Say what you will about the carelessness of risk-taking, shortterm thinking of
the banks, but please don't misrepresent reality

~~~
amznthrowaway5
Same nonsense we were told in 2008. The financial stuff is far too complicated
for us mere mortals to judge, leave it all up to the bankers. All of this
despite the fact that economics is a corrupt pseudoscience.

------
econcon
People sold stocks and cryptos to hold onto cash to save themselves from the
fall.

And Fed comes and dilutes other people's cash further.

------
munk-a
How much more effective would it be to put this purchasing power toward simply
combating the virus? Probably a lot...

~~~
eranima
The Fed doesn't have that power though, nor should they. That's up to congress
to decide

~~~
mushufasa
Exactly. The fed controls monetary policy and acts independently. The US
Executive + Legislative branch control fiscal policy, which would be where
they could spend on virus programs.

The fed is independent precisely so it can act fast in times like these. It's
a limited scope but it's something, whereas the extremely partisan congress +
Trump likely won't move as fast if at all.

------
kingpiss
I start my first real programming job tomorrow, and the stock market crashes
today.

I think I am going to have to keep looking.

------
aliswe
Not saying that fiat money is necessarily a good idea, and not clamping down
on gold standard currency, or anything, but the article doesn't say that the
money would be printed. If I'm not mistaken.

If what the mostly conspiratpry documentaries say is true, then the Fed lends
"the state" money (at interest) which is then needed to be paid back.

That would mean that the Fed probably has money reserves on its own.

~~~
lisper
I think you may have some basic misunderstandings of how money works in
today's world. _All_ money is debt, which is to say, it's a ledger entry that
gives the holder a claim on future productivity. Whether that ledger entry is
purely electronic or rendered onto a physical artifact (a coin or a bank note)
is irrelevant. At the end of the day it's all just bookkeeping. The national
debt _is_ the money supply. The key to nirvana is keeping the money supply in
balance with the actual value of goods and services in the economy in order to
keep prices stable. But that also has to be balanced against the need for
short-term liquidity. That's the tricky part because what is happening right
now is that the actual value of goods and services in the economy is
shrinking, but the need for liquidity is growing. Those present two
conflicting demands on the Fed, which controls interest rates which
(indirectly) control the money (debt) supply. There are no "reserves", there
is only the policy and decision-making that ultimately controls how much money
is out there, and thus the value of that money in terms of purchasing power.
Too much and you have inflation, too little and you have deflation and
liquidity crises.

~~~
aliswe
That may very well be. So correct me where I'm wrong here.

The Fed prints (or issues) currency, lends it to "the state" at interest.

The state eventually pays at least a part of that money back.

All I'm assuming is that if that paid money doesn't vanish, then the Federal
reserve will have a Federal reserve containing that money.

~~~
lisper
No, the Fed lends money _to banks_ , not to the state. Banks then in turn lend
that money to borrowers who hopefully use it to fund productive activities
which produce a profit that allows the loan to be repaid. It is actually a
pretty cool system and it generally works very well. Being able to control the
money supply as a simple matter of _policy_ rather than, say, relying on the
laws of physics to do it for you, is a very powerful economic technology.
(But, of course, like any technology, it can be abused.)

The state borrows money by issuing bonds which it sells to savers. That money,
like all money in a central-bank-based monetary system, ultimately comes from
the Fed, but only indirectly. The Fed _could_ loan money to the government
directly by buying government bonds directly, but it usually doesn't. Instead,
it buys bonds from banks who buy them from the government.

See:

[https://www.thebalance.com/how-is-the-fed-monetizing-
debt-33...](https://www.thebalance.com/how-is-the-fed-monetizing-debt-3306126)

also:

[https://www.investopedia.com/articles/economics/08/monetary-...](https://www.investopedia.com/articles/economics/08/monetary-
policy-recession.asp)

------
fallingfrog
Amazing how all this money can be summoned out of nowhere when it’s rich
people who are in trouble. But paid sick days for restaurant workers? No way.
I’ve been in a position where I was working at McDonald’s and literally
running to the back of the restaurant to vomit in a trash can and they still
didn’t let me go home, even without pay. Have fun eating out for the next
couple months.

