Results 1 to 21 of 21

Thread: Why did the Federal Reserve inject half a trillion dollars into the financial system?

  1. #1

    Why did the Federal Reserve inject half a trillion dollars into the financial system?

    https://www.nbcnews.com/business/eco...FD-AYUFEfIOcq8
    Why did the Federal Reserve inject half a trillion dollars into the financial system?

    “The declines in the stock market are big enough and deep enough that people are going to start pulling back on spending," said one economist.



    Federal Reserve Chairman Jerome Powell gives a press briefing after the surprise announcement the Fed will cut interest rates, on March 3, 2020.Eric Baradat / AFP - Getty Images







    March 12, 2020, 3:47 PM EDT
    By Martha C. White
    Wall Street briefly pared its losses on Thursday as investors reacted to the Federal Reserve’s announcement that it would dramatically increase liquidity by injecting as much as $1.5 trillion into the economy with an unprecedented series of asset purchases.
    Previously, the White House’s Europe travel ban and a cascade of headlines about the spread of the coronavirus in the United States had led to the unprecedented second weekly triggering of the market’s “circuit breaker” to halt trading for 15 minutes a few minutes into the trading day.





    While the travel, hospitality and energy sectors have so far been on the front lines of the coronavirus pandemic, analysts said the flight out of stocks reflecting a growing concern that a much wider swath of the American economy will be hurt, even with aggressive monetary policy moves.
    The New York Fed said in a statement it was expanding its purchases of Treasuries to include longer-term notes, bills and other instruments as a result of the “highly unusual disruptions in Treasury financing markets” as a result of the virus. This pivot marks a departure from the more limited liquidity measures in which the central bank had previously engaged, such as backstopping the overnight lending repo market.
    Still, the Fed’s interventions can only do so much to hedge against the uncertainty sweeping the market, said Scott Wren, senior global market strategist at the Wells Fargo Investment Institute. “There aren’t too many good answers. It’s all really revolving around the virus,” he said. “I think the market’s pricing in a lot of getting-worse kind of news.”
    Mark Zandi, chief economist at Moody’s Analytics, said investor anxiety is driven by market fears combined with unprecedented headlines such as the NBA canceling the rest of its season and actor Tom Hanks announcing that he and his wife had tested positive for the virus.




    “A couple more days like yesterday in the stock market could do it. It looks pretty ugly. I’m sure that’s really starting to spook people. It‘ll be hard to discern what eventually causes people to run for the bunker,” he said. “It’s not just one of those things, but it’s a flood of those things.”
    Recommended



    CORONAVIRUSMarkets will 'bounce back very big,' says Trump as Wall Street continues ugly week


    Zandi said the beleaguered retail sector could be the next shoe to drop, and the next casualties could be the media and entertainment industries, pointing out the mounting announcements of canceled or postponed sporting events, concerts and festivals. “Retail will start getting hit. The declines in the stock market are big enough and deep enough that people are going to start pulling back on spending, particularly Baby Boomers,” he said.
    “We’re trying to watch consumer spending. I think that’s where it’s going to show up first,” Wren said.
    To date, analysts characterized the response from lawmakers as inadequate — another factor injecting uncertainty into the market, even as the major indices moderated their earlier losses falling the New York Fed’s announcement.




    Some criticized what they saw as a slapdash response from the Executive Branch. “A payroll tax idea was floated by President Donald Trump, and I think he caught a lot of people, even in his own administration, off guard because there was no plan in place. I think investors have taken his comments as a sign that he’s shooting from the hip,” said Mitchell Goldberg, president of ClientFirst Strategy.
    “Last night’s speech was an opportunity the president failed to take,” Zandi said, noting Trump's lack of specificity. “It didn’t give a sense that they were thought through at all.”
    Investing experts expressed dim hope for getting fiscal stimulus and support for workers and small businesses through a divided Congress in short order. “There’s somewhat of a lack of support on both sides of the aisle for some kind of fiscal stimulus. By the time we actually get it… it’ll come in later than when it really needed to,” Wren said. “The uncertainty over the virus, the uncertainty over the fiscal stimulus, oil down to around $30 — those are three key things that are driving things and right now there’s not a lot of positive news.”
    In the U.S., “The lack of testing in the early stages of the outbreak means that cases will continue to rise sharply,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a client note. Shepherdson predicted that existing European containment measures would be deemed inadequate and that more drastic restrictions on the movement of people within and between countries would be undertaken.




    Some are starting to suspect that the U.S. will be unable to avoid implementing similar measures, in spite of the economic pain they will cause.
    “It’s going to be very difficult for businesses to maintain productivity under these circumstances. You can't have these measures without impacting the economy and I think people are going to have to accept that we’re taking an economic hit,” Goldberg said.

