QE for Dummies

[Kushinator]

Ideally, yes, the economy is controlled from the bottom up, by individual agents. But the Fed's massive interventions interfere with that ideal.

False. The Fed has existed for over 100 years, and there is no way to deny that their presence has led to a more stable and efficient long term economy.

Now we have a stock market completely divorced from reality, since there is no safe alternative.

It's a matter of valuation. Stocks are worth more when interest rates are low... and just to preempt your rebuttal: interest rates in the developed world are naturally low due to an over-supply of capital throughout the developed world. For example:

Even when the Fed increases the Fed Funds Rate, long term interest rates continue to move lower. From late 2015 until the middle of 2019, the Fed raised the FFR. And still, long term interest rates continued to fall.

And we have inflation, which was partially caused by unprecedented money creation.

False. We have inflation because the economy is running very hot. 6% inflation is a very good problem to have when it's accompanied by 12% GDP growth. The alternative would be 0% inflation and 2% GDP growth. **** that bullshit noise.

And the Fed can't let interest rise to control inflation without crashing the stock market and real estate markets, and making the astronomical debt unpayable.

Fed policy isn't driving inflation. The only people who believe that are motivated entirely by partisanship.

Economies can't be all good all the time. The Fed has been trying to create a perpetual motion machine.

Never said they will be. However, government can help ensure market failure doesn't create a psychological blow to overall confidence. We've learned from the Great Depression. You continue to exhibit extreme ignorance with regards to this subject.

 

[Good4Nothin]

Fed policy isn't driving inflation. The only people who believe that are motivated entirely by partisanship.

You're the one who displays ignorance. If Fed policy were not related to inflation, then WHY has the Fed decided to taper bond buying? I guess you don't know that the Fed's bond buying suppresses interest rates?

Everyone knows -- except you -- that one reason for raising interest rates, or allowing them to rise, is to control inflation. That is one of the main jobs of the Fed. But somehow you didn't know.

 

[Good4Nothin]

And yeah, the Fed existed for 100 years. But it only strayed far beyond its mandate since 2008.

 

[Kushinator]

You're the one who displays ignorance. If Fed policy were not related to inflation, then WHY has the Fed decided to taper bond buying?

Because the economy is growing at a level that no longer warrants $120 billion in monthly Treasury / Agency purchases.

I guess you don't know that the Fed's bond buying suppresses interest rates?

I guess you don't understand how the Fed controls interest rates.

Everyone knows -- except you -- that one reason for raising interest rates, or allowing them to rise, is to control inflation.

Sure. But the Fed isn't going to be raising interest rates anytime soon. Furthermore, tapering of asset purchases is expected to come in the second half of 2022.

That is one of the main jobs of the Fed. But somehow you didn't know.

Are you really trying to pretend like i am the one in this conversation who is operating from a knowledge deficit?

 

[Good4Nothin]

Because the economy is growing at a level that no longer warrants $120 billion in monthly Treasury / Agency purchases.



I guess you don't understand how the Fed controls interest rates.

Sure. But the Fed isn't going to be raising interest rates anytime soon. Furthermore, tapering of asset purchases is expected to come in the second half of 2022.

Are you really trying to pretend like i am the one in this conversation who is operating from a knowledge deficit?

I don't have to pretend, it is obvious you have a serious knowledge deficit.

The Fed can raise interest rates directly, but it also does it indirectly through tapering of bond buying. The Fed's bond buying decreases supply, which raises prices, which lowers interest on bonds. Which you somehow did not know.

And tapering will begin this month.

I don't know how you could possibly be unaware of all this.

 

[Kushinator]

I don't have to pretend, it is obvious you have a serious knowledge deficit.

The Fed can raise interest rates directly, but it also does it indirectly through tapering of bond buying. The Fed's bond buying decreases supply, which raises prices, which lowers interest on bonds. Which you somehow did not know.

False. Asset purchases are a means of ensuring liquidity in fixed income markets.

And tapering will begin this month.

I misspoke. The Fed targets the second half of 2022 for net-purchases to be zero. With nGDP sitting at 12%, monthly employment growth averaging 550k, unemployment at 4.2%, etc... the Fed does not need to maintain a policy that ensures liquidity in fixed income markets.

 

[Good4Nothin]

False. Asset purchases are a means of ensuring liquidity in fixed income markets.

I misspoke. The Fed targets the second half of 2022 for net-purchases to be zero. With nGDP sitting at 12%, monthly employment growth averaging 550k, unemployment at 4.2%, etc... the Fed does not need to maintain a policy that ensures liquidity in fixed income markets.

You are not aware that a policy can have more than one effect? It is a FACT that the Fed's bond buying reduces supply and therefore increases price, and lowers interest. Guess you have a lot to learn about the financial system.

 

[Kushinator]

You are not aware that a policy can have more than one effect?

If you have a point, make it. Attacking a strawman won't work here.

It is a FACT that the Fed's bond buying reduces supply and therefore increases price, and lowers interest. Guess you have a lot to learn about the financial system.

You're still ignorant of the data. Even as the Fed raised interest rates in the past, yields across the fixed-income spectrum continued to chug downward on a long-term basis. Nothing you can respond with negates this fact. Long-term interest rates are low for reasons beyond Fed policy....

 

[Good4Nothin]

If you have a point, make it. Attacking a strawman won't work here.