------
cheeseomlit
Where does that money come from?

~~~
dntbnmpls
Like all fiat money, it's conjured up out of thin air. And since money is
ultimately debt, every dollar conjured up has to be worked off by the people.

------
pauljurczak
Free markets demand that loses of financial elites have to be socialized.

------
k__
What does this actually mean and how can I profit from it?

~~~
blisterpeanuts
Not sure what effect this stimulus will have, if any, but long term economic
fundamentals are sound, so right now might be a buying opportunity.

------
monkpit
Adblock wall on safari mobile with Firefox focus...

------
kds3
US Treasury successfully completed today's 30Y auction. NY Fed was just
worried that without $1.5T injection, the auction would have failed.

They're not as stupid as you might think.

------
eranima
Yet another bailout for wall street. Why couldn't these investors stop buying
starbucks every day and save up like the rest of us?

~~~
anonu
This is not a wall Street bail out. This is a main Street bail out. Every
American's life savings is in the stock market... Don't conflate the two
please.

~~~
munk-a
Nope, sorry - this is literally an injection of cash into Wall Street.
Political spin can do massively crazy things but this particular injection is
specifically going straight into Wall Street - saying otherwise is extremely
disingenuous.

~~~
anonu
Just plain wrong. There are financial markets (stock, bond markets, etc..) and
there are financial market companies that operate in that market. The two are
distinct.

This is analogous to: oil in the ground (the financial market) and companies
like Exxon and Chevron (financial market companies).

The financial markets are connected to every aspect of the "average"
American's life. 65%+ of working-age Americans are invested in some way
through the markets - either a brokerage account or a retirement account
(401k, IRA, defined benefit plan, etc...).

So if the US Government steps in to stabilize the markets with an injection of
capital, yes, you can argue ad infinitum that this helps the Goldman Sachs of
the world. But guess what, financial market companies love volatility. That's
when the real money is made. So sure, theyll make money on the way up, but
they will also make plenty of money on the way down as well.

An injection of capital into the markets helps the average American. It brings
stability to people's nest eggs and retirement funds. It puts a floor on panic
selling.

There's nothing disingenuous in my distinction of financial markets vs
financial market companies. I a merely pointing out that the market is way
more complex and interconnected than is being portrayed in this thread.

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ivankolev
That smells a lot like panic move and I am not sure it will move the needle
much. Economy will severly shrink no matter what Fed do.

~~~
qayxc
It's not a panic move at all.

It's a required reassurance to investors and companies to prevent actual panic
moves (i.e. complete market crash).

I agree that the economy will shrink nonetheless, but there's a difference
between a small recession and a full blown depression.

~~~
A4ET8a8uTh0
I would normally agree with you, but whatever the intentions were, the market
pointedly shrugged it off. I might even suggest that this FED move along with
last week cut is part of the reason for the panic..

~~~
infinite8s
The financial economy is much much bigger than just the equities market.

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mdszy
Universal healthcare? Too expensive.

$1.5T to bail out wall street? Sure!

~~~
jacquesm
I don't think you fully understand the subject. This money did not 'bail out
wall street', it made sure the bottom did not drop out of the market which
would affect pensions and savings plans of very large numbers of people. The
thing to worry about is that _it did not work_.

~~~
thedance
The number of affected people is pretty large, but it's also worth remembering
that about half of American households have no direct exposure to stock
markets: no pension, no 401(k) plan, no direct holdings. If you're trying to
prop up the stock market you're only directly benefitting, at most, half the
people.

~~~
jacquesm
Fair enough. But half the people is a substantial number. What bugs me is how
short lived the 'up' was. You'd expect more from such a massive injection. All
it seems to have done was prop up the market long enough for some laggards to
exit their positions as well and then it was back where it all started. Very
scary.

------
ouid
They're just going to cause more panic, honestly.