    Martha C. White
    Martha C. White is an NBC News contributor who writes about business, finance and the economy.

















  2. Remove this section of ads by registering.
  3. #2
    Why not? Prop up malinvestment, more money for their Wall St. cronies, further concentrate wealth at the top. What’s not to like?
    "Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
    "Beware the Military-Industrial-Financial-Corporate-Internet-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
    "Debt is the drug, Wall St. Banksters are the dealers, and politicians are the addicts." - B4L
    "Totally free immigration? I've never taken that position. I believe in national sovereignty." - Ron Paul
    They are what they hate.” - B4L


    The views and opinions expressed here are solely my own, and do not represent this forum or any other entities or persons.

  4. #3
    End the FED.

    End the Crony Capitalist Orange Socialist.
    Quote Originally Posted by Swordsmyth View Post
    You only show up to attack Trump when he is wrong
    Make America the Land of the Free & the Home of the Brave again

  5. #4
    Because they want all their crony friends on Wall St. to get more money.
    "Perhaps one of the most important accomplishments of my administration is minding my own business."

    Calvin Coolidge

  6. #5
    Banks must maintain their 10% (iirc) reserve requirement to not be technically insolvent, under the fractional reserve system. Cash is a form of reserves. If cash is flying out the door of banks (and it likely is for various reasons) it's drawing down their required reserves into the danger zone. Buying bonds via QE and/or repo operations keeps the bank's reserves at the required level to not be technically insolvent.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    But now you can't talk to people because of "social distancing"....brought to you by shills and politicians.

  7. #6
    The rebound from all this stimulus (and more to come) is going to be stupendous! the greatest most spectacular rebound in the history of mankind.
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

  8. #7
    This needs to be said, again and again...

    Last edited by Marenco; 03-12-2020 at 11:06 PM.
    “Conformity is the jailer of freedom and the enemy of growth.'' - JFK

    “I love agitation and investigation and glory in defending unpopular truth against popular error.” - James A. Garfield

  9. #8
    Quote Originally Posted by devil21 View Post
    Banks must maintain their 10% (iirc) reserve requirement to not be technically insolvent, under the fractional reserve system. Cash is a form of reserves. If cash is flying out the door of banks (and it likely is for various reasons) it's drawing down their required reserves into the danger zone. Buying bonds via QE and/or repo operations keeps the bank's reserves at the required level to not be technically insolvent.
    Based on bond yields, there should be more than enough demand for bonds, at least during the day. No telling what the vampires are doing overnight.
    "Foreign aid is taking money from the poor people of a rich country, and giving it to the rich people of a poor country." - Ron Paul
    "Beware the Military-Industrial-Financial-Corporate-Internet-Media-Government Complex." - B4L update of General Dwight D. Eisenhower
    "Debt is the drug, Wall St. Banksters are the dealers, and politicians are the addicts." - B4L
    "Totally free immigration? I've never taken that position. I believe in national sovereignty." - Ron Paul
    They are what they hate.” - B4L


    The views and opinions expressed here are solely my own, and do not represent this forum or any other entities or persons.



  10. Remove this section of ads by registering.
  11. #9
    Why did the Federal Reserve inject half a trillion dollars into the financial system?
    Why not? Shrug.
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  12. #10
    Quote Originally Posted by Brian4Liberty View Post
    Based on bond yields, there should be more than enough demand for bonds, at least during the day. No telling what the vampires are doing overnight.
    There's this which is interesting.

    https://www.msn.com/en-us/money/mark...cid=spartandhp

    These stocks sank the most in market's rout
    Coronavirus-induced market mayhem has pushed so much liquidity out of U.S. Treasuries that the true value of more than $50 trillion in assets around the globe is in doubt.
    Yields in the world’s largest debt market have been on a mind-bending, three-week roller-coaster ride. At one point, the entire U.S. yield curve was below 1% for the first time ever. But this week rates have jumped from Monday’s all-time lows even though fear of the virus has intensified, and U.S. stocks sank into a bear market Wednesday. The biggest oil-price plunge since 1991 also stirred chaos this week.
    This volatility is happening as trading-platform order books thin out to a degree last seen during the 2008 financial crisis, making it harder to use Treasuries as a gauge of investor anxiety.
    And that’s not just a problem for the bond market’s elite since rates on everything from mortgages to municipal bonds and emerging-market debt are pushed and pulled by U.S. yields.


