Federal Reserve launches QE3

[SnakeBoy]

NEW YORK (CNNMoney) -- The Federal Reserve announced plans to unleash more stimulus Thursday, in its third attempt at a controversial program to rev up the U.S. economy.

The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.

The Fed is wasting no time. The purchases begin Friday and are expected to total about $23 billion over the remainder of September.

In addition, the Fed also indicated that it plans to keep interest rates at "exceptionally low levels" until mid-2015. Previously, the Fed had forecast rates would remain low until late 2014.

The central bank's main objective is to lower interest rates and mortgage rates in particular. By keeping rates low, the Fed hopes to fuel more spending and eventually, more hiring.

The policy "should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," the Fed's official statement said.

Meanwhile, the Fed will continue its existing policy known as Operation Twist. Together the two programs will add $85 billion in long-term bonds to the Fed's balance sheet each month.

Related: QE3 won't create jobs

The Fed has been trying to stimulate the economy for over three years now, and has exhausted its usual tool by keeping interest rates near zero since late 2008. Quantitative easing is an unconventional way of trying to lower rates further.

Still, the Fed is not satisfied, given that the unemployment rate has remained above 8%.

In a speech two weeks ago, Fed Chairman Ben Bernanke called the job market a "grave concern." Later, the government's jobs report showed hiring slowed substantially in August and the labor force shrank.

In its statement Thursday, the Fed indicated it will not only continue QE3, but also "employ its other policy tools" if the "labor market does not improve substantially."

The Fed's accommodative policies have been contentious from the start. Republicans often warn that as the Federal Reserve has expanded the money supply, it has set the economy up for rapid inflation in the future.

Meanwhile, economists expect the benefits to be minor, and the risks are uncertain. The first two rounds of quantitative easing lowered interest rates and fueled stock market gains, but banks haven't been eager to lend out money readily.

Martin Feldstein: What worries me about QE

Banks are sitting on $1.6 trillion in reserves and credit standards remain tight following the financial crisis. Households continue to pay down debt, and are in no hurry to ramp up their spending.

That said, it's possible the Fed's move could help the housing market slightly. New construction and home prices have already started picking up recently, and should mortgage rates fall further, that could fuel a quicker housing recovery.

[CosmicCowboy]

The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month.

Holy fuck. This is a huge bailout gift to the TBTF banks that got us into this shit.

Bank stocks should go fucking nuts.

[coyotes_geek]

Yay?

[boutons_deux]

"Households continue to pay down debt"

no, that's over.

http://www.nerdwallet.com/blog/wp-content/uploads/2012/05/AmericanHouseholdDebt-e1345671884593.jpg

http://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/

[boutons_deux]

"set the economy up for rapid inflation in the future"

St Ronnie's Fed guy Volcker showed how to stop that in '80s.

[CosmicCowboy]

I knew it was a big number but I didn't realize that student loan debt was larger than credit card debt.

[Clipper Nation]

Wow... terrible news, tbh.... setting us up for our dollar losing reserve status imho...

[CosmicCowboy]

Basically the Fed pays 100% face value for crap in bank portfolios that is actually worth pennies on the dollar. WTF? How does this help anyone but the fucking banks? Cocksuckers still don't make loans. Mother fuckers then borrow at 0% from the Fed window and buy treasuries with a guaranteed profit spread. Shit. Bernake sucks.

[Clipper Nation]

It's not just Bernanke... this shady shit is exactly how the Fed has operated since it came into existence, tbh.... this is why our Founders warned us against central banking and strictly delegated the coinage of money to Congress....

[ChumpDumper]

"set the economy up for rapid inflation in the future"

St Ronnie's Fed guy Volcker showed how to stop that in '80s.Actually St. Jimmy's Fed guy.

[SnakeBoy]

Holy fuck. This is a huge bailout gift to the TBTF banks that got us into this shit.

Bank stocks should go fucking nuts.

BofA is up 5% since the anouncement. I'm not sure that this will provide a lasting bump since the fed's actions basically amount to an announcement that the economy and our financial institutions are in worse shape than most people think.

[Winehole23]

^^^ that

[boutons_deux]

the biggies were ALL bankrupt end of 2008. and many still are except for taxpayer support.

Was the prime time to nationalize them all and turn banking a non-profit public utility, while removing the risk.

[CosmicCowboy]

BofA is up 5% since the anouncement. I'm not sure that this will provide a lasting bump since the fed's actions basically amount to an announcement that the economy and our financial institutions are in worse shape than most people think.

Buying 40 billion of crap every month indefinitely can go a long way towards fixing the banks fucked up balance sheets.

[CosmicCowboy]

the biggies were ALL bankrupt end of 2008. and many still are except for taxpayer support.

Was the prime time to nationalize them all and turn banking a non-profit public utility, while removing the risk.

Solyndra X 1,000,000,000,000,000

[Clipper Nation]

Was the prime time to nationalize them all and turn banking a non-profit public utility, while removing the risk.

You clearly know nothing about the economy or our government if you think nationalized banks would be anything other than a catastrophic failure, tbh.... between the Fed's non-stop money-printing and the scandal that occurred when the House of Representatives tried to run their own bank, nationalization would CREATE bigger risks than it could ever mitigate....

[coyotes_geek]

I swear we'd have been much better off just giving every household $100,000 than doing all this QE crap.

[LnGrrrR]

Blah. I'm not a huge fan of derivative sequels, excepting ESB of course.

[ElNono]

The scale is substantially smaller than previous instances. As long as there's no inflationary pressure, why not? If it helps prop the economy, then let's do it.

[TeyshaBlue]

I swear we'd have been much better off just giving every household $100,000 than doing all this QE crap.

Front loaded QE! I'm in!

[MannyIsGod]

I hate the fucking banks so much

[boutons_deux]

I hate the fucking banks so much

yep, but the banks are completely immune to hate from their victims.

[Homeland Security]

I thought this would push gold to $1800 but just $1760 so far.

[Wild Cobra]

I thought this would push gold to $1800 but just $1760 so far.
I wonder what will happen when that golden bubble pops?

[Homeland Security]

I wonder what will happen when that golden bubble pops?

The bubble already popped. It was over $1900 a year ago then fell down around $1500.

[Wild Cobra]

The bubble already popped. It was over $1900 a year ago then fell down around $1500.
No widespread news about it?

I wasn't paying attention to it, because I know it will be another place people lose money, and timing the rise and fall is difficult.

[Homeland Security]

No widespread news about it?

I wasn't paying attention to it, because I know it will be another place people lose money, and timing the rise and fall is difficult.

I don't speculate or play the margins in precious metals. Their use is as a hedge against inflation and holdings should be the actual metals and not certificates.

[CosmicCowboy]

No widespread news about it?

I wasn't paying attention to it, because I know it will be another place people lose money, and timing the rise and fall is difficult.

I bought a half pound of gold @ $370 oz. and the stockbroker I was using at the time told me I was stupid.

[Th'Pusher]

Yeah, I think the news here is that this is indefinite. They're just going to keep buying up mortgage backed securities until the unemployment rate comes down and they'll let inflation exceed the target 2%? Am I understanding that correct?

[Wild Cobra]

I bought a half pound of gold @ $370 oz. and the stockbroker I was using at the time told me I was stupid.
Good for you. So hard to predict the future. I saw the decline starting in 1998. Wish I was wiser and bought some then. I would be selling no later than mid next year I think, but then again, I would reassess then.

[angrydude]

the gold bubble will pop when the US issues its brand new currency

[Wild Cobra]

the gold bubble will pop when the US issues its brand new currency
The Chinaro?

[Clipper Nation]

Aaaaaand thanks to the corrupt Fed's launch of QE3, we've just been downgraded again... (http://www.cnbc.com/id/49037337)

[Wild Cobra]

Aaaaaand thanks to the corrupt Fed's launch of QE3, we've just been downgraded again... (http://www.cnbc.com/id/49037337)

The elitists are helping the rich get richer, one step at a time.

See what the stock market did?

[CosmicCowboy]

Good for you. So hard to predict the future. I saw the decline starting in 1998. Wish I was wiser and bought some then. I would be selling no later than mid next year I think, but then again, I would reassess then.

Did even better on 1 oz. Palladium Ballerina proofs I bought in 1990 and 1991. The USSR was hurting for dollars and they sold them at just a little over bullion price. I think I paid $225 for them. Then the USSR broke up and they became collectors items with newly rich Russians. Iv'e seen them go on e-bay for more than $2000.

[Wild Cobra]

Did even better on 1 oz. Palladium Ballerina proofs I bought in 1990 and 1991. The USSR was hurting for dollars and they sold them at just a little over bullion price. I think I paid $225 for them. Then the USSR broke up and they became collectors items with newly rich Russians. Iv'e seen them go on e-bay for more than $2000.
LOL...

Awesome.

[Winehole23]

obliquely related: http://finance.yahoo.com/news/enigma-mortgage-market-elevates-rates-161206290.html

[Wild Cobra]

obliquely related: http://finance.yahoo.com/news/enigma-mortgage-market-elevates-rates-161206290.html
I got this far before being disgusted:

Right now, borrowers are paying around 3.55 percent for a 30-year fixed rate mortgage that qualifies for a government guarantee of repayment. That's down from 4.1 percent a year ago, and 5.06 percent three years ago.
That's right, put the burden on our progeny.

[cheguevara]

the beginning of the end is starting. between this Central Bank and the shit going on in Europe's banks, time to buckle the belt and enjoy the ride to world financial oblivion

this is equivalent to the doctor giving the green light to unlimited amounts of morphine to a terminal cancer patient.

[Winehole23]

shouldn't terminal patients have robust palliative care?

[Winehole23]

Yet the 2012 presidential contest may have already been decided by the Federal Reserve, which just delivered an unprecedentedly aggressive dose of money-printing stimulus with the aim of boosting stock prices and home values, elevating consumer confidence and boosting job growth via increased consumer spending. It will also boost exports. It will encourage new investment by businesses. And it will take the sting out of ongoing federal deficits and a rising national debt by holding down the government's borrowing costs.


In other words, Fed Chairman Ben Bernanke -- an appointee of a Republican president, by the way -- has likely just delivered a second term to President Barack Obama.

http://money.msn.com/investing/did-the-fed-just-re-elect-obama

[boutons_deux]

Most commentators I read said the Fed's buying shit mortages and MBS helps the banks, while lower Fed rate is allowing the banks also to profit from the bigger spread rather than lowering rates to borrowers.

Obama doesn't need the Fed's help, as Gecko and Anne are screwing themselves everytime they open their mouths.

Of course, Gecko saying he'd fire Bernanke probably doesn't endear Benanke to Gecko. I expect Gecko's replacement would be even worse embedded with supporting the financial sector.

[mavs>spurs]

Most commentators I read said the Fed's buying shit mortages and MBS helps the banks, while lower Fed rate is allowing the banks also to profit from the bigger spread rather than lowering rates to borrowers.

Obama doesn't need the Fed's help, as Gecko and Anne are screwing themselves everytime they open their mouths.

Of course, Gecko saying he'd fire Bernanke probably doesn't endear Benanke to Gecko. I expect Gecko's replacement would be even worse embedded with supporting the financial sector.

I wonder if Romney paying a higher tax rate than boutons will offset the harmful effects of QE3 imho

[CosmicCowboy]

Most commentators I read said the Fed's buying shit mortages and MBS helps the banks, while lower Fed rate is allowing the banks also to profit from the bigger spread rather than lowering rates to borrowers.