You're still ignorant of the data. Even as the Fed raised interest rates in the past, yields across the fixed-income spectrum continued to chug downward on a long-term basis. Nothing you can respond with negates this fact. Long-term interest rates are low for reasons beyond Fed policy....

As the Fed tapers, interest rates will gradually rise.

 

[Kushinator]

As the Fed tapers, interest rates will gradually rise.

Doubtful. Furthermore, we know that the EFFR will still be anchored close to zero regardless of whether the Fed stops purchasing Treasury and Agency debt.

And as i've already shown you, when the Fed does decide to raise rates, we still see long-term fixed income yields across the spectrum continue to move down. It's been going on for more than 30 years.

 

[GummyVitamins]

Yeah. Someone with a PhD(c), MSc has no chance of grasping anti-vaxxer spam.

College credits are meaningless without common sense and judgement. While it's appreciated that your post is not screeching racism as per their usual tendencies this thread is about quotative easing.

 

[Good4Nothin]

College credits are meaningless without common sense and judgement.

And you think someone without common sense or judgement can get through a doctoral program?

 

[GummyVitamins]

And you think someone without common sense or judgement can get through a doctoral program?

Yes.

 

[Good4Nothin]

Yes.

A person without common sense and judgement would not even be able to find their classrooms. Let alone design, run and analyze experiments. And most importantly -- be nice to their research advisor.

Being a graduate student really tested my political skills, and how can anyone have political skills without common sense or judgement?

And statistics are probably one of the most confusing things ever invented. Try becoming skilled at statistics if you don't have any common sense or judgement.

All that said -- I have seen plenty of stupid ideas proudly held by PhDs. No more than the general public though.

 

[Kushinator]

this thread is about quotative easing.

Yes....

A less blunt tool for ensuring market liquidity during times of uncertainty. NOBODY other than a few speculators stand to gain from allowing credit markets to temporarily freeze up in the wake of a systemic event. The Fed does not intervene to help the stock market... sure, there are policies that can lead to higher valuations overall, but the Fed isn't looking to juice markets in some CT driven fantasy where a group full of cigar-smoking white men divvy up the spoils among themselves.

When the Fed does intervene, it's because a shock to the country / world has altered psychology to the point where credit markets are unable to function on a legal basis. That's not to say they shouldn't be able to intervene in other markets... but more in they are far too busy dealing with the macroeconomy much less trying to weave a side hustle aimed at enriching the cabal.

 

[Good4Nothin]

Yes....

A less blunt tool for ensuring market liquidity during times of uncertainty. NOBODY other than a few speculators stand to gain from allowing credit markets to temporarily freeze up in the wake of a systemic event. The Fed does not intervene to help the stock market... sure, there are policies that can lead to higher valuations overall, but the Fed isn't looking to juice markets in some CT driven fantasy where a group full of cigar-smoking white men divvy up the spoils among themselves.

When the Fed does intervene, it's because a shock to the country / world has altered psychology to the point where credit markets are unable to function on a legal basis. That's not to say they shouldn't be able to intervene in other markets... but more in they are far too busy dealing with the macroeconomy much less trying to weave a side hustle aimed at enriching the cabal.

Powell has EXPLICITLY STATED that he intends to support the stock market. Just watch -- any signs of a real stock market correction and he will halt the tapering.

 

[Kushinator]

Powell has EXPLICITLY STATED that he intends to support the stock market.

Why not provide a quote to go with that claim?

Just watch -- any signs of a real stock market correction and he will halt the tapering.

Bookmarked for future reference.

 

[ecofarm]

College credits are meaningless without common sense and judgement. While it's appreciated that your post is not screeching racism as per their usual tendencies this thread is about quotative easing.

Trying so hard. Pathetic.

 

[GummyVitamins]

A person without common sense and judgement would not even be able to find their classrooms. Let alone design, run and analyze experiments. And most importantly -- be nice to their research advisor

How do you explain the anti-vaxxor doctors that EcoFarm was complaining about?

 

[Good4Nothin]

How do you explain the anti-vaxxor doctors that EcoFarm was complaining about?

Many medical experts think the new covid vaccines could be unsafe. That doesn't mean they are against all vaccines.

 

[Good4Nothin]

Why not provide a quote to go with that claim?

"The Federal Reserve's ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions"

 

[Kushinator]

"The Federal Reserve's ongoing purchases and holdings of securities will continue to foster smooth market functioning and accommodative financial conditions"

That statement doesn't support this claim:

Powell has EXPLICITLY STATED that he intends to support the stock market.

 

[StillBallin75]

This is what some people mean when they say "I did my own research and came to my own conclusions."

And then you wonder why people with actual expertise on those issues call you out.

 

[Good4Nothin]

That statement doesn't support this claim:

You're kidding, right? "Smooth market functioning" means no crashes. So Powell wants to prevent stock market crashes. I think you just hate admitting when you are WRONG.

 

[Kushinator]

You're kidding, right? "Smooth market functioning" means no crashes.

He's not talking about the stock market lol.

So Powell wants to prevent stock market crashes.

I'm sure he doesn't want equity markets to crash, but Fed policy is not directed towards the stock market.

I think you just hate admitting when you are WRONG.

You have no idea what you're talking about, and this thread is a testament to your partisan ignorance.