    “Treasuries are the risk-free benchmark that anchors the over-$50 trillion in global dollar-denominated fixed-income securities,” said Joshua Younger, head of U.S. interest rate derivatives strategy at JPMorgan Chase & Co.
    “The level of volatility and lack of clarity in Treasuries makes it much harder to make sense of the value of all other assets,” added Younger, who has an astrophysics Ph.D. from Harvard University. “It can create a self-perpetuating flow of expectations that is not really reflective of financial markets and the true level of risk aversion.”
    One key gauge of Treasury liquidity -- market depth, or the ability to trade without substantially moving prices -- has plunged to levels last seen during the 2008 financial crisis, according to data compiled by JPMorgan. That liquidity shortfall, JPMorgan says, is most profound in long-term Treasuries.

    The ease of transacting in Treasuries is important for regulators as well. Liquidity drew greater scrutiny after Oct. 15, 2014, when Treasuries convulsed with no apparent trigger in what was dubbed a flash rally.
    Following that mysterious move, the Financial Industry Regulatory Authority began collecting transactions data in 2017 for regulators. Just this week, Finra for the first time began releasing aggregate weekly statistics to the public.




    So, somewhere within Finra, perhaps the website we can see some data for the first time that was just released last week.

    © Bloomberg Costs Soar
    Amid the current liquidity shortage, the cost to trade Treasuries is spiking. In the interdealer market, about 66% of 30-year bond trades are taking place at wider-than-average bid/ask spreads, or the difference between prices to buy and sell, JPMorgan data show.
    All that said, even though liquidity is scant, it’s still possible to cash out of Treasuries. Such selling could partly explain why yields have risen for two days.

    Treasuries are the “only product with any semblance of liquidity,” said Bill Finan, senior managing trader at Columbia Threadneedle. “So to hedge, however inefficient the hedge, you sell rates.”
    For Todd Colvin, senior vice president at Ambrosino Brothers, what has transpired since the beginning of March in the Treasury market is worse than what he experienced after Long-Term Capital Management blew up in the 1990s, requiring a bailout orchestrated by the Federal Reserve.
    The hedge fund lost $4 billion in 1998 after Russia’s default prompted investors to shun corporate and mortgage-backed bonds and buy less risky, more easily traded government securities. The carnage drove yields on 30-year Treasuries to a 1990s low of 4.72% in October 1998, down from a 1997 peak of 7.17%.
    This week, a Treasury rally on Monday produced the biggest intraday decline in 30-year yields since at least October 1998, when Bloomberg began recording daily highs and lows. The rate fell as much as 59 basis points to a record low 0.699%, its first-ever breach of 1%. Of the 10 steepest intraday declines, one occurred last week and four were in 2008 or 2009.
    The 30-year yield, which sits around 1.24% Thursday, is down from this year’s high of 2.42% set in early January. The 10-year yield is at 0.74%, down from its 2020 peak of 1.94%.
    The bond market was far smaller before the turn of the century. America’s debt pile has grown to nearly $17 trillion from about $2 trillion in 1990. Some think that can feed volatility.
    “The ability for markets to move is greater because the size of the market is much bigger now,” Colvin said.

    © Bloomberg Bigger swings coming in market that is multiples of its past size
    And back in the 1990s markets weren’t highly electronic like they are now. Back in those days, what happened in other markets around the globe didn’t hit as close to home. That’s changed with globalization.
    Today, investors and economists are struggling to figure out the path of the global economy as well as monetary and fiscal policy amid the spread of the deadly virus. Coupled with the worst trading conditions since the great recession a decade ago, pricing Treasuries has become a nightmare.
    “In a crisis you’re going to sell what you have, not what you want to,” said Priya Misra, rates strategist at TD Securities. “This is not a normal functioning market.”
    --With assistance from Stephen Spratt, Emily Barrett and Elizabeth Stanton.
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

  13. #11
    Because they can.
    "The journalist is one who separates the wheat from the chaff, and then prints the chaff." - Adlai Stevenson

    “I tell you that virtue does not come from money: but from virtue comes money and all other good things to man, both to the individual and to the state.” - Socrates

  14. #12
    Finra website:

    https://www.finra.org/#/
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

  15. #13
    Per registered decision, member has been banned for violating community standards as interpreted by TheTexan (respect his authoritah) as authorized by Brian4Liberty Ruling

    May God have mercy on his atheist, police-hating, non-voting, anarchist soul.
    Last edited by Voluntarist; 04-16-2020 at 12:08 PM.
    There exists in the world, a desperate need for conspiracies … otherwise, what are the libertarians going to have to talk about

  16. #14
    Quote Originally Posted by Voluntarist View Post
    Sorry, I can't accept such complacency. Surely a country as great as the United States of America could have pumped ten times that amount into the economy (and should have, just to illustrate its MAGAnificence). No wonder our great President is so upset with the Fed.
    Agreed on all points. Half a trillion? We can do better. Make it 10, 20, 100 trillion. And stock prices will go through the roof!!!
    It's all about taking action and not being lazy. So you do the work, whether it's fitness or whatever. It's about getting up, motivating yourself and just doing it.
    - Kim Kardashian

    Donald Trump / Rand Paul (Vice Pres) 2016!!!!