Damn Boutox...did you computer get a virus and start diverting your searches to conservative websites? You damn sure didn't read that on thinkprogress or alternet.

[boutons_deux]

so you assholes have nothing to say on the topic?

[CosmicCowboy]

so you assholes have nothing to say on the topic?

:lmao:lmao:lmao:lmao:lmao

Sorry you had to wait for someone else to tell you what to think so you could cut and paste it.

Here was my off the cuff response on page one as soon as it happened...did you even read the thread?


Basically the Fed pays 100% face value for crap in bank portfolios that is actually worth pennies on the dollar. WTF? How does this help anyone but the fucking banks? Cocksuckers still don't make loans. Mother fuckers then borrow at 0% from the Fed window and buy treasuries with a guaranteed profit spread. Shit. Bernake sucks.

[mavs>spurs]

so you assholes have nothing to say on the topic?

I want to see your fucking tax returns Mr

[boutons_deux]

I want to see your fucking tax returns Mr

GFY, stalker.

[mavs>spurs]

GFY, stalker.

the consensus around here is that you paid less taxes than mitt and don't get to criticize him anymore

[Agloco]

I knew it was a big number but I didn't realize that student loan debt was larger than credit card debt.

Yep. It's the other shoe that hasn't fallen yet tbh. Further complicating the issue is that bankruptcy does nothing to save you from it.

[mavs>spurs]

Yep. It's the other shoe that hasn't fallen yet tbh. Further complicating the issue is that bankruptcy does nothing to save you from it.

i'm not sure if this is true or not but i heard somewhere in the media that the student loan bubble is bigger than subprime ever was

[CosmicCowboy]

Meh. All the unemployed liberal arts majors will eventually get their inheritances and the loans will be paid in probate..

[mavs>spurs]

Meh. All the unemployed liberal arts majors will eventually get their inheritances and the loans will be paid in probate..

cofl the panic will start long before then, when the first of them start deferring their loans due to joblessness in mass

[Winehole23]

Dallas FED President Richard Fisher on QE3: http://www.realclearpolitics.com/articles/2012/09/22/we_are_sailing_deeper_into_uncharted_waters_115536 .html

[admiralsnackbar]

cofl the panic will start long before then, when the first of them start deferring their loans due to joblessness in mass

Phoenix alums (many of them bums given $50 to apply for FAFSA/Pell Grant aid (http://quantiger.wordpress.com/2012/08/10/the-gangsters-of-the-for-profit-education-apocalypse-richard-sperling-et-al/)) are already leading the vanguard.

Hooray free market.

[mavs>spurs]

^i think manny got his earth science or whatever degree from there rofl

[Winehole23]

are you sure about that, or do you just like to make stuff up?

[CosmicCowboy]

ust recently, in a hearing before the Senate, your senator and my Harvard classmate, Chuck Schumer, told Chairman Bernanke, “You are the only game in town.” I thought the chairman showed admirable restraint in his response. I would have immediately answered, “No, senator, you and your colleagues are the only game in town. For you and your colleagues, Democrat and Republican alike, have encumbered our nation with debt, sold our children down the river and sorely failed our nation. Sober up. Get your act together. Illegitimum non carborundum; get on with it. Sacrifice your political ambition for the good of our country—for the good of our children and grandchildren. For unless you do so, all the monetary policy accommodation the Federal Reserve can muster will be for naught.”

Awesome quote

[Winehole23]

As one would expect, most financial market operators focus their analysis on the financial aspects of so-called "deleveraging". And, no doubt about it, the titans of today's gigantic global leverage speculating community are precisely those players that have most adroitly played the ongoing cycle of global central bank reflationary policymaking. Their astounding financial success provides them a public forum in which to shape both the analytical debate and general viewpoints.

I tend to believe that conventional thinking - albeit from central bankers, bond and hedge fund kings, or FT and WSJ columnists - is wrong on deleveraging. Deleveraging is not predominantly a financial issue. Economic structure matters - and it matters tremendously. Importantly, true deleveraging requires that system debt loads are reduced to a level supportable by the capacity of an economy to produce real wealth.

A system can achieve stability and robustness only when a sound economy supports a manageable amount of system financial assets. Yet with a highly unsound economy, ongoing rampant inflation of non-productive debt and highly unstable financial markets, from my framework our system remains very much in a financial leveraging credit bubble cycle. http://www.atimes.com/atimes/Global_Economy/NI25Dj01.html

[Winehole23]

“We are unlikely to see much benefit to growth or employment from further asset purchases” Philadelphia FED President Charles Plosser said in a speech today at the district bank in Philadelphia. "Conveying the idea that such action will have a substantive impact on labor markets and the speed of the recovery risks the Fed’s credibility. ”


“I opposed the Committee’s actions in September because I believe that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment,” Plosser said. “Every monetary policy action has costs and benefits, and my assessment is that the potential costs and risks associated with these actions outweigh the potential meager benefits.” http://www.businessweek.com/news/2012-09-25/plosser-says-qe3-risks-fed-credibility-won-t-boost-jobs

[Winehole23]

The extent to which QE3 drives down new mortgage rates and helps homeowners or is pocketed by banks will be crucial to the success of the policy and the prospects for growth in the U.S. and global economies next year.The rise in profit earned by banks from creating new mortgages came as Fed chairman Ben Bernanke sought to defend QE3 against attacks from Republican presidential candidate Mitt Romney and other critics. Mr Romney said last week the Fed was keeping interest rates “artificially low”.


Speaking in Indianapolis on Monday, Mr Bernanke said it would be “inappropriate” and “ineffective” for the Fed to raise interest rates to put pressure on Congress to tackle the deficit. QE3 would not lead to long-term inflation, he said, adding that stronger growth would help savers in the long run despite low interest rates today.


Although the average rate on a fixed 30-year mortgage reached 3.4 percent this week – a record low – mortgage rates could be lower if banks passed on the full drop in their funding costs.


“For banks which are mortgage originators this [QE3] was some of the best news they could possibly have heard,” said Steven Abrahams, mortgage strategist at Deutsche. “They will continue originating loans and selling them into the market at a significant premium.”


The interest banks pay on mortgage bonds has dropped from 2.36 percent on September 12, the day before the Fed announced its program, to as low as 1.65 percent last week. It edged up to 1.85 percent on Monday.


That means the profit, or spread, banks earn from creating new mortgages for homeowners paying around 3.4 percent and selling the loans into the secondary market has risen to around 1.6 percent. That is higher than the 1.44 percent spread they pocketed before QE3 and significantly greater than the 0.5 percent they earned on average in the decade between 2000 and 2010.

http://www.cnbc.com/id/49249106

[Winehole23]

http://www.project-syndicate.org/commentary/why-qe3-is-unlikely-to-help-us-economic-recovery-by-nouriel-roubini

[Agloco]

En Ingles for the slow people WH.

Is QE3 simply more shit on the fan, or does this have a shot not reversing our fortunes?

The fact that Bernanke appears to be speaking in tongues quite frequently is troubling to me.

[Winehole23]

the concern seems to be that countercyclical Fed policy is creating more asset bubbles in a time of weak growth. the correlation of a rising market in times of declining profit is ominous. certain asset classes would seem to be divorced from the fundamentals, which will not be mocked forever.

[Winehole23]

pride ever goeth before a fall, etc..

[Winehole23]

unaccompanied as it is by any stimulus to the broader economy -- and indeed, very much accompanied by the spectre of austerity and the reality of deleveraging -- QE3 may face some strong headwinds . . .

[Winehole23]

that's my recap of the Roubini bit, btw . . .

[boutons_deux]

Sorry you had to wait for someone else to tell you what to think so you could cut and paste it.

Here was my off the cuff response on page one as soon as it happened...did you even read the thread?

you sorry? :lol

I have more evidence and research for my positions. Yours if basically "I'm bad assed wealthy 1% son of a bitch sucking in health care dollars, all you 99%ers can GFY. AND cut my taxes more!"

[Winehole23]

That sanguine view of the inflation risk posed by the Fed's actions was disputed by Richmond Federal Reserve President Jeffrey Lacker, who dissented against the policy easing last month and voiced concern about the impact on price stability.

"The behavior of inflation is fundamentally attributable to the actions of the central bank, while growth and labor market conditions are affected by a wide variety of factors," he told a business conference in Roanoke, Virginia.


Lacker said that while the Fed had the tools - in theory - that would allow it to shrink the balance sheet and lean against inflation, the exercise had never been conducted in real-life, sounding a note of scepticism over how confident policymakers should be that they can do so when the time comes.


He also voiced doubt that the U.S. economy was really running so far beneath its so-called trend growth rate, and that there is not much more monetary policy can do at the moment to spur the economy.


"Simply observing a high unemployment rate does not imply that the Fed's monetary policy is failing to comply with its congressional mandate, nor does it necessarily mean that monetary policy needs to do more to achieve its goals," he said.

http://www.reuters.com/article/2012/10/16/us-usa-fed-idUSBRE89419L20121016

[boutons_deux]

"behavior of inflation is fundamentally attributable to the actions of the central bank"

supply and demand aren't a factor? gasoline price in CA inflated recently due to limited supply from refinery and pipeline problems, and CA's special gasoline not produced by out-of-state refineries.

The Fed has been pumping out t $Ts and inflation is not rampant. In fact, it's non-factor. Today's SS COLA for 2013 will be lowest in decades.

Fucking economists, what a bunch of losers. And they were so accurate and forewarning, and USEFUL!, about the credit/housing bubble. :lol

[Winehole23]

the diversity of views expressed by the Fed is a bit of an historical oddity. before 2008, anyway.

[Winehole23]

The Federal Reserve said Wednesday that it plans to keep interest rates ultra-low even after unemployment falls close to a normal level — which it thinks could take three more years. As long as expected inflation remains tame, the Fed said it could keep its key short-term rate near zero even after unemployment falls below 6.5 percent. Unemployment is now 7.7 percent.

http://www.washingtonpost.com/business/federal-reserve-wraps-up-2012-still-facing-high-unemployment-and-sub-par-economic-growth/2012/12/12/cea83aee-4419-11e2-8c8f-fbebf7ccab4e_story.html

[Winehole23]

http://www.policyshop.net/home/2012/12/13/how-zero-interest-rate-policy-clobbers-seniors.html

[Winehole23]

seamy underbelly: is 6.5% unemployment the new full employment?

http://www.forbes.com/sites/cedricmuhammad/2012/12/13/the-feds-new-nairu-evil-enough-to-unite-democrats-and-republicans/

[Winehole23]

Minyanville on the specter of inflation:

http://www.minyanville.com/business-news/the-economy/articles/When-Will-Expected-Inflation-Hit-252525253F/12/13/2012/id/46664

[boutons_deux]

seamy underbelly: is 6.5% unemployment the new full employment?

http://www.forbes.com/sites/cedricmuhammad/2012/12/13/the-feds-new-nairu-evil-enough-to-unite-democrats-and-republicans/

Don't worry about unemployment. As soon the job-creating House Repugs get back to work in the next session, they will continue their incredible, never-ending War on Unemployment and helping the jobless.

[Winehole23]

how does giving away money to banks lessen unemployment? the linkage ain't clear. can you explain it to me, maestro?

[Winehole23]

related: Fed extends liquidity swaps to foreign banks through 2014:

The Federal Reserve, along with four other central banks, announced Thursday that it will extend a program that keeps borrowing costs cheap for foreign banks that want to deal in U.S. dollars.
Last year, the Fed slashed in half the rate that foreign central banks pay to borrow U.S. dollars, a staple in global financial transactions.



