The Dow, Trump and .... the Fed.

[bendog]

Taking nothing away from Trump's tweeting ability to tank the Dow for a day, or even the longterm effect his increasing with full employment a deficit budget by 25% over a recession budget. There WILL be a debt crisis, but as Trump predicts, it will be after he's gone. But the current Dow trends stem from quantitative easing.


How Long Will The Fed's Reverse-Quantitative Easing Last?
"The stock market has been going up since the credit crunch of 2007/2008 because liquidity has been pumped into the system and made the value of assets go up as the cheap credit has driven participants to seek out assets that will appreciate faster than the interest they have to pay. This is how QE (quantitative easing) saved the global economy and a lot of people’s homes and jobs.

"Now that rescue cycle is deemed over, the Federal Reserve has decided to (and has been encouraged to) reverse the QE, to get its assets and liabilities downsized. From a QE high of $4.5 trillion they have shrunk the balance sheet down to $4.1 trillion.

"It is no coincidence that this process started in earnest this January and coincides with the U.S. stock markets going into cardiac arrest or at least changing its never-ending upward trend into a serious of vicious slumps and rallies. (emphasis mine)
-------
the Fed's balance sheet:
Federal Reserve Board - Recent balance sheet trends
-----
Again from the Forbes article:

"The trouble is if the Fed is to get its balance sheet back down to 2008 levels of approximately $1 trillion at the advertised rate of $50 billion a month it will take 3-4 years of reverse-QE and ever-increasing tightening to get there."

Before the mortgage crisis, the Dow was around 14K and the Fed had about a billion in assts. The Fed started buying Treasuries and Mortgage Backed Securities in 2009 (Dec 08). The Dow cratered then at around 7200. (I can't link a user generated dow chart, but if you know how to get to yahoo, you can get your own)

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value. Again, the Fed has no real reason to fear selling at a loss because it's all paper money. But somebody may be willing to pay real money to buy a security paying 2% interest on ten thousand dollars for ... say .... nine thousand dollars.

That's not good news for the stock market, but it might be good news for the bond market

 

[jc456]

the fed didn't need to do anything. yet they did. hmmmmm

 

[mudwhistle]

the fed didn't need to do anything. yet they did. hmmmmm

They must do what the Deep State wants to keep the economy in check.
We cannot allow Trump to fix everything because that would mean it will be much more difficult for them to get rid of him.

 

[jc456]

the fed didn't need to do anything. yet they did. hmmmmm

They must do what the Deep State wants to keep the economy in check.
We cannot allow Trump to fix everything because that would mean it will much more difficult for them to get rid of him.

it's what they did to bush as well. go figure eh?

 

[mudwhistle]

the fed didn't need to do anything. yet they did. hmmmmm

They must do what the Deep State wants to keep the economy in check.
We cannot allow Trump to fix everything because that would mean it will much more difficult for them to get rid of him.

it's what they did to bush as well. go figure eh?

It's the Democrats.....fraud.
They should all be in prison.

All of the extra interest added to the debt and all of the extra interest everyone is having to pay because of these dishonest motherfuckers.

 

[bendog]

the fed didn't need to do anything. yet they did. hmmmmm

Deflation would probably improve your ability to understand life, but it'd suck for the rest of us who really don't need to experience it. And QE prevented deflation.

 

[bendog]

the fed didn't need to do anything. yet they did. hmmmmm

They must do what the Deep State wants to keep the economy in check.
We cannot allow Trump to fix everything because that would mean it will much more difficult for them to get rid of him.

it's what they did to bush as well. go figure eh?

It's the Democrats.....fraud.
They should all be in prison.

All of the extra interest added to the debt and all of the extra interest everyone is having to pay because of these dishonest motherfuckers.

W and Trump are blameless. this goes without saying.

 

[mudwhistle]

the fed didn't need to do anything. yet they did. hmmmmm

Deflation would probably improve your ability to understand life, but it'd suck for the rest of us who really don't need to experience it. And QE prevented deflation.

QE helped double the national debt in only a few years.

 

[g5000]

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value.

Christ Almighty, I warned about this very thing over five years ago: The Fed's Bond Bubble Doomsday Machine

 

[g5000]

I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist.

Heh. The End-The-Fed dipshits are never told this part. I bet that sentence draws blank stares from them.

 

[Lesh]

They don't have a clue

 

[bendog]

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value.

Christ Almighty, I warned about this very thing over five years ago: The Fed's Bond Bubble Doomsday Machine

Of course you did, and everyone in financial services wondered how the Fed could pull out the QE money without crashing the economy. But the fact is the FED is already about 15% towards pulling out the money. The economy is NOT crashing. What's happening is the IDIOTS who though the Dow would keep going up past 27K are FUCKED. That's risk.

The banks aren't panicked. Trump's bloviating because he tied himself to the Dow even though his brilliant economic performance had nothing to do with the bull market. And you posted about that too.

The point of the thread was just to show the Trumpsterhuckers that Trump's bloviating is just bullshit. The fed is not crashing the dow just to thwart him. Rather the fed is trying to raise interest rates enough so large traders aren't taking money they can borrow without any interest to buy stocks with no end in sight. That's not the fed's job. The fed prevented deflation by flooding the markets with money. That's exactly what the monetarists behind Reaganomics promised. But they also predicted that "too much" money will eventually cause inflation. I'd say it's also causing some equities to be overvalued too. Can the fed pull out 2-3 trillion without crashing the economy? It's never been tried before. Of course they never tried jacking interest rates up to 20% to kill inflation in 78-82, but it worked. Big Time.

I think they can pull it off. Ideally, we'd have a mentally stable president and a budget that was reducing federal spending in a time of peace and econ expansion. But we have Trump. Still, if the fed is sitting on a three trillion pile of bonds (MOSTLY TREASURY BONDS) CAN THEY SELL THEM. Yes they can Because those Treasuries pay lower interest than new Treasuries, so anyone can buy tenthousand dollars of treasuries for something less than tenthousand. If there's no inflation, that's not a bad investment.

But Trump's incessant spending is creating new Treasuries too. And it's not just Trump. McConnell and Ryan had a responsibility to say "no."

 

[g5000]

The point of the thread was just to show the Trumpsterhuckers that Trump's bloviating is just bullshit. The fed is not crashing the dow just to thwart him. Rather the fed is trying to raise interest rates enough so large traders aren't taking money they can borrow without any interest to buy stocks with no end in sight.

Bingo. The proverbial removing of the punch bowl.

 

[kyzr]

g5000 the question I have is: does the admin's economic policies ever get coordinated with the Feds long term strategy and policies?
1. Did the Trump personal (top rate) tax cuts to stimulate the GDP to 3% at the expense of adding $1.3T a year to the Debt make sense to the Fed?
2. If the Fed had a seat at the cabinet, what would they recommend to Trumps economic advisors? Cut spending? Can't do that, 3rd rail. Implement a Federal sales tax to get back to a balanced budget? Or something else?

p.s. really enjoyed reading the economic policy/opinions

 

[Bootney Lee Farnsworth]

Taking nothing away from Trump's tweeting ability to tank the Dow for a day, or even the longterm effect his increasing with full employment a deficit budget by 25% over a recession budget. There WILL be a debt crisis, but as Trump predicts, it will be after he's gone. But the current Dow trends stem from quantitative easing.


How Long Will The Fed's Reverse-Quantitative Easing Last?
"The stock market has been going up since the credit crunch of 2007/2008 because liquidity has been pumped into the system and made the value of assets go up as the cheap credit has driven participants to seek out assets that will appreciate faster than the interest they have to pay. This is how QE (quantitative easing) saved the global economy and a lot of people’s homes and jobs.

"Now that rescue cycle is deemed over, the Federal Reserve has decided to (and has been encouraged to) reverse the QE, to get its assets and liabilities downsized. From a QE high of $4.5 trillion they have shrunk the balance sheet down to $4.1 trillion.

"It is no coincidence that this process started in earnest this January and coincides with the U.S. stock markets going into cardiac arrest or at least changing its never-ending upward trend into a serious of vicious slumps and rallies. (emphasis mine)
-------
the Fed's balance sheet:
Federal Reserve Board - Recent balance sheet trends
-----
Again from the Forbes article:

"The trouble is if the Fed is to get its balance sheet back down to 2008 levels of approximately $1 trillion at the advertised rate of $50 billion a month it will take 3-4 years of reverse-QE and ever-increasing tightening to get there."

Before the mortgage crisis, the Dow was around 14K and the Fed had about a billion in assts. The Fed started buying Treasuries and Mortgage Backed Securities in 2009 (Dec 08). The Dow cratered then at around 7200. (I can't link a user generated dow chart, but if you know how to get to yahoo, you can get your own)

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value. Again, the Fed has no real reason to fear selling at a loss because it's all paper money. But somebody may be willing to pay real money to buy a security paying 2% interest on ten thousand dollars for ... say .... nine thousand dollars.

That's not good news for the stock market, but it might be good news for the bond market

I am still waiting on an audit of The Fed.

Any decade now.

.

 

[jc456]

the fed didn't need to do anything. yet they did. hmmmmm

Deflation would probably improve your ability to understand life, but it'd suck for the rest of us who really don't need to experience it. And QE prevented deflation.

didn't need to anything. Not a damn thing. the GDP was growing appreciably and there was no reason to interfere. Absolutely no reason. Accept for one, to kill the growth, which, well look at the stock market. how are your stocks doing? Mine thank god are ok. but it is unnecessary to engage in sell and buys just cause of these idiots.

 

[jc456]

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value.

Christ Almighty, I warned about this very thing over five years ago: The Fed's Bond Bubble Doomsday Machine

Of course you did, and everyone in financial services wondered how the Fed could pull out the QE money without crashing the economy. But the fact is the FED is already about 15% towards pulling out the money. The economy is NOT crashing. What's happening is the IDIOTS who though the Dow would keep going up past 27K are FUCKED. That's risk.

The banks aren't panicked. Trump's bloviating because he tied himself to the Dow even though his brilliant economic performance had nothing to do with the bull market. And you posted about that too.

The point of the thread was just to show the Trumpsterhuckers that Trump's bloviating is just bullshit. The fed is not crashing the dow just to thwart him. Rather the fed is trying to raise interest rates enough so large traders aren't taking money they can borrow without any interest to buy stocks with no end in sight. That's not the fed's job. The fed prevented deflation by flooding the markets with money. That's exactly what the monetarists behind Reaganomics promised. But they also predicted that "too much" money will eventually cause inflation. I'd say it's also causing some equities to be overvalued too. Can the fed pull out 2-3 trillion without crashing the economy? It's never been tried before. Of course they never tried jacking interest rates up to 20% to kill inflation in 78-82, but it worked. Big Time.

I think they can pull it off. Ideally, we'd have a mentally stable president and a budget that was reducing federal spending in a time of peace and econ expansion. But we have Trump. Still, if the fed is sitting on a three trillion pile of bonds (MOSTLY TREASURY BONDS) CAN THEY SELL THEM. Yes they can Because those Treasuries pay lower interest than new Treasuries, so anyone can buy tenthousand dollars of treasuries for something less than tenthousand. If there's no inflation, that's not a bad investment.

But Trump's incessant spending is creating new Treasuries too. And it's not just Trump. McConnell and Ryan had a responsibility to say "no."

stock market is all risk. and again, the feds did not need to interfere. accept to stop growth. demolosers greatest dream, kill the economy.

They love 2% GDP and people sucking off of their tit.

 

[Bootney Lee Farnsworth]

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value.

Christ Almighty, I warned about this very thing over five years ago: The Fed's Bond Bubble Doomsday Machine

Of course you did, and everyone in financial services wondered how the Fed could pull out the QE money without crashing the economy. But the fact is the FED is already about 15% towards pulling out the money. The economy is NOT crashing. What's happening is the IDIOTS who though the Dow would keep going up past 27K are FUCKED. That's risk.

The banks aren't panicked. Trump's bloviating because he tied himself to the Dow even though his brilliant economic performance had nothing to do with the bull market. And you posted about that too.

The point of the thread was just to show the Trumpsterhuckers that Trump's bloviating is just bullshit. The fed is not crashing the dow just to thwart him. Rather the fed is trying to raise interest rates enough so large traders aren't taking money they can borrow without any interest to buy stocks with no end in sight. That's not the fed's job. The fed prevented deflation by flooding the markets with money. That's exactly what the monetarists behind Reaganomics promised. But they also predicted that "too much" money will eventually cause inflation. I'd say it's also causing some equities to be overvalued too. Can the fed pull out 2-3 trillion without crashing the economy? It's never been tried before. Of course they never tried jacking interest rates up to 20% to kill inflation in 78-82, but it worked. Big Time.

I think they can pull it off. Ideally, we'd have a mentally stable president and a budget that was reducing federal spending in a time of peace and econ expansion. But we have Trump. Still, if the fed is sitting on a three trillion pile of bonds (MOSTLY TREASURY BONDS) CAN THEY SELL THEM. Yes they can Because those Treasuries pay lower interest than new Treasuries, so anyone can buy tenthousand dollars of treasuries for something less than tenthousand. If there's no inflation, that's not a bad investment.

But Trump's incessant spending is creating new Treasuries too. And it's not just Trump. McConnell and Ryan had a responsibility to say "no."

There's a fix to all that free-money borrowing and trading.

Let the bubble burst and let the chips fall where they may.

Why is it so hard to let idiots do their risky bullshit and live with the consequences?

But, no. We let a non-government, private entity (the Fed) fuck the rest of us over to keep little johnny dumbass trader from destroying himself.



.

 

[bendog]

I think the question is what will the Dow be when the Fed pulls out two .... or even three trillion in bonds. I believe the 700 million or so the Feds gotten off it's balance sheet mostly just reached maturity ... and ceased to exist. The Fed didn't pay actual money for them. If the fed starts selling ... it could get mighty interesting fast. If the Fed owns a security that pays 2% interest, and if the fed rate is 2.5% .... that security is worth less than its face value.

Christ Almighty, I warned about this very thing over five years ago: The Fed's Bond Bubble Doomsday Machine

Of course you did, and everyone in financial services wondered how the Fed could pull out the QE money without crashing the economy. But the fact is the FED is already about 15% towards pulling out the money. The economy is NOT crashing. What's happening is the IDIOTS who though the Dow would keep going up past 27K are FUCKED. That's risk.

The banks aren't panicked. Trump's bloviating because he tied himself to the Dow even though his brilliant economic performance had nothing to do with the bull market. And you posted about that too.

The point of the thread was just to show the Trumpsterhuckers that Trump's bloviating is just bullshit. The fed is not crashing the dow just to thwart him. Rather the fed is trying to raise interest rates enough so large traders aren't taking money they can borrow without any interest to buy stocks with no end in sight. That's not the fed's job. The fed prevented deflation by flooding the markets with money. That's exactly what the monetarists behind Reaganomics promised. But they also predicted that "too much" money will eventually cause inflation. I'd say it's also causing some equities to be overvalued too. Can the fed pull out 2-3 trillion without crashing the economy? It's never been tried before. Of course they never tried jacking interest rates up to 20% to kill inflation in 78-82, but it worked. Big Time.

I think they can pull it off. Ideally, we'd have a mentally stable president and a budget that was reducing federal spending in a time of peace and econ expansion. But we have Trump. Still, if the fed is sitting on a three trillion pile of bonds (MOSTLY TREASURY BONDS) CAN THEY SELL THEM. Yes they can Because those Treasuries pay lower interest than new Treasuries, so anyone can buy tenthousand dollars of treasuries for something less than tenthousand. If there's no inflation, that's not a bad investment.

But Trump's incessant spending is creating new Treasuries too. And it's not just Trump. McConnell and Ryan had a responsibility to say "no."

There's a fix to all that free-money borrowing and trading.

Let the bubble burst and let the chips fall where they may.

Why is it so hard to let idiots do their risky bullshit and live with the consequences?

But, no. We let a non-government, private entity (the Fed) fuck the rest of us over to keep little johnny dumbass trader from destroying himself.



.

I don't think it's that exactly. QE did just as it was planned. Before QE, at the height of the credit meltdown, there came a point where people with a dollar to led offered it in the money markets but no one offered to borrow it for a dollar and one cent. THAT is the definition of deflation. The last time it occurred in the US was 1929, and the Great Depression ensued. QE allowed people to borrow a dollar for a dollar. (this is an oversimplification but basically that's it. And fortunately people didn't lose faith that the US economy was solid. Rather people were unsure whether they should buy a stock or a bond that conceivably could be worth less tomorrow just because no one was willing to risk a dollar and one cent, even though the underlying company offering the stock was fundamentally solid)

Anyone with a 401K or IRA propbably holds 20% or more of bank stocks. We were all looking at losing it. When you speak of letting the bubble burst and living with the consequences you literally mean everyone losing their IRA or 401K

The "trick" (top hat and white rabbit) will be taking the money back out without crashing the economy. The Dow is NOT the economy. Trump (and other pols) have equated the two, but it's bullshit. The economy is people buying shit, like cars and tv, and bonds as well as stocks.

the proplem is that Trump is creating a lot of Tbills, and the Fed is also trying to sell a LOT of Tbills. And Jina is not exactly awash in extra dollars from US trade now. That is, different parts of govt are operating at cross-purposes.

And Trump is just incompetent to do a real deal with real money without bankruptcy and making his partners take a loss.