American Capitalism has Officially Changed

[Mac1958]

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

 

[EdwardBaiamonte]

what i

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

What is your point?

 

[Mac1958]

what i

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

What is your point?

Um, the thread title.

 

[EdwardBaiamonte]

what i

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

What is your point?

Um, the thread title.

Afraid to tell us how the Fed is putting free markets at risk rather than trying to preserve them????

 

[Mac1958]

what i

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

What is your point?

Um, the thread title.

Afraid to tell us how the Fed is putting free markets at risk rather than trying to preserve them????

I assumed it would be screamingly obvious. It isn't the Fed's role to jump in, buy trillions of crap securities, and then unwind them every time we need to be saved from ourselves. First the NY Fed pours in over a trillion over the last couple of years to unfreeze short term credit markets, now it's up over FIVE trillion with this.

I know that, for you guys, it's fine when Trump is in office, but that's not the Fed's mandate, regardless of the President.

The Federal Reserve is now as important to the everyday economy as the consumer. That's not free market capitalism. We should be examining why our system needs this crutch, but we're not.

 

[candycorn]

In short, we now have a Federal Reserve that is an ongoing, active, aggressive, and very influential participant in our economic system.

The Fed is going to buy ETFs. What does it mean?

The central bank will use some new tools to help stabilize markets.

www.marketwatch.com

While some of the lessons from the Meltdown remain unlearned, ONE thing we clearly DID learn was that the Fed can step in, purchase an ENORMOUS amount of assets to bail us out temporarily, and then unwind their balance sheet by selling those assets back off.

But now, with it coming in to buy huge swaths of specific ETFs, we're in all new territory. We now have a MASSIVE, all-new, and incredibly powerful tactic for buoying the economy. The variable regarding its effectiveness of this approach will be whether it has enough time to unwind its assets before it goes back in to save us by buying NEW assets.

I'll let the wingers from each end play their winger games with this, but this fundamental change in capitalism is going to cut across all party lines, so blaming the other guy is bullshit.

Very interesting perspective, and much in line with some cogitations of my own. Hopefully, this present situation will last just long enough to confront us all with the necessity of and willingness for fundamental redirection. Not long enough, and too few will be convinced. Too long, and too much damage will have been done.
This may have little to do with the 'fed', and much more to do with individual socio-political awareness.

I can tell that within the industry, the opinion is that this is the status quo going forward. No going back now.

Look, in all honesty, this could turn out to be a good thing, an improvement. A Fed that can swoop in and buy pretty much anything like this could be a handy tool.

The problem is that when we find a shiny new toy, we find a way to break it before long.

Not sure how relevant it is to your discussion but I've long held that Reagan did what he had to do to beat the Soviets. He ran up (what were at the time) huge debts which the Soviets had to match. The problem was that while capitalism could issue debt to cover the costs, Mother Russia could not....nobody was going to buy Russian bonds per say.
The problem was that when he retired, he was and still is hugely popular and the debt is rarely brought up due to the popularity. Subsequent presidents have seen this and have cared less and less about the debt. So the "good thing" Reagan did--getting rid of our competing superpower--had the ill effect of the subsequent presidents not giving a crap about the money they spent.

As for your discussion, I wonder if this is just the new norm; spend a few trillion to fix the highways and dams and bridges and spread the Internet to every corner of the country...the FED will underwrite it. Spend a few trillion to bail out every state and municipality...the FED will underwrite it.

Like with the soviets/debt scenario....there doesn't seem to be a political downside to the "I want...."/fed underwriting scenario. Here is my partisan broadside....how man TEA Partiers here do you see talking ill about the President who has spent $5T in 3 years?

 

[EdwardBaiamonte]

what i

Others are catching on to my point.

The Fed is Putting Free Markets at Risk

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

What is your point?

Um, the thread title.

Afraid to tell us how the Fed is putting free markets at risk rather than trying to preserve them????

I assumed it would be screamingly obvious. It isn't the Fed's role to jump in, buy trillions of crap securities, and then unwind them every time we need to be saved from ourselves. First the NY Fed pours in over a trillion over the last couple of years to unfreeze short term credit markets, now it's up over FIVE trillion with this.

I know that, for you guys, it's fine when Trump is in office, but that's not the Fed's mandate, regardless of the President.

The Federal Reserve is now as important to the everyday economy as the consumer. That's not free market capitalism. We should be examining why our system needs this crutch, but we're not.

you didn’t say what you imagine the feds role is if not lender of last resort during day say a pandemic. Capitalism requires money and it is not clear that that use the money impedes capitalism rather than keeps it running smoothly.

 

[Tom Paine 1949]

The OP raises an important point and the linked article is informative. It inevitably goes over the heads of people who see the world in only “Democratic vs. Republican” partisan terms. The new “Modern Monetary Theory” postulate that the state (semi-private) bank (our Federal Reserve) and treasury of the the U.S. can and should essentially create unlimited credit and fiat money to backstop American capitalism when it is in crisis — this is a dramatic move towards U.S. state capitalism.

Unlike in 2008, the purchasing of corporate credit assets probably will never be “unwound” successfully, just as U.S. budgets will probably never again be “balanced” through taxation. The problem — besides the obvious ones of “crony capitalism” and “moral hazard” — is that greater financial bailouts of ridiculously over-leveraged institutions will make the real productive efficiency of the economy and real profitability of corporations less important. This may “save” corporations and Hedge Funds and asset values, but it will have negative influence on our competiveness in world markets in the long run.

Of course the greatest U.S. (mostly internet-based) world corporations do not need funding and will continue to grow at the expense particularly of basic and small-scale industry. Because for now neither the U.S. government nor the Federal Reserve nor a divided Congress is considering planning or financing long-term strategic investments, or appropriate infrastructure and education Investments, or apparently even necessary state bankruptcy avoidance (due to party-partisan interests), and because social-democratic reforms in taxation and healthcare are also verboten, a continuing (probably dramatic) increase in inequality is inevitable.

I can’t discuss here the inevitable international ramifications this will have, nor do I have a very good idea how this new economic stage will finally end.

 

[EdwardBaiamonte]

how man TEA Partiers here do you see talking ill about the President who has spent $5T in 3 years?

None because Trump is the second coming compared to those who support the treasonous Green New Deal Second Great Depression and Communist Revolution, open borders, and free health care for entire world.

 

[Natural Citizen]

In short, we now have a Federal Reserve that is an ongoing, active, aggressive, and very influential participant in our economic system.

The Fed is going to buy ETFs. What does it mean?

The central bank will use some new tools to help stabilize markets.

www.marketwatch.com

While some of the lessons from the Meltdown remain unlearned, ONE thing we clearly DID learn was that the Fed can step in, purchase an ENORMOUS amount of assets to bail us out temporarily, and then unwind their balance sheet by selling those assets back off.

But now, with it coming in to buy huge swaths of specific ETFs, we're in all new territory. We now have a MASSIVE, all-new, and incredibly powerful tactic for buoying the economy. The variable regarding its effectiveness of this approach will be whether it has enough time to unwind its assets before it goes back in to save us by buying NEW assets.

I'll let the wingers from each end play their winger games with this, but this fundamental change in capitalism is going to cut across all party lines, so blaming the other guy is bullshit.

I told you guys they were gonna start buying ETFs two months ago...

At least they can't do anything else now without Congressional approval. All they can really do is buy singles and ETFs.

But nyooo....nobody wanna listen to Natty C. Pffft...

 

[EdwardBaiamonte]

In short, we now have a Federal Reserve that is an ongoing, active, aggressive, and very influential participant in our economic system.

It was from the day it was created. And???

 

[Mac1958]

In short, we now have a Federal Reserve that is an ongoing, active, aggressive, and very influential participant in our economic system.

It was from the day it was created. And???

You clearly don't know what's been happening. Or you're being obtuse for partisan reasons. Play with someone else.

 

[Mac1958]

The OP raises an important point and the linked article is informative. It inevitably goes over the heads of people who see the world in only “Democratic vs. Republican” partisan terms. The new “Modern Monetary Theory” postulate that the state (semi-private) bank (our Federal Reserve) and treasury of the the U.S. can and should essentially create unlimited credit and fiat money to backstop American capitalism when it is in crisis — this is a dramatic move towards U.S. state capitalism.

Unlike in 2008, the purchasing of corporate credit assets probably will never be “unwound” successfully, just as U.S. budgets will probably never again be “balanced” through taxation. The problem — besides the obvious ones of “crony capitalism” and “moral hazard” — is that greater financial bailouts of ridiculously over-leveraged institutions will make the real productive efficiency of the economy and real profitability of corporations less important. This may “save” corporations and Hedge Funds and asset values, but it will have negative influence on our competiveness in world markets in the long run.

Of course the greatest U.S. (mostly internet-based) world corporations do not need funding and will continue to grow at the expense particularly of basic and small-scale industry. Because for now neither the U.S. government nor the Federal Reserve nor a divided Congress is considering planning or financing long-term strategic investments, or appropriate infrastructure and education Investments, or apparently even necessary state bankruptcy avoidance (due to party-partisan interests), and because social-democratic reforms in taxation and healthcare are also verboten, a continuing (probably dramatic) increase in inequality is inevitable.

I can’t discuss here the inevitable international ramifications this will have, nor do I have a very good idea how this new economic stage will finally end.