~~~
mindslight
They pushed the button that makes the ecomony go. Why doesn't it go?

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bfrog
Cool, glad we can try to artificial support the boomers 401ks, meanwhile the
SMBs won't see a dollar of that and live month to month

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OscarTheGrinch
Gotta soothe those Animal Spirits.

------
Fauntleroy
It'll be very interesting to see how individuals who value "pure" capitalism
where market dynamics handle everything reckon with the realities of disaster
and epidemic response.

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hastes
Really love how people are on Twitter and other outlets blaming this action on
Trump already when it literally has absolutely nothing to do with him and he
has opposed almost all action the Fed has taken so far. Social media and the
hive mind read the title and not the information mentality is really getting
tiring for me..

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mushufasa
we're about to witness the limits of Quantitative Easing. I predict this will
be the first of several such moves, to diminishing effects.

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cryptica
When the Fed says that they will "pump 1.5 trillion dollars into the financial
system", in reality what they mean is "pump 1.5 trillion into Facebook,
Google, Amazon, Apple and all other crony-capitalist institutions which
already have a ton of money and which couldn't exist without this constant
injection of free cash".

The Fed has turned the system is a giant pyramid scheme which rewards the rich
for being rich and systematically locks out value producers.

This new Fed money is not going to reach value producers; it will go to
straight financiers, venture capitalist, investment bankers, shareholders,
lawyers, fund managers. In the meantime farmers in the US are committing
suicide and nobody gives a crap. This is profoundly immoral.

I bet the Fed chose this very opportune moment to announce this injection
because they know that with the Coronavirus news, people are not going to
gather in large crowds to protest. They're exploiting the situation to give
their cronies handouts.

------
olliej
Only corporations get a welfare net.

------
JustSomeNobody
Wait for it. Next week stock buybacks will be all over the news. I bet AT&T
will be leading the charge.

~~~
oarabbus_
Next week the coronavirus cases and death tolls will be 2-3x what they are
today. Little chance of a V-shaped recovery. We are a long way from the
bottom.

~~~
rabuse
Exactly. This is just the beginning, and our efforts are a lot more lax than
these other countries combating this issue.

------
laughingbovine
Guys this is low-level plumbing work to keep the market moving. If they DIDNT
do this, then people wouldn't be able to make trades, and that would cause
trust to be lost in the system, and that would be really bad. Someone correct
me if I'm wrong, but I believe this money is for what are effectively loans
that will get paid back in a very short amount of time.

~~~
RIMR
Maybe trust SHOULD be lost in this system if it can't withstand the real world
without falling into chaos...

This money could do so much good in our society, and yet we're using it to
prop up a broken capitalist system that contributes to economic problems for
Americans.

~~~
imcoconut
I actually tend to agree with you philosophically. But practically the outcome
of inaction on the fed's part would very likely be disastrous to regular
Americans.

Think about America during the great depression. Modern fed theory and policy
is all aimed toward preventing something like that from happening again. It's
possible that without TARP, QE, etc. in 2008 (and onward) the great recession
would have become great depression 2.0.

While a complete economic reset might be in order, the question is how well
would America fare during the transition?

------
hogFeast
I had a conversation with a "very serious" economist the other day about
monetary policy was basically solved, and that the Great Moderation proved
that we were totally in control...$1.5trn...govt debt monetized, every time we
pull back the market collapses, and now we are on fire again...this is
connected, if you give a heroin addict more heroin, their health will
improve...keep doing it, and they will get sick.

The game is over. The market saw this, and kept falling. It is
over...hopefully, things will improve from now and we stop pumping money into
markets (and we realise that central bankers had no fucking idea what they
were doing...they were just doing whatever was politically expedient, which
is...hand out free money).