The so-called dollar liquidity swaps are basically credit lines to foreign central banks. It's a tool that has been extended and revived several times, to lower the cost of short-term borrowing, particularly for European banks, and keep the global economy free of a credit crunch as in 2008.


The Fed announced Thursday that it will extend the program through February 2014. Previously (http://money.cnn.com/2011/11/30/news/economy/fed_ecb_dollar_liquidity/index.htm?iid=EL), it was set to remain in place until February 2013.

http://money.cnn.com/2012/12/13/news/economy/federal-reserve-us-dollar/index.html?iid=HP_LN

[boutons_deux]

how does giving away money to banks lessen unemployment? the linkage ain't clear. can you explain it to me, maestro?

Don't worry about unemployment. As soon the job-creating House Repugs get back to work in the next session, they will continue their incredible, never-ending War on Unemployment and helping the jobless.

[CosmicCowboy]

related: Fed extends liquidity swaps to foreign banks through 2014:

The Federal Reserve, along with four other central banks, announced Thursday that it will extend a program that keeps borrowing costs cheap for foreign banks that want to deal in U.S. dollars. http://money.cnn.com/2012/12/13/news/economy/federal-reserve-us-dollar/index.html?iid=HP_LN

Fuckers are whoring to foreign banks propping the dollar to counterbalance the negative impact of monetizing of debt. Son of a bitch!

[CosmicCowboy]

Don't worry about unemployment. As soon the job-creating House Repugs get back to work in the next session, they will continue their incredible, never-ending War on Unemployment and helping the jobless.

What?

I thought we were "moving forward" with Obama to eliminate unemployment.

[boutons_deux]

What?

I thought we were "moving forward" with Obama to eliminate unemployment.

The Repugs control the House financial strings.

[Wild Cobra]

The Repugs control the House financial strings.
And the senate keeps shutting the house down.

[Winehole23]

"For the many reasons I have noted today, I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed," Yellen said.http://www.marketwatch.com/story/yellen-feds-extraordinary-aid-to-last-for-some-time-2014-03-31

[boutons_deux]

And the senate keeps shutting the house down.

example?

we know Boner won't even allow votes on stuff that comes from the Senate with bi-partisan passage.

[boutons_deux]

http://www.marketwatch.com/story/yellen-feds-extraordinary-aid-to-last-for-some-time-2014-03-31

nothing but continuing to enrich the financial sector, giving them free money to gamble.

Fed offers NO HELP for the non-financial economy, as always

[Winehole23]

can't piss off the political donor class. how can a public servant do good if he can't afford to run?

[boutons_deux]

can't piss off the political donor class. how can a public servant do good if he can't afford to run?

Fed people are appointed, not elected.

the Fed was created by the banks, for the banks, always was, always will be.

[Winehole23]

you'd do well to focus on basic elements of grammar and style. your posts often have a fractured, frenetic quality that does you little credit.

presumably there is such a thing subject/verb agreement in whatever your first language is.

[Winehole23]

cost of ultra low interest rates to American savers -- and hence, the benefit to banks -- is $758 billion, and that's just purchasing power lost to inflation.

http://www.money-rates.com/research-center/cost-of-fed-rates-2014.htm

[boutons_deux]

you'd do well to focus on basic elements of grammar and style. your posts often have a fractured, frenetic quality that does you little credit.

presumably there is such a thing subject/verb agreement in whatever your first language is.

typy/grammar smack! GFY

[Winehole23]

QE3 comes to an end:


The Federal Reserve on Wednesday formally ended its controversial purchases of government and mortgage bonds, and in doing so cleared the decks for eventual increases in interest rates, last seen in 2008.

The nearly unanimous decision by the rate-setting Federal Open Market Committee – only one member of the 10-person panel voted “no” – brought to a close a program that saw the Federal Reserve make more than $4 trillion in bond purchases, over three incarnations, designed to keep the economy moving forward after the financial crisis

Read more here: http://www.mcclatchydc.com/2014/10/29/244962_bond-buying-ends-but-whats-next.html?sp=/99/200/328/&rh=1#storylink=cpy

[boutons_deux]

so the financial sector created $Ts in toxic loans, and their puppets at the Fed bought them all.

"designed to keep the economy moving forward after the financial crisis"

:lol no, designed to keep the financial sector afloat and enriching itself with free Fed $Ts. The Real Economy? still stagnating

[Winehole23]

we're in agreement there, only, I don't find it funny.

[boutons_deux]

the Real Economy will go into full recession once the Repugs gut even more fed, state, local spending, eg, Kansas, Wisconsin, etc.

[Winehole23]

Republicans don't control the economy any more than Dems do. That's a fairytale.

[Winehole23]

Plus which, you're terrible at prediction. You do it all the time here, and you're almost always wrong.

[boutons_deux]

Republicans don't control the economy any more than Dems do. That's a fairytale.

who said anything about control?

govt spending, govt employment are huge components of the economy.

Cut $300B from DoD and see how many Ms of jobs are lost.

Just the fucking F-35 fiasco sustains jobs in nearly every state. That's why Congress won't kill it, even though the military doesn't want it and other useless weapons systems.

[Winehole23]

govt spending, govt employment are huge components of the economy.government spending is not going away under GOP rule.

[boutons_deux]

government spending is not going away under GOP rule.

fed govt spending on science, safety net, health, environment, education, IRS, etc, will all be cut more, as they have been since 2010.

And red states will continue to screw public schools, lay off public school teachers, etc and then blame the schools for poor performance so they can transfer taxpayers funds to Christian Taliban madrasas and for-profit charter scammers, and kill RET as they are paid to do by BigCarbon.

[Winehole23]

Republicans have different spending priorities than Democrats. that's well known.

[boutons_deux]

Republicans have different spending priorities than Democrats. that's well known.

they will cut spending for the 99%, esp for Bishop Gecko's 47%, and increase "tax expenditures" for the wealthy and BigCorps, eg, $19B/year in TX for business tax expenditures.

NC's experiment of cutting unemployment totally failed to force the moochers/takers into getting jobs, no change in unemployment rate.

[angrydude]

Without US government spending who is going to buy all those bombs? Clearly the US economy cannot exist without perpetual war. The factories will close and never be retooled to produce something as useless as consumer goods.

[RandomGuy]

Without US government spending who is going to buy all those bombs? Clearly the US economy cannot exist without perpetual war. The factories will close and never be retooled to produce something as useless as consumer goods.

Ah, the persistent myth of "perpetual war".

Tell me, what % of the US economy is dependent on "perpetual war"?

http://3.bp.blogspot.com/-V9wH9SvXAq4/Tj_tQXM53AI/AAAAAAAAA8Q/rYpOY_sU-fU/s1600/Defense+spending+as+a+percent+of+GDP%252C+bar+char t.jpg

Kinda hard to "retool" factories to produce consumer goods, when that is what they are already doing, innit?

[Winehole23]

Stephen Roach takes the Fed to the woodshed for its accommodation on interest rates:


America’s Federal Reserve is headed down a familiar – and highly dangerous – path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic.


Consider the December meeting of the Federal Open Market Committee (FOMC), where discussions of raising the benchmark federal funds rate were couched in adjectives, rather than explicit actions.




In line with prior forward guidance that the policy rate would be kept near zero for a “considerable” amount of time after the Fed stopped purchasing long-term assets in October, the FOMC declared (http://www.federalreserve.gov/newsevents/press/monetary/20141217a.htm) that it can now afford to be “patient” in waiting for the right conditions to raise the rate. Add to that Fed Chair Janet Yellen’s declaration (http://www.federalreserve.gov/mediacenter/files/FOMCpresconf20141217.pdf) that at least a couple more FOMC meetings would need to take place before any such “lift-off” occurs, and the Fed seems to be telegraphing a protracted journey on the road to policy normalization.


This bears an eerie resemblance to the script of 2004-2006, when the Fed’s incremental approach led to the near-fatal mistake of condoning mounting excesses in financial markets and the real economy. After pushing the federal funds rate to a 45-year low of 1% following the collapse of the equity bubble of the early 2000s, the Fed delayed policy normalization for an inordinately long period. And when it finally began to raise the benchmark rate, it did so excruciatingly slowly.


In the 24 months from June 2004, the FOMC raised the federal funds rate from 1% to 5.25% in 17 increments of 25 basis points each. Meanwhile, housing and credit bubbles were rapidly expanding, fueling excessive household consumption, a sharp drop in personal savings, and a record current-account deficit – imbalances that set the stage for the meltdown that was soon to follow.

Read more at http://www.project-syndicate.org/commentary/fed-interest-rates-policy-normalization-by-stephen-s--roach-2014-12#hS7mq4HpATcXwhWP.99

[Winehole23]

Central banking has lost its way. Trapped in a post-crisis quagmire of zero interest rates and swollen balance sheets, the world’s major central banks do not have an effective strategy for regaining control over financial markets or the real economies that they are supposed to manage. Policy levers – both benchmark interest rates and central banks’ balance sheets – remain at their emergency settings, even though the emergency ended long ago.


While this approach has succeeded in boosting financial markets, it has failed to cure bruised and battered developed economies, which remain mired in subpar recoveries and plagued with deflationary risks. Moreover, the longer central banks promote financial-market froth, the more dependent their economies become on these precarious markets and the weaker the incentives for politicians and fiscal authorities to address the need for balance-sheet repair and structural reform.

Read more at http://www.project-syndicate.org/commentary/fed-interest-rates-policy-normalization-by-stephen-s--roach-2014-12#hS7mq4HpATcXwhWP.99

[SnakeBoy]

Read more at http://www.project-syndicate.org/commentary/fed-interest-rates-policy-normalization-by-stephen-s--roach-2014-12#hS7mq4HpATcXwhWP.99

Good article but I think we go into recession if the Fed starts raising interest rates right now. Damned if you do, damned if you don't.

[CosmicCowboy]

In a world of negative true interest rates there is nowhere to put money BUT the stock market and real estate. Both markets are getting frothy because of the funny money.

[CosmicCowboy]

Of course, I'm ignoring the gold/silver bugs. Those guys are trying to swim upstream.

[Winehole23]

Good article but I think we go into recession if the Fed starts raising interest rates right now. Damned if you do, damned if you don't.That's an opinion you and Wall Street share. The era of zero bound interest rate policy is almost over.

[Winehole23]

six years after the epochal financial panic

[boutons_deux]

six years after the epochal financial panic

... the criminal perps are richer and more powerful than ever, while their robbed, bled, screwed victims continue to be powerless and more poor.

[SnakeBoy]

six years after the epochal financial panic

Market wanted to clear out the dead wood quickly & without mercy. We opted to save the dead wood and bleed out slowly instead. Jury is still out if we made the right decision imo.

[boutons_deux]

Market wanted to clear out the dead wood quickly & without mercy.

:lol

Lehman failed, credit markets froze. Any deadwood was ignored because the financial sector was looting and booming.

"the market" :lol

[Winehole23]

Market wanted to clear out the dead wood quickly & without mercy. We opted to save the dead wood and bleed out slowly instead. Jury is still out if we made the right decision imo.Republicans, for all their bluster about free markets, voted to socialize the costs of the Panic of 2008.

[boutons_deux]

Republicans, for all their bluster about free markets, voted to socialize the costs of the Panic of 2008.

and with help from the Dems, they just voted to let the banks gamble with taxpayer-insured taxpayers' deposits. Voted for private gain, public pain. heads we win, tails all y'all lose. Fucking amazing.

There will be another huge, deep financial crisis, sooner rather than later. There always is, has been for centuries, when financial sector/capitalists are free from regulation, free from countervailing power.

