Is what the Fed doing like QE?

3,231 Views | 20 Replies | Last: 3 yr ago by rathAG05
jamey
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4:54p, 3/15/23
AG
How is what the fed is doing for banks not QE again?

Basically giving banks full value over current mark to market, if I understand it right. It's worth 70 cents on the dollar and the Fed gives them a dollar

As I understand it w

We've tapered from about 9 trillion in QE to 8.4 lately with QT.

Will this not make that go back
up and work towards more inflation?
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atmtws
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In reply to jamey • 5:34p, 3/15/23
AG
From what I understand, this money will stay on the banks books to help reduce panic induced runs, and not go into circulation causing inflation to go up. But….if runs continue to happen then, we're fooked.
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jamey
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In reply to atmtws • 5:44p, 3/15/23
AG
atmtws said:
From what I understand, this money will stay on the banks books to help reduce panic induced runs, and not go into circulation causing inflation to go up. But….if runs continue to happen then, we're fooked.


I'm trying to wrap my head around why every bank would not do this. If they're made whole on long term bonds that are currently an unrealized loss, doesn't that increase liquidity?
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P.H. Dexippus
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7:16p, 3/15/23
AG
https://www.bloomberg.com/news/articles/2023-03-13/-qe-in-another-name-new-bank-backstop-could-mean-end-of-fed-qt?leadSource=uverify%20wall

Quote:
"Their new BTFP facility is QE in another name assets will grow on the Fed balance sheet which will increase reserves," Citi strategists Jabaz Mathai, Jason Williams and Alejandra Vazquez Plata wrote in a note to clients on Monday. "Although technically they are not buying securities, reserves will grow."
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jamey
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In reply to P.H. Dexippus • 8:41p, 3/15/23
AG
I wonder if we're ever going to go back to risk management being something more than if all else fails the government and tax payers will bail us out

Congress handing out money like candy on Halloween doesn't help
Hard to see this ending well, if not us for our children. Nobody is being serious with thr future in mind. It's all about now, today, not even next year.
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aggiedaniel06
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In reply to jamey • 11:06p, 3/20/23
AG
No. By definition, QE is when the Fed prints money and purchases assets.
What they have done in the last week is tap into the short term emergency lending program to stabilize the banking system.
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Stat Monitor Repairman
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12:06a, 3/21/23
If you are a bank, what incentive is there not to **** up?
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Aglaw97
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In reply to jamey • 6:25a, 3/21/23
AG
jamey said:
I wonder if we're ever going to go back to risk management being something more than if all else fails the government and tax payers will bail us out

Congress handing out money like candy on Halloween doesn't help
Hard to see this ending well, if not us for our children. Nobody is being serious with thr future in mind. It's all about now, today, not even next year.


Risk management in both the business and personal sense is not what it used to be. Right now we live in a society where the finger is often pointed at others and we should be rescued from our mistakes vs learning from them
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HumpitPuryear
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In reply to aggiedaniel06 • 7:14a, 3/21/23
AG
aggiedaniel06 said:
No. By definition, QE is when the Fed prints money and purchases assets.
What they have done in the last week is tap into the short term emergency lending program to stabilize the banking system.

But both flood the market with cash right? I know the new money is "supposed " to stay in the bank as reserves but as soon as a bank needs those reserves they will flow to the market. I also remain skeptical that banks won't use the program to increase reserves enabling non-program dollars to be used for other purposes thus indirectly putting more money into circulation. This isn't my area of expertise though. Curious to hear what our banking experts have to say.
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8:25a, 3/21/23
BlueHeeler
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3:05p, 3/21/23
AG
Yes, the Fed upped their balance sheet by 300 billion in a week. However, they are holding the sunk treasury bonds the banks have as collateral. This is all a big game. The fed knows they are going to have to slam rates back to 0 at some point soon when the recession hits. That's going to drive bond prices back up and make the crap interest rate bonds that the banks were holding go back up to par. Fed is just buying them time right now.
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500,000ags
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3:26p, 3/21/23
AG
From the beginning, the Fed should have said we are raising rates by 25bps until further notice. Less of a shock to the system. Trying to unwind all that stimulus-led inflation in 12-18 months was a bad idea.
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HumpitPuryear
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In reply to 500,000ags • 4:24p, 3/21/23
AG
500,000ags said:
From the beginning, the Fed should have said we are raising rates by 25bps until further notice. Less of a shock to the system. Trying to unwind all that stimulus-led inflation in 12-18 months was a bad idea.
Rates should have never been as low as they were. Borrowing money should have risk and interest should be a meaningful expense. Wall Street will never let rates go back up and stay at a moderate level. They can't skim from peoples' money sitting in CDs and the market actually has to perform to attract investment. As long as CDs are paying <1% its easy for Wall Street to entice money into the market and then they can play games with it. And inflation with low rates is better for the federal government than moderate interest and low inflation. So, Joe Sixpack better get used to buying Natty light instead of craft brew because powerful forces are allied that don't give a **** about him.
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BoDog
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In reply to BlueHeeler • 11:11p, 3/21/23
AG
Bonfire97 said:
Yes, the Fed upped their balance sheet by 300 billion in a week. However, they are holding the sunk treasury bonds the banks have as collateral. This is all a big game. The fed knows they are going to have to slam rates back to 0 at some point soon when the recession hits. That's going to drive bond prices back up and make the crap interest rate bonds that the banks were holding go back up to par. Fed is just buying them time right now.

Anyone else think no chance in hell rates go back to 0...?
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11:16p, 3/21/23
JSKolache
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In reply to Stat Monitor Repairman • 12:05a, 3/23/23
AG
Stat Monitor Repairman said:
If you are a bank, what incentive is there not to **** up?
Moral hazard 100%. No one should be too big to fail. If you subsidize it, you are incentivizing it. Dont feed the bears or the bears will come back. Etc etc etc. It is bad policy by any rational measure.
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lobopride
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7:29a, 3/23/23
What happens if we have a recession but still have inflation?
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7:59a, 3/23/23
500,000ags
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9:53a, 3/23/23
AG
High unemployment with high inflation is when you know you're ****ed.
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BoDog
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In reply to 500,000ags • 1:56p, 3/23/23
AG
500,000ags said:
High unemployment with high inflation is when you know you're ****ed.
and that day will arrive on or near the start of Q4.....
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rathAG05
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In reply to BoDog • 8:47p, 3/23/23
AG
BoDog said:
500,000ags said:
High unemployment with high inflation is when you know you're ****ed.
and that day will arrive on or near the start of Q4.....


Mmmk. Tell us more with your crystal ball, please.
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