What do you think of central bank policies since the 2008 financial crisis, mainly quantitative easing (QE)?
My view is that these policies are approximately correct and that most critics simply don't understand how the monetary system works, although I don't claim to be an expert either.
QE as I understand is basically the same thing that central banks normally do, except instead of buying short-term bonds to influence short-term interest rates, the central bank buys long-term bonds to influence long-term interest rates. Another difference is that even non-government bonds are being purchased.
And why do this? Here's one explanation I like but don't yet 100% understand. The natural interest rate is now much closer to zero than before for various reasons including demographics and inequality, therefore the central bank doesn't have room to deal with recessions. If the correct policy response is to drop the interest rate by 5 percentage points but it's currently set to 2%, you have to do QE.
Result; gold and silver both drop. What the Hell. These comments should send everyone running for PMs. They are adding institutions to help prop up a failing system while keeping their foot on the inflationary gas pedal.
In addition, the Fed said it would continue buying $120 billion of asset.
icahn not happy about the bubbles
http://www.cnbc.com/2015/09/28/5-things-that-keep-carl-icahn-up-at-night.html
"God knows where this is going. It's very dangerous and could be disastrous,"
http://www.reuters.com/article/2015/09/29/us-icahn-fed-idUSKCN0RT09120150929
Ladapes and gentleapes, a lot of names are fast becoming common in the sub, so I thought to go over something with you guys. Something which these names were part of. It was something bad, and they're still in it.
EDIT 3: There's no TL;DR. It's just a 3mins read. If you a retarded smooth-brained crayon-muncher you should be able to read it in 5mins.
Let's go back to the 2008 financial crisis. Bear Stearns, one of the big boys of wall street fell. Why did BS fall? Simply put, BS had a lot of bad deals in their books. BS had a lot of 'toxic real estate assets' that no one wanted to touch with a 10ft pole. JP Morgan bought Bear Sterns for $2 a share. They wouldn't have done it if the government hadn't sent in $30b of taxpayer money to support the deal.
But why exactly did Bear Stearns accumulate such bad deal, that no bank wanted to touch? Money. Greed. BS wrote so many real estate deals, they became stupidly retarded and believed prices only go up. Everyone was either buying, building or selling houses. It was a money printing machine. You need a home, they write you a deal, no questions asked. No good job, no steady income? no problem, BS would write you a deal and get you a house. When housing prices fell, they were left holding the bag, their ballsack was down. Everyone could see it, and no one wanted to touch it. Oh, I just remembered the greedy Lehman Brothers. They were also holding bad bad real estate assets no one wanted. It was so bad one option was for the government to buy all the houses and literally set them on fire. House inflation. They can easily raise interest rates to keep up with money printing, but there's no remedy for houses no one wants to buy. Lehman Brothers stock price fell so fast, then CEO said it was a short and destroy attack. Now, keep this in mind, while we fast forward to the present.
It's 2021, HFs are making lots of money shorting stocks, together with their accomplices. It's so profitable they have forgotten they can lose it all. They've gotten greedy. Same mistake Lehman Brothers, Bear Stearns made.
There's something not being talked about much. A financial instrument that played a big role in destroying the market.
Let's go back to 2008. Remember the role CDOs played? The instrument that allowed banks make money from debt obligations. They now call it Bespoke Tranche Opportunity. Stay with me, we'll see why this is important.
The overall volume of CDOs on bespoke portfolios rose rapidly in the early
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Given that this will probably explode in the coming months with the EU and US are having low-inflation and lower growth, so the temptation of policy makers and politicians to intervene in Monetary policy, especially in the QE and Zero Interest Rate realm (but weirdly not increasing the inflation targeting to 4% in the Euro zone).
Personally I think the zero-interest rate threatens to create zombie companies that will hang around too long, perhaps when they do pop reinstate zero-interest rates so zombies can live longer, a cycle of useless companies being kept around (look at the retail apocalypse) while QE's drawbacks have never manifested.
Beginning Monday, January 10, 2022, Federal Reserve Bank of New York staff will release a four-part series on its Liberty Street Economics blog about the Federal Reserve’s monetary policy implementation framework. One post in the series will go live each day between January 10 and January 13 at 7:00am EST.
The purpose of this series is to help explain how the Federal Reserve implements monetary policy today. This series is also a follow up to a speech by the New York Fed’s Lorie Logan, Manager of the System Open Market Account, last fall: Monetary Policy Implementation: Adapting to a New Environment. The blog series aims to clarify:
- How the Fed’s approach to keeping its key rate—the effective federal funds rate (EFFR)—within its target range has changed since the 2008 global financial crisis;
- The role of the Fed’s key policy implementation tools—the interest on reserve balances (IORB) and the overnight reverse repurchase (ON RRP) agreement facility—in supporting the current framework;
- How and why “technical adjustments” to the IORB and ON RRP rates are sometimes used to steer the EFFR without changing the Fed’s monetary policy stance; and,
- How the Fed’s new backstop facility announced last year—the domestic standing repurchase agreement (repo) facility—works to support control over the federal funds rate on occasions when money market pressures unexpectedly emerge.
Authors are: Gara Afonso, Lorie Logan, Antoine Martin, William Riordan, and Patricia Zobel.
Press Call on the Monetary Policy Implementation Framework Series:
An educational deep background press call will take place on Thursday, January 13 at 2:30pm EST to provide further context on the series. Journalists interested in participating should RSVP to Betsy Bourassa and Mariah Measey at Betsy.Bourassa@ny.frb.org **a
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