[Winehole23]

and with help from the Dems, they just voted to let the banks gamble with taxpayer-insured taxpayers' deposits. they're working hand-in-glove with the GOP to screw us all, wouldn't you say?

[boutons_deux]

they're working hand-in-glove with the GOP to screw us all, wouldn't you say?

yep, that's why I support the Dems only because they aren't a aggressively, intentionally horrible as the Repugs, just passively so.

Obama said he hasn't vetoed much because (the insane House Repugs shit) the Dem Senate blocked.

now he's he says ready to veto the insane House/Senate Repugs shit

[SnakeBoy]

Republicans, for all their bluster about free markets, voted to socialize the costs of the Panic of 2008.

Why single out republicans? Dems, independents, just about all of the American people wanted to bail out the tbtf's in the mistaken belief that the crisis on wall street could be kept from affecting main street. As I recall you and I were the only ones on here that thought nationalization as the swedes did in the 90's or as we did with the S&L's was a better option.

[Winehole23]

Why single out republicans? Most hypocritical. They abandoned their so-called principles in adversity

[boutons_deux]

"Dems, independents, just about all of the American people wanted to bail out the tbtf's"

bullshit.

It was very clear that The American People didn't know WTF was going on in the autumn 2008 crash of the entire criminal financial sector. Lehman? Bear Stearns? AIG? who's that?

I remember very clearly reading that the incredible complexity of the financial system had finance people saying "we don't really know the cause, don't what's going on, except nobody's lending anymore, credit freeze up".

All the financial sector knew was they wanted was $Ts in bailout money, and they got it.

The American People were, even as now, nothing but duped, ignorant, trusting bystanders to the financial sector's meltdown.

The American People didn't know, don't know, WTF are MBS, CDS, CDO, chain-of-title-breaking MERS, counter-parties, derivatives,etc, etc, all the "financial innovations" the criminal financial sector got via the Gramm–Leach–Bliley Act (http://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act)

[SnakeBoy]

Most hypocritical. They abandoned their so-called principles in adversity

Bailing out wall street is part of the Dems principles?

[boutons_deux]

Bailing out wall street is part of the Dems principles?

Repug Paulson demanded TARP, Repug WH have it to him.

[Th'Pusher]

Bailing out wall street is part of the Dems principles?

Nationalizing the baking system leans a little more left than right, wouldn't you say?

[boutons_deux]

Nationalizing the baking system leans a little more left than right, wouldn't you say?

of course. Repugs would NEVER nationalize anything.

I was all for nationalizing all the bankrupt banks, just like FDIC does with non-TBTF banks by the 100s, AIG, re-implementing Glass-Steagall WITH A VENGEANCE.

It's the Repugs who have been pushing for, gutting, defunding Sarbones-Oxley, Dodd-Frank, CFPB, etc.

[Winehole23]

Bailing out wall street is part of the Dems principles?That's not the laissez faire

[Winehole23]

still relevant: http://mises.org/library/end-sound-money-and-triumph-crony-capitalism

[Winehole23]

punchbowl removed too quickly?


My summary assessment is that the FOMC underperformed in the past three years with respect to the price stability mandate and the employment mandate. I’m sometimes asked, “What concrete actions could the FOMC have taken to provide additional stimulus?” I think one concrete action would have been not to reduce stimulus. In mid-2013, the FOMC began communicating about the eventual elimination of its asset purchase program that took place from December 2013 and October 2014. These communications, and the follow-up actions, served as a tightening of monetary policy. Accordingly, they were associated with sharp increases in market interest rates and sharp reductions in the rate of home mortgage refinancing.https://www.minneapolisfed.org/news-and-events/presidents-speeches/thoughts-on-monetary-policy-and-community-banks

[Winehole23]

Most hypocritical. They abandoned their so-called principles in adversityeven their most ardent enemies will admit, the swift abandonment of principle in a dire moment, was one of their virtues. gold-plated socialism for big banks and traders couldn't have been possible without it.

[Winehole23]

Stockman takes a swipe at Yellen after the putative end of ZIRP:


In point of fact, the primary source of private sector credit growth since the pre-crisis peak has been in the business sector. Credit market debt outstanding in nonfinancial business has risen from $10.6 trillion on the eve of the financial crisis to $12.6 trillion.


Yet the lion’s share of that $2 trillion gain is accounted for by the surge of high yield loans and bonds, which have more than doubled from $1.2 trillion to $2.6 trillion during the same period.


http://davidstockmanscontracorner.com/wp-content/uploads/2015/12/levdebt-480x3261-480x326.png

(http://davidstockmanscontracorner.com/wp-content/uploads/2015/12/levdebt-480x3261-e1450298526710.png)

And one thing can be said with authority with respect to this soaring pile of junk. Namely, that it was overwhelmingly used for financial engineering in the form of stock buybacks, M&A deals and LBO’s. It thereby help to drive up the price of existing financial assets, not expand the US economy’s productive capacity and efficiency.


http://davidstockmanscontracorner.com/wp-content/uploads/2015/12/Capture2-480x340.png

(http://davidstockmanscontracorner.com/wp-content/uploads/2015/12/Capture2.png)

In this context, the march of the junk debt yield curves shown below says it all. The Fed’s heavy-handed financial repression did not trigger a domestic investment boom as Bernanke promised the Congress over and over during his twice yearly forays in deception on Capitol Hill; it simply stampeded yield-starved money managers and retail investors alike into the junk bond market regardless of risk.


Stated differently, the major channel of monetary policy transmission that actually worked during the past seven years was the junk debt market. And that $2.6 trillion enterprise in the mispricing of risk was the primary driver of $5 trillion in domestic M&A deals and stock buybacks since the crisis.


Yellen and her cohort have no clue, however, that all of their massive money printing never really left the canyons of Wall Street, but instead inflated the mother of all financial bubbles.


So they are fixing to blow-up the joint for the third time this century.


That was plain as day when our Keynesian school marm insisted that the Third Avenue credit fund failure this past week was a one-off event—-a lone rotten apple in the barrel.
Now that is the ultimate in cluelessness.
http://assets.bwbx.io/images/iFoLShg69ejo/v1/-1x-1.png
.
http://assets.bwbx.io/images/itLuj2ldTjus/v1/-1x-1.png




http://davidstockmanscontracorner.com/sell-the-bonds-sell-the-stocks-sell-the-house-dread-the-fed/

[CosmicCowboy]

That and the junk bond financed oil frack boom. That was good for hundreds of billions more which stand a good chance of defaulting.

[Winehole23]

drill baby drill

[Winehole23]

looks like another round of deflation. where's the hyperinflation, CC?

[Winehole23]

Early on in the ZIRP & QE era the overwhelming belief from fear mongers was that those policies would inevitably result in inflation/hyper inflation as liquidity & easy money started to push more dollars to fewer resources. As such, it is somewhat ironic that one could make a reasonable argument that QE and ZIRP policies played a large role in oversupplying not only the oil and gas markets, but commodity markets in general. Along with the velocity of technological innovation we’ve seen in America’s oil fields this access to cheap capital allowed drillers to vastly increase both the number of wells drilled and the amount of oil/gas extracted from each well.

[Winehole23]

global deflationary headwinds:


The world’s most powerful central banks will be forced to tear up their plans following the carnage that has engulfed financial markets since the beginning of the year.



Investors now believe there will not be a single interest rate rise from any of the G7 group of central banks this year, while the number of expected rate cuts this year has increased from zero to six.


http://www.telegraph.co.uk/finance/economics/12154667/Major-central-banks-tear-up-interest-rate-plans-as-market-turmoil-forces-them-into-reverse.html

[Winehole23]

QE, before and after

https://pbs.twimg.com/media/Dasyh6uU8AA_5Md.jpg

[Winehole23]

Cheap credit keeps zombies afloat:

1140609853578047488

[Winehole23]

so much for the rising tide floating all boats

1140260706488639498

[Winehole23]

Nouriel Roubini reads the tea leaves regarding the next contraction:


Under these conditions, a severe enough shock could usher in a global recession, even if central banks respond rapidly. After all, in 2007-2009, the Fed and other central banks reacted aggressively to the shocks that triggered the global financial crisis, but they did not avert the “Great Recession.” Today, the Fed is starting with a benchmark policy rate of 2.25-2.5%, compared to 5.25% in September 2007 (https://www.federalreservehistory.org/essays/great_recession_of_200709). In Europe and Japan, central banks are already in negative-rate territory, and will face limits on how much further below the zero bound they can go. And with bloated balance sheets from successive rounds of quantitative easing (QE), central banks would face similar constraints if they were to return to large-scale asset purchases.

On the fiscal side, most advanced economies have even higher deficits and more public debt today than before the global financial crisis, leaving little room for stimulus spending. And, as Rosa and I argued last year, “financial-sector bailouts will be intolerable in countries with resurgent populist movements and near-insolvent governments.”
https://www.project-syndicate.org/commentary/trade-war-recession-crisis-2020-by-nouriel-roubini-2019-06

[boutons_deux]

The non-oligarchy simply can't defeat, or even contain, the oligarchy armed with $10Ts, aided and abetted by the totally corrupt Repug whore stooges, now corrupting, destroying the "administrative state", and packing the Federal judiciary with Leonard Leo's incompetent, young, right-wing extremist politicians to serve as "judges"

[Winehole23]

boutons says WE ARE DOOMED

[Winehole23]

$12T in bonds in sub zero territory. The smart money is willling to pay a premium to park its money with zero chance of a profit.

http://archive.is/zS44d

[boutons_deux]

boutons says WE ARE DOOMED

The Great Boutons is infallible

been waiting for YEARS for anybody here to show in practice how to avoid climate catastrophe or disempower the wealth-extractive oligarchy.

[Winehole23]

It's very odd you'd expect to find solutions to real world problems on a discussion board.

[CosmicCowboy]

It's very odd you'd expect to find solutions to real world problems on a discussion board.

:lmao

Especially this one.

[boutons_deux]

It's very odd you'd expect to find solutions to real world problems on a discussion board.

So many experts here, why not?

Nobody even tries, other other some silly jokes about pendulums or voting

[CosmicCowboy]

So many experts here, why not?

Nobody even tries, other some silly jokes about pendulums or voting

Others just pooping their pants and whining about fucked and unfuckable.

[Chucho]

Others just pooping their pants and whining about fucked and unfuckable.

.

Shit posting spam is "doing something".

[Winehole23]

BofA is up 5% since the anouncement. I'm not sure that this will provide a lasting bump since the fed's actions basically amount to an announcement that the economy and our financial institutions are in worse shape than most people think.Still true seven years later, the Fed just announced QE4.

So much for monetary normalization, the emergency propping up of "systemically imporant" institutions by central banks appears to be permanent.

The gold-plated socialism for banks and investors inaugurated by Obama continues under Trump. For the rest of us, there's rat race capitalism, debt peonage and fiscal austerity.

It's all worth it so banks will never have to face the consequences of fraud and bad decisions like the rest of is.





Because the flood of new government-issued debt securities that the U.S. Treasury will be issuing in the months ahead is so large, the Fed will feel compelled to “resume the organic growth of the balance sheet sooner than we thought,” in the words of Fed Chair Jerome Powell this past week. Which is to say that the Federal Reserve is getting set to restart its quantitative easing policies within the next few months.

https://blog.independent.org/2019/09/23/the-return-of-quantitative-easing/

[boutons_deux]

"government-issued debt securities"

... as we saw with earlier QEs, 90%+ of the Fed's money goes to enrich the rigged Fed's scamming owers: BigFinance.