  17. #15
    Per registered decision, member has been banned for violating community standards as interpreted by TheTexan (respect his authoritah) as authorized by Brian4Liberty Ruling

    May God have mercy on his atheist, police-hating, non-voting, anarchist soul.
    Last edited by Voluntarist; 04-16-2020 at 12:09 PM.
    There exists in the world, a desperate need for conspiracies … otherwise, what are the libertarians going to have to talk about

  18. #16
    Quote Originally Posted by RonZeplin View Post
    End the FED.
    GOPA supporters are not going to appreciate such a comment.

    “The Federal Reserve must FINALLY lower the Fed Rate to something comparable to their competitor Central Banks,” Trump wrote in a tweet that called out Fed Chair Jerome Powell by name.
    “Jay Powell and group are putting us at a decided economic & physiological disadvantage. Should never have been this way. Also, STIMULATE!



  19. Remove this section of ads by registering.
  20. #17
    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks
    + rep
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

  21. #18
    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

    ROTFL!

    I'd +rep you if I could.
    Chris

    "Government ... does not exist of necessity, but rather by virtue of a tragic, almost comical combination of klutzy, opportunistic terrorism against sitting ducks whom it pretends to shelter, plus our childish phobia of responsibility, praying to be exempted from the hard reality of life on life's terms." Wolf DeVoon

    "...Make America Great Again. I'm interested in making American FREE again. Then the greatness will come automatically."Ron Paul

  22. #19
    There's no problem that Helicopter Money won't solve.


    neoSocialism
    Last edited by RonZeplin; 03-14-2020 at 01:59 PM.
    Quote Originally Posted by Swordsmyth View Post
    You only show up to attack Trump when he is wrong
    Make America the Land of the Free & the Home of the Brave again

  23. #20
    Quote Originally Posted by RonZeplin View Post
    There's no problem that Helicopter Money won't solve.


    neoSocialism
    Uncle Sugar’s manna from the heavens! Praise be to Uncle Sugar!

    Over a trillion a year (that we know about anyway) in deficit spending keeping this bubble from bursting. Thanks for keeping the economy going great and choogling along Uncle Sugar! We are all on the dole now.

  24. #21
    Quote Originally Posted by Brian4Liberty View Post
    Based on bond yields, there should be more than enough demand for bonds, at least during the day. No telling what the vampires are doing overnight.
    Why would there be demand for bonds that yield next to nothing? They become little more than a day-trading vehicle if there's no yield to earn by holding. Tax receipts pay the yield to bondholders. The economy is slowly shutting down if we stay on the current trajectory, which means greatly reduced tax receipts at some point in the near future. And especially since this "employer paid leave bill" will probably be enacted, the response from the private sector will be to cut employees instead of paying them to sit at home indefinitely after the first 2 weeks. Long story short, bonds quickly become next-to-worthless and pointless to hold since there's no labor/taxation backing them (the "full faith and credit") and no yield to earn by holding them. They go from safe haven status to worthless, quickly.

    That doesn't even take into account the prospect of what helicopter money would do to the FRN, which are basically created out of the issuance of bonds at the Fed/Treasury level. FRN=worthless, bonds backing them=worthless.
    "Let it not be said that we did nothing." - Ron Paul

    The entire internet is the domain of paid shills and bots. If you don't know this by now....

    Israel, under control of the Crown and, ultimately, the Vatican, own the USA. If you don't know this by now....

    Talk to people about liberty. You won't find it on websites, you won't find it in politicians.

    But now you can't talk to people because of "social distancing"....brought to you by shills and politicians.



Similar Threads

  1. Replies: 347
    Last Post: 07-10-2012, 03:38 PM
  2. Replies: 3
    Last Post: 04-22-2009, 11:41 PM
  3. Replies: 0
    Last Post: 02-05-2009, 12:22 PM
  4. Bad Debt Plan May Cost Up to Half a Trillion Dollars
    By wirenut in forum Economy & Markets
    Replies: 3
    Last Post: 09-18-2008, 09:24 PM
  5. Replies: 1
    Last Post: 07-31-2008, 07:00 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •