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Thread: The Fed lost control

  1. #31

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    [QUOTE=oak333;2709053]This is an interesting interview with Frank Giustra:

    https://www.zerohedge.com/geopolitic...ould-mean-gold

    I disagree that the Fed will go negative. ( perhaps marginally on 1 year T Bills or less, for short time, in case longer term starts moving up)
    I have already elaborated on why I do not think so. ( once interest rates are 0, or almost 0, governments can borrow for free, so unnecessary to accept downside risks for
    no upside) Trump will certainly have no say in it at this point ( may change in the unlikely scenario he is allowed to be reelected)

    As far as savers being screwed with negative interest rates, what is the difference if the interest income is -.25 or .25% for most. They are already getting screwed if they have their money in bank accounts or term deposits.

    Below is the parts of the zerohedge conversation I am responding too:

    __________________________________________________ ______________________________________________

    Giustra:

    So far, the Fed has been very reluctant to talk about introducing negative rates.

    As hopeless as they are, I think they understand what that would mean if the U.S. went into negative rate territory.

    But Trump is a bully. If he sees the economy still floundering between now and November, he’s going to push and bully.

    He will likely get his way because the Fed is not truly independent. That idea went out the window long ago. It all started with Greenspan. It was gradual in the beginning, but eventually, it became clear that the separation between church and state was gone. Fiscal and monetary policy work in tandem. It’s one big happy gravy train for the markets.

    I believe if the economy does what I think it will do, Trump might get his way.

    International Man:

    Negative interest rates incentivize bad behavior. Savers will be decimated, and borrowers will be rewarded.

    What do you think the effects of that would be?

    Frank Giustra:

    It’s true what you say about the savers. Unfortunately for them, they are not the ones that influence policy. Wall Street alone has that power.

    Savers will certainly get screwed in the end and eventually the speculators will also. They think this party will never end, but they are delusional. It will end.

    Delusion is firmly engrained in the investor psyche.

    Wall Street pushes for this continued bad behavior. They throw a hissy fit when they don’t see enough easy credit, and they always seem to get what they want.

  2. #32

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    [QUOTE=brutus2;2709055]
    Quote Originally Posted by oak333 View Post
    ...I disagree that the Fed will go negative. ...
    I didn't think we would have QE2 or QE3 or zero reserve requirements, yet here we are - https://www.federalreserve.gov/monet...20institutions

    Nothing the Fed does anymore seems unbelievable. The unbelievable part is the fact that people still manage to conduct commerce with the paper they continue to print.

    In order to make negative rates stick, I believe that we would have to go to totally digital money & not have paper anymore. Otherwise there would be no way to enforce the negative rate.

  3. #33

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    [QUOTE=SilverPalm;2709324]
    Quote Originally Posted by brutus2 View Post
    I didn't think we would have QE2 or QE3 or zero reserve requirements, yet here we are - https://www.federalreserve.gov/monet...20institutions

    Nothing the Fed does anymore seems unbelievable. The unbelievable part is the fact that people still manage to conduct commerce with the paper they continue to print.

    In order to make negative rates stick, I believe that we would have to go to totally digital money & not have paper anymore. Otherwise there would be no way to enforce the negative rate.
    I only say I do not believe the US Fed will introduce negative interest rates as, I believe, there is no beneficial reason for them to do so.

    Unlike the marginally negative rate entities so far ( Euro, Japan, Switzerland -.5%, -.1% and -.75% respectively, they are not net export driven economies that need to keep their
    currencies artificially low to maintain this important aspect of their economies.

    The world is awash in liquidity ( dollars) so no need to lower for this reason

    No Central Bank wants to go lower than 0. That provides a rate the government can borrow to infinity, at no cost.
    Negative rates bring in competition ( alternate currencies, alternatives to banks, gold, etc)
    They are very hard on banks that do what they were intended for ( banking)
    If the US lowers and other nations do not follow to go even more negative, then the dollar will become less desirable,
    not a good outcome for a hopeless debtor, with a world awash with US dollars.
    It will reduce liquidity in the system, as their will be a cost to being liquid, so it may encourage more less liquid asset holdings
    that pay positive yield, ie swaps between businesses, large net worth individuals etc.
    It also increases bubbles in assets, that in the long term is not good
    It also distorts capital markets
    The short history of negative rates has not shown anything positive from the countries involved, other than keeping their currencies weaker than they should be.
    The US $ has been dropping just lately and the Fed will not want any part of Stagflation, if it continues.