QEs bail out Wall st, not Main st

[pgardn]

Debt is no longer a worry for the red team.
At least criticize the blue team for never thinking it was a problem.

Cant wait for the precipitous decline in debt when all the 2019 taxes have come in and we see we have grown our way out.
But, But... the jobs and the stock market. You mean the 4 jobs per poor household and paper gains.

Btw is anyone cashing in on the stock market, I’m waiting for it to fall to buy as things are too good? Isn’t that the strategy... You fools that sell too early...

[Winehole23]

1187450197523214336

[boutons_deux]

The World Economy Is Stumbling Toward Disaster

If a new recession strikes, the Trump administration will get — and deserve — much of the blame.

https://www.bloomberg.com/opinion/articles/2019-10-21/imf-growth-forecasts-world-economy-is-stumbling-toward-disaster

[SnakeBoy]

Btw is anyone cashing in on the stock market, I’m waiting for it to fall to buy as things are too good? Isn’t that the strategy... You fools that sell too early...

No such thing as selling too early. It's only fools who think they have to hit it big to get ahead. 1%-5% gains are pretty easy to get once or twice per month, sometimes weekly.

[boutons_deux]

'What Is the Fed Not Telling Us?':

Fears of Economic Instability After Central Bank Intervention Spikes

"A financial system that requires over $100B of liquidity injections every day, temporary, permanent or otherwise, has major issues."

https://www.commondreams.org/news/2019/10/27/what-fed-not-telling-us-fears-economic-instability-after-central-bank-intervention?cd-origin=rss (https://www.commondreams.org/news/2019/10/27/what-fed-not-telling-us-fears-economic-instability-after-central-bank-intervention?cd-origin=rss)

[Winehole23]

The Fed now has to lend to hedge funds directly, why?

1217248159245619200

[boutons_deux]

The Fed Protects Gamblers at the Expense of the Economy (https://www.counterpunch.org/2020/01/14/the-fed-protects-gamblers-at-the-expense-of-the-economy/)

the Fed is now pouring billions of dollars into the repo (repurchase agreements) market, in effect making risk-free loans to speculators at less than 2%.

the Fed is trapped into this speculative monetary expansion

to avoid a cascade of defaults of the sort it was facing with

the Long-Term Capital Management crisis in 1998 and

the Lehman crisis in 2008.

The repo market is a fragile house of cards

waiting for a strong wind to blow it down,

propped up by

misguided monetary policies that have forced central banks to underwrite its highly risky ventures.

https://www.counterpunch.org/2020/01/14/the-fed-protects-gamblers-at-the-expense-of-the-economy/ (https://www.counterpunch.org/2020/01/14/the-fed-protects-gamblers-at-the-expense-of-the-economy/)

[Winehole23]

The Fed now has to lend to hedge funds directly, why?

1217248159245619200Zero Hedge is out there, but so is are the circumstances. Ten years of interest rate repression and QE are bound to have caused a few distortions, like the 944 trillion in global exposure to financial derivatives.

Why is the Fed openly discussing bailing out hedge funds?

https://www.zerohedge.com/markets/944-trillion-reasons-why-fed-quietly-bailing-out-hedge-funds

[boutons_deux]

“NO LONGER TETHERED TO THE FUNDAMENTALS”:

A NASSIM TALEB PROTÉGÉ ON HOW TO PREPARE FOR THE COMING MARKET CRASH

what’s been happening and how for the last decade central banks around the world have been

warping our financial markets by keeping interest rates artificially low.

“These monetary distortions lead to this reckless reach for yields that we are all seeing,”

“Big caps, small caps, credit markets, volatility; it’s crazy. Reach for yield is everywhere.”

“When the stock market is no longer tethered to fundamentals—

that’s the distorted environment we live in, that’s just where we are—

when that happens, any price can print,” he says.

“Any price can print.

We shouldn’t be surprised by anything on the upside at this point because what’s tethering the markets?

People need yield and when they pursue yield because of the momentum that we have in the markets today, anything is possible.”

https://www.vanityfair.com/news/2020/02/nassim-taleb-protege-on-how-to-prepare-for-coming-market-crash?utm_source=nl&utm_brand=biz&utm_ca%E2%80%A6

[hater]

the stock market scam is on its last legs

instead of shooting the cancerous dog they are still pumping in worthless medicines that will only let the dog breath a few more weeks/months

then it's game over

[Winehole23]

Yves Smith tries to talk us off the ledge by pointing out the Fed maybe doesn't know what it's doing:


John Dizard in the Financial Times pointed out that the reason big banks like JP Morgan who made clear they had ample liquidity but couldn’t be bothered to provide it to the repo market was that they were making more in foreign exchange swaps.
https://www.nakedcapitalism.com/2020/02/foreign-exchange-swaps-hidden-debt-lurking-vulnerability.html

[Winehole23]

Note finally that the Bank of International Settlements has been worried about hidden foreign exchange swaps debt since at least 2017. The fact that they have not gotten to the bottom of it is a cause for concern. Opacity and hidden leverage are prescriptions for disruption or worse.

The bottom line is foreigners’ “hidden” dollar borrowings via foreign exchange swaps look to be bigger than their visible on-balance sheet borrowings. This is not a pretty picture, and among other things, means that credit rating agencies and other financial analysts have a big blind spot.

[Winehole23]

William White, former BIS guy, on ultra-low interest rates, QE and stimulus


Doubts about the effectiveness of monetary easing go back at least as far as 1936 when John Maynard Keynes wrote “If, however, we are tempted to assert that money is the drink that stimulates the system to activity, we must remind ourselves that there may be several slips between the cup and the lip.” More recently, similar concerns have been raised that unprecedented policy responses might increase uncertainty and suppress the “animal spirits” necessary to motivate sustained spending. Turning to the components of demand, consumption might also suffer if low rates of accumulation mean people must save more to meet retirement goals. Investment might also fail to respond for a whole variety of reasons.


Perhaps more importantly, there is reason to believe that the effectiveness of monetary stimulus diminishes with extended or repeated use. Lower rates induce people to borrow and to spend today what they would otherwise have spent tomorrow. The ratio of global debt (governments plus households and corporates) to GDP had in fact risen by over 50 percentage points prior to the pandemic. However, if the spending is used for unproductive purposes, as is often the case, then the buildup of debt eventually becomes burdensome and slows future spending. In short, there is a negative feedback loop, once referred to by Chairman Greenspan as “headwinds”. At first, these can be offset by ever more aggressive easing but, as the headwinds grow commensurately, monetary policy eventually ceases to work at all.
https://www.ineteconomics.org/perspectives/blog/the-full-case-against-ultra-low-and-negative-interest-rates

[Winehole23]

moral hazard, malinvestment and indebtedness pose deflationary risks



Growing ineffectiveness is a problem in itself. The ammunition to fight future battles is no longer available. But a bigger problem is that, if monetary stimulus is sustained for a long period, then undesirable side effects accumulate. The first of these is the higher debt level, which increases systemic risk in almost all states of nature. In the midst of the Great Depression, Irving Fisher sketched out how a debt/deflation process can play out with devastating consequences. As noted above, Paul Volcker shared these concerns quite recently.

However, debt accumulation is not the only unintended consequence of relying on monetary stimulus. Such policies also threaten financial stability in various ways. They pose a danger to the survival of financial institutions and to pension funds by squeezing net returns on traditional assets. Moreover, institutions subject to such threats then “reach for yield” in an attempt to compensate, often leaving themselves open to risks that they had not anticipated and have no experience of managing. A related concern is that of growing “moral hazard.” Every time a problem materializes, the central banks or regulators create another safety net to protect the exposed, which then encourages them to behave even more badly.

Similarly, unusually easy monetary conditions over long periods can threaten the effective functioning of financial markets. In recent years, we have documented: recurrent “flash crashes”; waves of Risk-On and Risk-Off behavior; persistent “anomalies” from normal price relationships; growing evidence that normal “price discovery” has been suppressed; and finally, the near-collapse of the US Treasuries market in September 2019 and March 2020. Moreover, easy monetary conditions lead to continuing increases (bubbles?) in the prices of virtually all financial assets and often to real assets (like houses and other property) as well. For a long while, these price increases can mask the other undesired consequences of easy monetary conditions but, as “fundamentals” eventually reassert themselves, a price collapse can easily follow.

Another side effect of easy monetary conditions could be a reduction in potential growth rates. The possibility of “malinvestments” and wasted resources was raised by Friedrich Hayek in the 1930s and has also been treated increasingly seriously by the BIS, OECD, and IMF in recent years. A well-functioning economy, with expanding growth potential, has ample room for companies to both exit and enter. However, there is growing evidence that easy monetary conditions discourage both processes from working effectively. In many counties, the birth and death rates of companies have in fact been falling sharply as indeed have measures of productivity growth.

Nor is this the end of the list of unintended consequences. Easy money in advanced countries spills over into emerging market countries threatening them with the same kind of distortions and exposures. Rising inequality, especially in the distribution of wealth, can have important social and political implications. Ironically, the extended reach of central bank actions could even threaten their cherished “independence”. Finally, since monetary easing in any individual (big) country generally affects the exchange rate, it invites retaliation (currency wars) and also protectionism (trade wars). None of this is desirable.
A fundamental complication is that once well embarked on this path, it is not obvious how a central bank gets off it. There is a kind of “debt trap.” Tightening policy, given high debt levels and the other unintended consequences of past easing, could trigger the very crisis the initial easing was designed to avoid. Conversely, failing to tighten invites still more unintended consequences.

The paper considers some possible scenarios leading to higher future inflation, but concludes that an excessively disinflationary outcome seems more likely. In this event, fiscal policy will have to be used more aggressively (as has been the case since the pandemic) and orderly debt restructurings should be encouraged. This might require some prior structural reforms. The OECD, the IMF, and the Group of Thirty have all recently contended that existing restructuring procedures in most countries are inadequate to deal with the many insolvencies likely to emerge in the near future.

[Winehole23]

1384239048387006465

[Winehole23]

1393557333117186048

1393562201596723200

[Winehole23]

https://pbs.twimg.com/media/E5kbx5SUYAIH3sB?format=jpg&name=medium

[Winehole23]

1235608411146006528

[Winehole23]

at current rates of interest, savers are fools

779092490796142592

[Winehole23]

Fed Chairman Powell tries to stifle inflation worries, signals start of Fed tapering "sometime this year"


The Committee remains steadfast in our oft-expressed commitment to support the economy for as long as is needed to achieve a full recovery. The changes we made last year to our Statement on Longer-Run Goals and Monetary Policy Strategy are well suited to address today's challenges.


We have said that we would continue our asset purchases at the current pace until we see substantial further progress toward our maximum employment and price stability goals, measured since last December, when we first articulated this guidance. My view is that the "substantial further progress" test has been met for inflation. There has also been clear progress toward maximum employment. At the FOMC's recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year. The intervening month has brought more progress in the form of a strong employment report for July, but also the further spread of the Delta variant. We will be carefully assessing incoming data and the evolving risks. Even after our asset purchases end, our elevated holdings of longer-term securities will continue to support accommodative financial conditions.


The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff, for which we have articulated a different and substantially more stringent test. We have said that we will continue to hold the target range for the federal funds rate at its current level until the economy reaches conditions consistent with maximum employment, and inflation has reached 2 percent and is on track to moderately exceed 2 percent for some time. We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis.


https://www.federalreserve.gov/newsevents/speech/powell20210827a.htm

[Winehole23]

Barron's Op-Ed says it's time to give the Greenspan put the heave-ho.