Good stuff. Three points:

1. We clearly have a shiny new toy now, and while that's fine in a vacuum, the question going forward will be whether the Fed can unwind quickly enough from the LAST time it saved our butts to the NEXT time it has to save our butts. Otherwise its balance sheet becomes a joke, much like our debt. So we've now created a "Fed intervention cycle" to keep an eye on.

2. I very much agree that there is no way to know how this will play out. On one hand, we may actually have discovered a missing link within capitalism, one that runs counter to the regular business and debt cycle. On the other, we may end up becoming so dependent on it that it distorts markets (which is already happening) and becomes a debt-like behemoth.

3. As usual, when the shit hits the fan, we run around in a panic looking for the nearest band-aid -- without seriously examining why the shit hit the fan in the first place. Why do our credit markets keep freezing? Has our debt cycle become "too big to fail"? If we don't start looking seriously at this, those who are attacking capitalism will have even more ammo to work with.

 

[EdwardBaiamonte]

You clearly don't know what's been happening.

happening? Economy has been booming!! And??

 

[EdwardBaiamonte]

The OP raises an important point and the linked article is informative. It inevitably goes over the heads of people who see the world in only “Democratic vs. Republican” partisan terms. The new “Modern Monetary Theory” postulate that the state (semi-private) bank (our Federal Reserve) and treasury of the the U.S. can and should essentially create unlimited credit and fiat money to backstop American capitalism when it is in crisis — this is a dramatic move towards U.S. state capitalism.

Unlike in 2008, the purchasing of corporate credit assets probably will never be “unwound” successfully, just as U.S. budgets will probably never again be “balanced” through taxation. The problem — besides the obvious ones of “crony capitalism” and “moral hazard” — is that greater financial bailouts of ridiculously over-leveraged institutions will make the real productive efficiency of the economy and real profitability of corporations less important. This may “save” corporations and Hedge Funds and asset values, but it will have negative influence on our competiveness in world markets in the long run.

Of course the greatest U.S. (mostly internet-based) world corporations do not need funding and will continue to grow at the expense particularly of basic and small-scale industry. Because for now neither the U.S. government nor the Federal Reserve nor a divided Congress is considering planning or financing long-term strategic investments, or appropriate infrastructure and education Investments, or apparently even necessary state bankruptcy avoidance (due to party-partisan interests), and because social-democratic reforms in taxation and healthcare are also verboten, a continuing (probably dramatic) increase in inequality is inevitable.

I can’t discuss here the inevitable international ramifications this will have, nor do I have a very good idea how this new economic stage will finally end.

Good stuff. Three points:

1. We clearly have a shiny new toy now, and while that's fine in a vacuum, the question going forward will be whether the Fed can unwind quickly enough from the LAST time it saved our butts to the NEXT time it has to save our butts. Otherwise its balance sheet becomes a joke, much like our debt. So we've now created a "Fed intervention cycle" to keep an eye on.

2. I very much agree that there is no way to know how this will play out. On one hand, we may actually have discovered a missing link within capitalism, one that runs counter to the regular business and debt cycle. On the other, we may end up becoming so dependent on it that it distorts markets (which is already happening) and becomes a debt-like behemoth.

3. As usual, when the shit hits the fan, we run around in a panic looking for the nearest band-aid -- without seriously examining why the shit hit the fan in the first place. Why do our credit markets keep freezing? Has our debt cycle become "too big to fail"? If we don't start looking seriously at this, those who are attacking capitalism will have even more ammo to work with.

 

[EdwardBaiamonte]

whether the Fed can unwind quickly enough from the LAST time it saved our butts to the NEXT time it has to save our butts.

not sure what you mean? the Fed has unlimited funds regardless of balance sheet size

 

[EdwardBaiamonte]

we may end up becoming so dependent on it that it distorts markets (which is already happening) and becomes a debt-like behemoth.

so then if it distorts markets in a negative way Fed can change or reverse policy

 

[EdwardBaiamonte]

why the shit hit the fan in the first place. Why do our credit markets keep freezing? Has our debt cycle become "too big to fail"? If we don't start looking seriously at this, those who are attacking capitalism will have even more ammo to work with.

1) hit fan in this case because of Corona
2) freeze this time because of Corona
3) yes too big to fail, obviously
4) those attacking capitalism make no sense so their attacks make no sense

 

[Mac1958]

Did I call it?

Why, yes. Yes I did.

https://www.advisorperspectives.com/articles/2020/05/18/the-fed-is-putting-free-markets-at-risk?bt_ee=bWd1ApsVcZvBHWscL7ERChhzTKImuOdgO%2FKqcxorgncZPDtcmkC74JWHykPUkfWh&bt_ts=1589882731794

 

[EdwardBaiamonte]

Did I call it?
Why, yes. Yes I did.

Care to tell us what you called???