    I am only taking the Fed at its word, not because I trust it, only that it makes sense that it would prefer rates where they are.
    Great for cheap money for the government to continue to be Santa Claus.
    They could go negative, but I think the odds, and the risk reward, says they will not

    Just my opinion

  4. #34

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    [QUOTE=SilverPalm;2709324]
    Quote Originally Posted by brutus2 View Post
    I didn't think we would have QE2 or QE3 or zero reserve requirements, yet here we are - https://www.federalreserve.gov/monet...20institutions

    Nothing the Fed does anymore seems unbelievable. The unbelievable part is the fact that people still manage to conduct commerce with the paper they continue to print.

    In order to make negative rates stick, I believe that we would have to go to totally digital money & not have paper anymore. Otherwise there would be no way to enforce the negative rate.
    Let me clarify that statement a little. I do believe that EFFECTIVE negative rates are possible, with currency value fluctuation. I do not believe that straight up negative rates can be realistically enforced until cash is gone.

  5. #35

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    [QUOTE=SilverPalm;2709460]
    Quote Originally Posted by SilverPalm View Post

    Let me clarify that statement a little. I do believe that EFFECTIVE negative rates are possible, with currency value fluctuation. I do not believe that straight up negative rates can be realistically enforced until cash is gone.
    I should clarify also. I have no doubt negative nominal interest rates can be implemented in the US, for its own debt instruments. My opinion was just that I thought they would not. ( reasons described above)

  6. #36
    Join Date
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    The Fed is trying to regain control. It had a big shift. It channels money now
    into businesses, not into financial markets any more.

    So far, the Fed had big announcements: buying stocks, buying ETF's, buying
    junk bonds etc. In spite of a severely declining economy and tens of millions
    unemployed, the stock market was soaring. Not any more.

    Last week (ending June 17) the Fed actually shrunk its balance sheet by
    79 $ billion. Not a lot, when its balance sheet is over 7 $ trillion...but it
    shows a direction.

    https://dailyreckoning.com/the-feds-big-shift/

  7. #37

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    I wonder what the percentage that was getting skimmed of by the FED Corp owners was? That is now going to the Treasury.
    What's the Frequency, Kenneth?

    432Hz

  8. #38

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    I believe that there exists a FED, Gov, Fedowners deal. Zero rate means that the fed acts as if the treasury prints money, the fed however keeping the right to print money in excess of what the gov needs, it can give part of the printed money to the ownerbanks who can make profits on loans etc. Otherwise there is no beef in the whole setup, and i cannot imagine this trinity didn't think about its own profit first.

    Golditiki2+++

  9. #39

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    Fed buying corporate debt and market efficiency is quite an oxymoron.



    05:17 AM EDT, 06/29/2020 (MT Newswires) -- The Federal Reserve disclosed on Sunday that it has bought $429 million worth of corporate bonds, including those issued by AT&T (T), Comcast (CMCSA), and AbbVie (ABBV), as part of its plan to buy a total of $750 billion of corporate debt to boost the market's efficiency and investor confidence.

  10. #40

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    the fed is not a national bank, but private institution, so when the fed buys bonds or whatever it buys, it are the partners who benefit of the ceded richess be it debtcollateral. It means that when the debtor cannot pay, his debts, his stocks will be forced down and go to the FED, in reality to the Fed owners, which means that when thisjoke will be over the Fedowners will own big chunks of the US corporations and be able to reorganize the whold US economy. It is just a matter of time, because the innocent idiots are so concentrated on covid and partisanwarfare they do not see wherto this song is leading.

    The FED ( I mean its shareholders ) instead of loosing control is taking control of the US economy.

    Golsitiki2+++
    Last edited by golditiki2; 07-03-2020 at 01:38 AM.

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