It makes several points I've been harping on for years: chronic instability, slow growth, malinvestment and financial suppression that punishes savers and enriches already superrich speculators


Fed policy has three key components, none of which have worked as planned. The post-2010 recovery was the weakest (https://www.wsj.com/articles/SB10000872396390444840104577553083256753076) since the Second World War; inflation constantly surprises the central bank; and markets keep rising to troubling and sometimes disastrous heights even as U.S. economic inequality gets steadily more acute.


The Fed first relies on ultra-low rates set via its longstanding open-market operations. These low, low rates are making it harder for middle-class families to save while boosting the fortunes of the ultra-rich. And while the Fed won’t own up to its part in inequality (https://www.barrons.com/articles/what-if-the-fed-worked-for-the-people-this-is-how-it-can-start-curbing-inequality-51627420203?mod=article_inline), it has set rates so low that there’s no room for error above the “zero lower bound” at which short-term rates would become negative in nominal terms, just the inflation-adjusted ones to which we’ve become all too familiar. It thus added quantitative easing to its toolkit, striding even farther off the shore and from known, safe territory.



In QE, the Fed buys trillions of Treasury and agency assets. Now, these have grown to $8.3 trillion (https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm) or about one-third of U.S. GDP. The Fed thought that all these trillions would make a major macroeconomic difference in part by giving banks cash with which to lend, thus boosting growth. However, bank lending as a percentage of GDP has gone steadily down (https://www.fdic.gov/analysis/quarterly-banking-profile/fdic-quarterly/2021-vol15-2/fdic-v15n2-1q2021.pdf) even as markets go ever upward. An important study (https://www.bis.org/publ/work680.pdf) shows that the Fed’s portfolio has had ten times more impact on equity prices than output.


The reason? The more safe assets the Fed takes out of financial markets, the greater the demand for them, the lower the rates safe issuers such as Treasury need to pay, and the more investors desperate for real returns above zero head into high-risk equity and bond markets. The Fed thought that interest on the reserves banks hold at the Fed in the course of QE would bolster traditional rate-setting operations by placing a floor under short-term rates. But the floor keeps sinking even though the Fed continues to tinker with the rate it pays banks to park funds with the Fed.


Even these fixes haven’t worked as hoped. In 2013, markets trembled so the Fed stepped still deeper into the river. It created an overnight reverse-repo program to recycle cash from banks and money-market funds. These are not small programs. Banks now hold $3.9 trillion (https://fred.stlouisfed.org/series/TOTRESNS) at the Fed and the ONRRP just took in record amounts of as much as $1.08 trillion (https://fred.stlouisfed.org/series/RRPONTSYD). Because none of this worked as hoped, the Fed just created yet another window, a Standing Repo Facility (https://www.federalreserve.gov/newsevents/pressreleases/monetary20210728b.htm).

As it set rates since 2008, bulked up QE since 2020, and established one after another market interventions, the Fed still could not achieve stable, sustained, shared prosperity. It has, though, effectively exercised the “Greenspan put (https://www.bloomberg.com/opinion/articles/2018-02-13/powell-s-fed-isn-t-about-to-end-the-greenspan-put?sref=BSO3yKhf),” setting a floor under financial markets in hopes that the trickle-down benefit of the “wealth effect” will eventually materialize. While waiting for this victory, the Fed strode so deep into uncharted waters that it has become not just the lender of last resort, once considered the sole remit of central banks in the market, but also the market-maker and even the broker-dealer of last resort. Does the Fed like getting this wet and dirty? Of course not. It wants banks to lend out its cash and knows that savings—not speculation—best ensures financial stability. It also knows that its huge portfolio distorts markets, making them far more dependent on utterances from central-bank officials than any profit-or-loss fundamental. And the Fed also knows that backing markets with billions and trillions encourages behavior that is at best unwise from yield-chasing investors.

What it doesn’t know is how to step back, turn around, and go back to the shallow waters in which its presence made a meaningful difference toward ensuring shared prosperity and financial stability.
https://www.barrons.com/articles/fed-economic-policy-powell-inflation-51631120497

[boutons_deux]

Barron's Op-Ed says it's time to give the Greenspan put the heave-ho.

It makes several points I've been harping on for years: chronic instability, slow growth, malinvestment and financial suppression that punishes savers and enriches already superrich speculators

https://www.barrons.com/articles/fed-economic-policy-powell-inflation-51631120497

The Fed pumps money into BigFinance which hoards it for the oligarchy, so 95% of growth of national wealth post-2010 went the wealthy, not to the general economy.

iow, the Fed, aka the oligarchy's ATM, is a key part of the rigging of the economy for the Capitalist oligarchy while impoverishing the non-oligarchy of Labor.

All working according to the rigging plan.

[Thread]

at current rates of interest, savers are fools

779092490796142592

- "Jerry, I'm looking for FDIC for my money. I don't see any of that here."

- Jerry's FIL - "Fargo"

[Winehole23]

This message is hidden because boutons_deux is on your ignore list (https://www.spurstalk.com/forums/profile.php?do=ignorelist).

[Thread]

This message is hidden because boutons_deux is on your ignore list (https://www.spurstalk.com/forums/profile.php?do=ignorelist).

You broke ranks once, there when mother fucker Biden hit the quarter million dead Americans mark.

lmcontrollinao!!!

[Winehole23]

This message is hidden because Thread is on your ignore list (https://www.spurstalk.com/forums/profile.php?do=ignorelist).

[Thread]

This message is hidden because Thread is on your ignore list (https://www.spurstalk.com/forums/profile.php?do=ignorelist).



I baited you into talking to me once since you put me on (Ignore). And I got nigh on 28 stacks of High Society and counting. When I get to 30 stacks of High Society I'll thread it and we shall see if you can maintain decorum.

Let us proceed...

[boutons_deux]

whine hole, stfu, nobody but you cares who you are ignoring

[Winehole23]

1438903025100152835

[Winehole23]

https://pbs.twimg.com/media/E_gFDZHVUAUDE7f?format=png&name=900x900

[Winehole23]

Fed signals tightening


The Federal Reserve provided multiple indications Wednesday that its run of ultra-easy policy since the beginning of the Covid pandemic is coming to a close, making aggressive policy moves in response to rising inflation.


For one, the central bank said it will accelerate the reduction of its monthly bond purchases.




The Fed will be buying $60 billion of bonds each month starting in January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022.


After that wraps up, in late winter or early spring, the central bank expects to start raising interest rates, which were held steady at this week’s meeting.
Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024.
https://www.cnbc.com/2021/12/15/fed-will-aggressively-dial-back-its-monthly-bond-buying-sees-three-rate-hikes-next-year.html

[SnakeBoy]

Fed signals tightening

https://www.cnbc.com/2021/12/15/fed-will-aggressively-dial-back-its-monthly-bond-buying-sees-three-rate-hikes-next-year.html


The Fed will be buying $60 billion of bonds each month starting in January

lol tightening

[Winehole23]

The Fed will be buying $60 billion of bonds each month starting in January

lol tighteningtapering.

If there are rate hikes that would be tightening.

[Winehole23]

The notion that QE and ZIRP were necessary only to muddle through a recession is a fiction. They're crutches now. Removing the QE punch bowl or raising fates would cause a politically unsustainable recession for whoever happened to be in charge.

1479115626794737668

[Winehole23]

Bad as QE was at its intended aim (stimulating economic demand; it's main effect has been to push investment into riskier asset-classes), reversing it too quickly could be really bad. The Fed's declared plan isn't too different from the BofE's, described below.


The QE programme has come to an end. The total government cash requirement is to be funded by financial markets. And, in addition, QE may begin to be unwound. This means that the Bank of England will not repurchase gilts when those it owns are redeemed. It owns 33% of all gilts right now.

What this means is, broadly speaking (and all the figures are estimates, so broadly speaking is good enough) that in 2022/23 the financial markets will have to fund £100 billion of gilt purchases and at the same time the Bank of England will withdraw over £35 million from that market. That means there will be a cash call on U.K. financial markets of around £140 billion when over the last two years there has been none, in effect.

This is a seismic change to funding. More than 6% of UK GDP is going to be required by government to be withdrawn from effective money supply. What are the consequences?

Candidly, who knows?

We can be sure that the policy is deliberately designed to push down government bond prices by increasing the number of gilts available to the market. The result will be increasing interest rates. That much is predictable.

It is also predictable that without a change in policy more than £100 billion is going to be withdrawn from financial markets over the following few years.
Apart from increasing interest rates no one can be sure what the consequence of this is. But, given that QE was always intended to push investor funds into riskier assets, and this has clearly happened, what we can reasonably expect is a reversal of this trend. There will be sales of riskier assets. In fact, those sales could be significant. The £140 billion required in the coming year has to come from somewhere within the financial system, and they do not create the money to fund this.

What this might mean is three things. First, there will be net selling markets in riskier assets.

Second, net selling markets reduce prices at the margin.

Third, markets are valued at marginal prices, meaning that the overall sense of well-being amongst those with assets will fall.

Which assets are likely to fall in value? Gilts will, of course. But so too will shares. Corporate bonds will also fall as interest rates rose. And most likely house prices will too as the stimulus has also ended there.

Summarise this, and the massive reversal of economic policy that the end of QE, rising interest rates, and QE reversal simultaneously represent look likely to create a significant fall in assets values, across the board in the UK, with the US looking likely to do much the same.

Corporate profits will fall as a result as pension deficits rise. Real investment will fall in the economy.

But what else happens? In effect, liquidity dries up. Because prices in markets are expected to fall no one wants to buy. So prices fall again. Or, alternatively, markets freeze. Both create chaotic situations. And given the intense financialisation of the UK economy, the result could be chaotic.

There could be banking crises, e.g. because of property price falls, or a stock exchange crash, or a loss of confidence simply leading to an economic downturn.

QE was done in the UK with the aim of inflating asset prices. That was always the wrong thing to do. There was always the better alternative of Green or People’s QE. But QE was done. And now the intention is to reverse it, rapidly. My point is a simple one. Bad as QE was, unwinding it rapidly could be worse and this government and the Bank of England seem unaware of that, which is really quite worrying.
https://www.taxresearch.org.uk/Blog/2022/01/28/bad-as-qe-was-unwinding-it-rapidly-could-be-worse/

[Winehole23]

In the summer of 2016, while researching his book “Kochland,” Christopher Leonard interviewed a bond trader who told him a fact that blew his mind. “He said the Federal Reserve had printed 350 years’ worth of money in about four and a half years,” Leonard said. “And that this ‘quantitative easing,’ as the Fed called it, had completely distorted America’s financial markets, widened the gap between the rich and everybody else in this country, and essentially forced banks to make riskier and riskier loans that were imperiling the entire economy.”


Read more at: https://www.kansascity.com/news/business/article257995568.html#storylink=cpy

[Winehole23]

Take the example of CALPERS, which is the huge pension fund for public retirees in California. It has billions of dollars in assets and the fund’s managers have to figure out where to invest it to earn money. Before, it could have met all its obligations by simply investing in super-safe Treasury bills. But when rates are at zero, that won’t cut it. So now we are seeing huge pension funds that used to be very conservative finding themselves having to invest in things like corporate junk debt and fracking wells – stuff that used to be the domain of risky speculators on Wall Street

[Winehole23]

A zombie company is a company that has taken on so much corporate debt that its total profits don’t even cover its interest costs, let alone the underlying debt due at the end of the loan. And we have seen a dramatic increase of zombie companies in America in recent years, all of which are the direct result of Fed policies that make this sort of behavior logical. The proliferation of zombie companies has made corporate debt markets extraordinarily fragile and unstable, very similar to the home loan market in the 2000s. The market for corporate debt in the 2010s was like the market for home loans in the 2000s. It was characterized by an almost pathological optimism, sloppy underwriting, a blind eye to risk, and a seemingly never-ending flow of new money to be lent.

[Winehole23]

At the time I called it a Chinese-style solution, but perhaps the PRC has just been copying the Fed.

1272998380814336006

1272690308334055424


When COVID hit, in March 2020, we saw a home loan-like crisis break out in the corporate debt markets. It was a financial crisis worse than the one in 2008. But the difference was that this time the Fed stepped in more rapidly and with a much larger intervention and instantly bailed out these risky corporate loans it had incentivized over the last decade. A lot of this corporate debt is in the form of leveraged loans, which get packaged and resold just like home loans used to. In 2008, there were CDOs: collateralized debt obligations. In 2020, we had CLOs: collateralized loan obligations. It’s the exact same thing. Wall Street securitizes and bundles up these corporate loans in the same way they did with mortgages. And when COVID hit, everybody knew these corporate loans would go bust, which meant the CLOs would fail, which meant that the banks that owned the CLOs would be put into terrible shape. And it would create economic carnage the government wasn’t willing to accept. And that’s exactly what started to happen in March 2020, at which point the Fed stepped in and directly bought up all this corporate junk debt and the securitized form of this junk debt in the form of the CLOs.

[Winehole23]

the problem isn't so much inflation as such as asset bubbles created by a decade plus of financial repression and malinvestment.


The Fed has had the luxury to engage in these experiments in money printing because we haven’t seen inflation. But now the bill is coming due. The Fed has tried to create growth by increasing levels of debt for households, governments, corporations; by stoking risky investments in tech stocks, third world debt, all kinds of things. It has been pumping up markets with easy money for a decade. And if it has to tighten because of rising inflation, the markets will react the way they have in the past. To speak in really plain English, it could cause the markets to crash.

[SnakeBoy]

1272690308334055424



It will go away in the 2nd half of this decade. Will be painful for some.

[Winehole23]

It will go away in the 2nd half of this decade. Will be painful for some.that's somewhat cryptic.

what will go away and how?

[SnakeBoy]

that's somewhat cryptic.

what will go away and how?

Fixed it

[Winehole23]

Fixed itfixed what?

your point is completely unclear.

[Winehole23]

It will go away in the 2nd half of this decade. Will be painful for some.does this go back to your crank theory that the EU and the PRC will implode and China will become as US vassal state?

[SnakeBoy]

does this go back to your crank theory that the EU and the PRC will implode and China will become as US vassal state?

Never said that and no

I've never heard anyone say China will become a US vassal state lol. Did you just make that up on your own?

[Winehole23]

Never said that and no

I've never heard anyone say China will become a US vassal state lol. Did you just make that up on your own?Pretty sure you predicted something of the sort last year, fine by me if you've given it up.

[SnakeBoy]

Pretty sure you predicted something of the sort last year, fine by me if you've given it up.

I said China isn't rising they have risen. They've seen their peak.

Zeihan thinks the CCP will collapse, seems a stretch to me or more likely clickbait. Even that isn't "China will become as US vassal state".

Murica is in retreat and it's a good thing. We don't need the old world.

Murica 1st :tu

[Winehole23]

I said China isn't rising they have risen. They've seen their peak.

Zeihan thinks the CCP will collapse, seems a stretch to me or more likely clickbait. Even that isn't "China will become as US vassal state".

Murica is in retreat and it's a good thing. We don't need the old world.

Murica 1st :tuYou still haven't said how you think "it [indefinite pronoun reference] will go away in the 2nd half of this decade"

[SnakeBoy]

You still haven't said how you think "it [indefinite pronoun reference] will go away in the 2nd half of this decade"

You're the one who brought "it" up. Why pretend you don't know what "it" is?

You think "it" will never go away, I don't agree. No need to get all pissy about it.

[Winehole23]

You're the one who brought "it" up. Why pretend you don't know what "it" is?

You think "it" will never go away, I don't agree. No need to get all pissy about it.I don't know which "it" you are referring to. There are many potential "its" in this thread. More descriptors are needed to clarify which one you had in mind.

It would have been so much easier to merely say what you mean than to duck and deflect again, but I guess that's just you.

[SnakeBoy]

I don't know why you're being so pissy. You're saying it will never go away and I think it will go away the 2nd half of this decade. Could it go away sooner, sure it could.

[Winehole23]

I don't know why you're being so pissy. You're saying it will never go away and I think it will go away the 2nd half of this decade. Could it go away sooner, sure it could.I still have no idea what you're talking about.

Debt bubbles?

QE?

Inflation?

Zero bound interest rates?

I don't believe I ever predicted none of these would go away, everything eventually changes, nothing is eternal.

[Winehole23]

I wouldn't be so pissy if you weren't so damn stuck on not saying what you mean.

[Winehole23]

https://pbs.twimg.com/media/FLx4e4yWYAcYqwz?format=jpg&name=medium

[Winehole23]

1491508399619534848 (https://twitter.com/RudyHavenstein/status/1491508399619534848?s=20&t=gOqx2zs2g1N7mRKp1ovfig)

[SnakeBoy]

Inflation helps it

[Winehole23]

Inflation helps itinflation helps what?

[SnakeBoy]

What you're posting about

[Winehole23]

What you're posting aboutand what do you take that to be? you're doing that thing again with the indefinite pronoun reference.

what does inflation help and how?

[ChumpDumper]

:lol boy never says anything

[CosmicCowboy]

IMHO we will never again see interest rates as low as they have been the last few years. I expect interest rates to increase up to 200 basic points over the next two years and inflation will settle at 4%-5%. Too much is already baked in. I get supplier increases every day and those won't be reversed.

[Winehole23]

IMHO we will never again see interest rates as low as they have been the last few years. I expect interest rates to increase up to 200 basic points over the next two years and inflation will settle at 4%-5%. Too much is already baked in. I get supplier increases every day and those won't be reversed.Interest rates have been artificially depressed since 2008, I don't think there's any equivalent for it in US history. The price of credit wasn't going to stay that low forever.

[CosmicCowboy]

Interest rates have been artificially depressed since 2008, I don't think there's any equivalent for it in US history. The price of credit wasn't going to stay that low forever.

And when we have 30 trillion in debt the politically easiest way out is to inflate and pay it off with devalued dollars.

And, of course, just like they are doing now, they will blame the inflation on "greedy corporations".

[SnakeBoy]

IMHO we will never again see interest rates as low as they have been the last few years. I expect interest rates to increase up to 200 basic points over the next two years and inflation will settle at 4%-5%. Too much is already baked in. I get supplier increases every day and those won't be reversed.

Interest rates were going to have to go up the 2nd half of this decade whether the Fed likes it or not. The ideal scenario would be the Fed stays dovish (200 basis points over the next 2 years is dovish) and is then forced to go all Volcker to control inflation and in doing so creates another 30 year bull bond market. Not saying that will happen but it's what I'm hoping for.

[Winehole23]

https://pbs.twimg.com/media/FNXQvvCXsAA50kw?format=jpg&name=4096x4096

[ElNono]

And when we have 30 trillion in debt the politically easiest way out is to inflate and pay it off with devalued dollars.

And, of course, just like they are doing now, they will blame the inflation on "greedy corporations".

Well, let's not forget this also liquidates the "greedy corporations" debt as well, not to mention lowering wages, so you really shouldn't rule that out entirely either.

[Winehole23]

the last ten years are an extreme outlier in terms of the price of credit. bets made on the stability of ZIRP will not end well.

1503357604189421571

[Winehole23]

Profit margins and stock buybacks are currently at an all-time high.

https://pbs.twimg.com/media/FOZhx6gVIAAUl7d?format=jpg&name=4096x4096



1508451572828844037

[Winehole23]

https://pbs.twimg.com/media/FHyuwYWXoAA0ixK?format=jpg&name=small

[CosmicCowboy]

Mortgage rates are screaming higher. They have doubled in a year. 30 year just hit 5% with no end in sight. With REIT's scooping up inventory with cash + interest rates At this rate the middle class will be renters and not buyers.

[Winehole23]

Mortgage rates are screaming higher. They have doubled in a year. 30 year just hit 5% with no end in sight. With REIT's scooping up inventory with cash + interest rates At this rate the middle class will be renters and not buyers.yep, that seems to be the plan. if you're not already rich, the American dream is dead.

[Winehole23]

Interest rates have been artificially depressed since 2008, I don't think there's any equivalent for it in US history. The price of credit wasn't going to stay that low forever.


The 10-year Treasury yield rose by 8 basis points to 2.93% at the close today, the highest since December 2018. The magic number there is 3.24%, beyond which yields are back in 2011 territory:
https://wolfstreet.com/wp-content/uploads/2022/04/US-Treasury-yield-2022-04-19_10-year.png


When yields rise, it means prices of those bonds fall, and prices fall the hardest of bonds with the longest remaining maturities.


And it’s a massacre for people who invested in what they thought was a very conservative and prudent instrument, namely a bond fund tracking long-term Treasury securities, when in fact it turned out to be a highly risky wager on long-term Treasury yields always going lower forevermore.
https://wolfstreet.com/2022/04/19/treasury-bond-massacre-mortgage-rates-hit-5-35-highest-since-2009-and-its-only-april/

[Winehole23]

The longer end of the Treasury yields, from five-year maturities on up to the 30-year yield is still weighed down by the Fed’s obese balance sheet. QE was designed to push down long-term yields, and it did that. Now QE has ended, and the yields have come up some, but not nearly enough. But QT – the kick-off is sometime after the Fed’s meeting in May – will do the opposite of QE and will remove little by little that weight and will allow long-term yields to rise further, while the short-term yields will rise with the Fed’s rate hikes. And this should make for much higher long-term yields, higher mortgage rates, and a steeper yield curve as QT gets going.

[Winehole23]

thanks for the heads-up!


The Federal Reserve warned of deteriorating liquidity conditions across key financial markets amid rising risks from the war in Ukraine, monetary tightening and high inflation in a semi-annual report published Monday.

“According to some measures, market liquidity has declined since late 2021 in the markets for recently-issued U.S. cash Treasury securities and for equity index futures,” the U.S. central bank said in its Financial Stability Report (https://www.federalreserve.gov/publications/financial-stability-report.htm).

“While the recent deterioration in liquidity has not been as extreme as in some past episodes, the risk of a sudden significant deterioration appears higher than normal,” the report said. “In addition, since the Russian invasion of Ukraine, liquidity has been somewhat strained at times in oil futures markets, while markets for some other affected commodities have been subject to notable dysfunction.”
https://www.bloomberg.com/news/articles/2022-05-09/fed-warns-of-worsening-financial-liquidity-in-stability-report

[Winehole23]

nice nutshell

the implicit federal safety net for banks (and non-bank broker-dealers,) hyperinflated credit, the carried interest loophole and interest rate arbitrage over the last 14 years have led us to where we are now

1526279170749235201

1526280328956067841

[SnakeBoy]

14 years have led us to where we are now


I'm pretty happy with where "we" were led and where "we" are tbh. I'm sorry you're having a rough time in Biden's America.

[Winehole23]

I'm pretty happy with where "we" were led and where "we" are tbh. I'm sorry you're having a rough time in Biden's America.I wasn't speaking for myself, I was speaking to the macro situation.

Big timing and towel snapping is about all you do beside shitposting

[SnakeBoy]

Fed Starts Experiment of Letting $8.9 Trillion Portfolio Shrink
https://www.bloomberg.com/news/articles/2022-06-01/fed-starts-experiment-of-letting-8-9-trillion-portfolio-shrink

The Fed is capping monthly runoff at $47.5 billion -- $30 billion for Treasuries and $17.5 billion for mortgage-backed securities -- until September. Those thresholds will then double to a combined $95 billion. That compares to a peak of $50 billion a month when the Fed performed the exercise starting in 2017.

This is going to be an interesting experiment

[Winehole23]

1541925140581285890

1541925903672004610

[Winehole23]

England nearly shit the bed, reportedly.

BOE had to save pension funds from margin calls.

1575302900871581698 (https://twitter.com/MaAndersn/status/1575302900871581698?s=20&t=fnWRGAcKjFVULoeVPoj4EQ)

[Winehole23]

nuts and bolts of the BOE's short term pension fund bailout

1575542768352759808

[Winehole23]

1575542775478595584

[BackHome]

Right know there is something like 900 billions dollars in Credit Card debt in America as the Fed raises rates the crash will be following real close.

[Winehole23]

Positioning for a pause in rate hikes?

1575834627625070593

[Winehole23]

The embedded explainer is eye-opening

1575902836613066752

[Winehole23]

Credit Swisse appears to be circling the drain. Deutsche Bank isn't doing so great either. BOE and the Fed have warned of systemic risks, the next year or two could be interesting.

[Winehole23]

after a lost decade, the hangover.

in retrospect, the Fed's unexplained repo ops in 2019 were a sign of something badly awry. Why shovel $Ts out the to the banks in just a few months?

https://upload.wikimedia.org/wikipedia/commons/5/55/Cfl423-fig1.png

https://wallstreetonparade.com/wp-content/uploads/2021/12/The-Feds-Repo-Loan-Operations-2005-through-2019.jpg

1576248886246526980

[Winehole23]

Also, when banks mistrust their counterparties, they stop lending. It would appear a liquidity problem has its nose inside the tent, and once again the exposure of banks and nonbanks to illiquid assets is a major factor.


another force is acting to drain bank liquidity – ironically, a creation of the Fed itself. The ‘reverse repo’ facility (RRP) allows intermediaries to place funds overnight at the Fed, secured against US Treasury collateral. This otherwise innocuous corner of the payments architecture is important because it provides access to the Fed’s balance sheet for non-banks, specifically the $4.5 trillion (https://www.ici.org/research/stats/mmf) money market mutual fund (MMMF) industry. Over $2.2 trillion of funds (https://www.bloomberg.com/news/articles/2022-05-23/fed-s-reverse-repo-facility-exceeds-2-trillion-for-first-time) are now parked at the Fed each evening via the RRP, the vast bulk of which comes from the MMMF sector.


MMMFs’ use of the RRP drains reserves out of the banking system, dollar for dollar. In short, it gets us to the liquidity biting point faster than QT alone. How much faster is uncertain, but demand for RRP access is growing (see chart) – and likely to keep on doing so. When interest rates are rising, cash investors switch into MMMFs because they increase their rates faster than the banks, making them more attractive. And as funds invested in MMMFs grow, so will the desire to place those funds in the Fed’s RRP.

https://www.ruffer.co.uk/en/thinking/articles/the-green-line/2022-07-the-green-line

[Winehole23]

Capitalism imploded in 2008-9. Keeping systemically important firms on a QE/ZIRP drip for 13 years has amplified fragility and deprived economies of productive investment. Rapidly rising interest rates will reveal who's swimming naked as liquidity vanishes and debt burdens grow.

https://thethreadtimes.com/zombie-capitalism-is-unravelling

[Winehole23]

price discovery can be delayed, but not forever

1576078069726859265

[Winehole23]

Credit Swisse appears to be circling the drain. Deutsche Bank isn't doing so great either. BOE and the Fed have warned of systemic risks, the next year or two could be interesting.credit default swaps

https://pbs.twimg.com/media/Fd-wodVXwAEluv7?format=jpg&name=large

[Winehole23]

thinly sourced at WSJ, but maybe something to watch out for


Pension funds adopted the so-called liability-driven investment strategy, or LDI, to address regulatory changes and help to close the gap between assets and liabilities. But the strategy faltered as interest rates surged and bond prices fell, forcing more selling and driving prices still lower. 'A vicious cycle kicks in and pension funds are selling and selling,' said Calum Mackenzie, an investment partner at pension-fund adviser Aon PLC. 'What you start to see is a death spiral'… Some of the more than $1.8 trillion worth of corporate pension plans in the U.S. are also facing margin calls."https://seekingalpha.com/article/4544182-weekly-commentary-threatening-turn

[Winehole23]

BlackRock was tapped to manage the Fed's SPVs in March of 2020 and also supervised its (then) unprecedented purchasing of corporate bonds.

https://www.cato.org/blog/feds-corporate-lending-facilities-case-pseudo-markets

1577026418525237248

[Winehole23]

Nouriel Roubini predicts a long, stagflationary recession


For a year (https://www.project-syndicate.org/commentary/mild-stagflation-is-here-and-could-persist-or-deepen-by-nouriel-roubini-2021-08) now, I have argued (https://www.project-syndicate.org/commentary/great-stagflation-has-replaced-great-moderation-by-nouriel-roubini-2022-08) that the increase in inflation would be persistent, that its causes include not only bad policies but also negative supply shocks, and that central banks’ attempt to fight it would cause a hard economic landing (https://www.project-syndicate.org/commentary/reducing-inflation-likely-to-cause-recession-by-nouriel-roubini-2022-05). When the recession (https://www.project-syndicate.org/commentary/reducing-inflation-likely-to-cause-recession-by-nouriel-roubini-2022-05) comes, I warned, it will be severe and protracted, with widespread financial distress and debt crises (https://www.project-syndicate.org/commentary/stagflationary-debt-crisis-by-nouriel-roubini-2022-06?barrier=accesspaylog). Notwithstanding their hawkish talk, central bankers, caught in a debt trap, may still wimp out (https://www.project-syndicate.org/commentary/great-stagflation-has-replaced-great-moderation-by-nouriel-roubini-2022-08) and settle for above-target inflation. Any portfolio (https://www.project-syndicate.org/commentary/inflation-will-hurt-both-stocks-and-bonds-by-nouriel-roubini-2022-01) of risky equities and less risky fixed-income bonds will lose money on the bonds, owing to higher inflation and inflation expectations.

How do these predictions stack up? First, Team Transitory clearly lost to Team Persistent in the inflation debate. On top of excessively loose monetary, fiscal, and credit policies, negative supply shocks caused price growth to surge. COVID-19 lockdowns led to supply bottlenecks, including for labor. China’s “zero-COVID” policy created even more problems for global supply chains. Russia’s invasion of Ukraine sent shockwaves through energy and other commodity markets. And the broader sanctions regime – not least the weaponization of the US dollar and other currencies – has further balkanized the global economy, with “friend-shoring” and trade and immigration restrictions accelerating the trend toward deglobalization.

Everyone now recognizes that these persistent negative supply shocks have contributed to inflation, and the European Central Bank, the Bank of England, and the US Federal Reserve have begun to acknowledge that a soft landing will be exceedingly difficult to pull off. Fed Chair Jerome Powell now speaks of a “softish landing (https://www.marketwatch.com/story/powell-says-a-softish-landing-for-u-s-economy-is-plausible-11652812959)” with at least “some pain (https://edition.cnn.com/2022/08/30/economy/fed-jerome-powell-pain-economy/index.html).” Meanwhile, a hard-landing scenario is becoming the consensus among market analysts, economists, and investors.

It is much harder to achieve a soft landing under conditions of stagflationary negative supply shocks than it is when the economy is overheating because of excessive demand. Since World War II, there has never been a case where the Fed achieved a soft landing with inflation above 5% (it is currently above 8% (https://www.bls.gov/cpi/)) and unemployment below 5% (it is currently 3.7% (https://www.bls.gov/news.release/pdf/empsit.pdf)). And if a hard landing is the baseline for the United States, it is even more likely in Europe, owing to the Russian energy shock, China’s slowdown, and the ECB falling even further behind the curve relative to the Fed.
Are we already in a recession? Not yet, but the US did report negative growth (https://www.project-syndicate.org/commentary/two-consecutive-quarters-negative-us-growth-predict-recession-since-1948-by-robert-j-barro-2022-07) in the first half of the year, and most forward-looking indicators of economic activity in advanced economies point to a sharp slowdown that will grow even worse with monetary-policy tightening. A hard landing by year’s end should be regarded as the baseline scenario.https://www.project-syndicate.org/commentary/stagflationary-debt-crisis-is-here-by-nouriel-roubini-2022-10

[Winehole23]

IMF warns of instability risks

1577525644795076608

1577525648892907520

1577525653955440640

[Winehole23]

Still true seven years later, the Fed just announced QE4.

So much for monetary normalization, the emergency propping up of "systemically important" institutions by central banks appears to be permanent.

The gold-plated socialism for banks and investors inaugurated by Obama continues under Trump. For the rest of us, there's rat race capitalism, debt peonage and fiscal austerity.

It's all worth it so banks will never have to face the consequences of fraud and bad decisions like the rest of is.




https://blog.independent.org/2019/09/23/the-return-of-quantitative-easing/it continues under Brandon, too.

until, of course, whenever we have to face the consequences and mark illiquid assets and debts to market.

[Winehole23]

"who's got the deuce in their briefcase?"

eventually, in principal and practice, you can run out of bigger fools to sell it to. when that happens, the exit is too small and failures to pay start to cascade through the economy. they used to call it panic.

[Winehole23]

CNN: Bernanke reelected Obamahttp://money.msn.com/investing/did-the-fed-just-re-elect-obama

[Winehole23]

it continues under Brandon, too.

until, of course, whenever we have to face the consequences and mark illiquid assets and debts to market.some open-end commercial real-estate funds in the UK have already gated redemptions.


So heavy was the selling that three of the UK’s largest commercial property fund managers — Schroders, which runs the the £2.7 billion UK Real Estate fund; Columbia Threadneedle (£2.3 billion Pooled Property fund), and BlackRock (£3.5 billion UK Property fun) — as well as a smaller fund run by CBRE have admitted (https://www.reuters.com/world/uk/some-uk-property-funds-defer-investor-withdrawals-2022-10-04/) that they could not meet the pace of redemptions.


In response, Schroders announced it will make some redemptions originally due on Monday this week as late as July next year. For its part, Columbia Threadneedle said volatile market conditions had forced it to switch from daily to monthly payouts. BlackRock has also imposed new restrictions on withdrawals. All told, around £9 billion of assets have been affected.


This is not the first time that volatile market conditions have forced property fund managers in the UK to gate their funds. In June 2016, in the aftermath of the Brexit vote, six commercial real estate (CRE) funds suspended redemptions. The same happened in March 2020, when the virus crisis was just beginning. At that time, 10 open-end property funds in the UK slammed their doors shut on investors, citing concerns about asset valuation. Between them they managed some £11 billion of assets.


For the moment, it is only institutional investors that have been affected by the newly gated funds. The hope is that it will stay that way and that the funds will once again be able to reopen their doors once the dust settles, as happened in 2016 and 2020.
https://www.nakedcapitalism.com/2022/10/imf-just-flagged-another-multi-trillion-dollar-threat-to-the-global-financial-system.html