It's looking like DEFLATION, has come home to roost. The Fed would be more effective, throwing $100 bills from the tops of skyscrapers.
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Senior Member
It's looking like DEFLATION, has come home to roost. The Fed would be more effective, throwing $100 bills from the tops of skyscrapers.
- Either you're part of the problem or you're part of the solution or you're just part of the landscape - Sam (Robert DeNiro) in, "Ronin" -
Senior Member
It's not an either/or proposition and there's no way of knowing the right combination until after the fact, especially for something unprecedented like this. The Fed should be adding liquidity to the market so companies have access to capital AND the government needs to do more to keep consumers' money in their own pockets. Payroll tax cut would be a start (that would actually add to the deficit without a cut in other spending, unlike repossession), but companies also need access to capital to keep the goods and services flowing for consumers to buy. A sudden, severe shortage on the supply side while the government throws money at people leads to people hoarding, a la 1929. Sudden, severe shortages on the supply side have long-term negative effects on the demand side as people adapt. Once they've adapted, it's much harder to get them to go back to their old spendthrift ways.Originally Posted by The_War_Wagon
Paid sick leave and basically everything the House dems want will have little to no positive effect on the economy, but it sounds nicer and more "working man" friendly than a payroll tax cut, because many people don't know any better. In an economy with record unemployment, the government shouldn't be concerned with keeping people in jobs that by their nature don't already provide those benefits - direct stimulus would be far more effective.
Last edited by sundance435; 03-12-20 at 15:34.
Member
I agree with you that there is no way of knowing the right combination until after the fact, but there is a great opportunity to learn from history and apply principles-based approaches to what is becoming a much more complex situation every moment.
While I agree that stimulus isn't a bad thing and that companies need operating capital, supply chains are globalized affairs and many precursors for American-manufactured items come from overseas. If there is a strain on the system, it will take time to replenish stocks of commonly available items and specialty items when there is en-masse demand.
What we are beginning to experience is a very complex issue because it will touch nearly every facet of industry in some way, shape, or form, and there will be unintended consequences economically which will be directly experienced immediately, and also be distributed throughout our daily lives on an extended timeframe. These issues will become compounded as they interact with with each other over time, and will create more unintended (and likely serious) consequences on a large scale.
Banned
Change My Mind:
We just saw the biggest stock crash in over 30 years, right after the Fed announcement.
Nothing they can do will fix things. They have no options left but to print. We are fvcked. Great Depression inbound.
Senior Member
No. The stock market is reacting to uncertainties caused by a world wide pandemic and the drastic reduction of products from China. We will not have a great depression.
The people who sold their stock/traded stock for bonds after the market dropped will be rending their garments and wailing about how they will never be able to retire. It's 2008 all over again, except this time we have the government and media whipping up a firestorm of terror over a pretty freaking nasty virus that still won't kill most of us.
Life is going to suck for a few months, and then we will be back to business as usual, only with a huge surplus of toilet paper.
Andy
Banned
You didn’t mention the $1 Trillion in liquidity that the Fed announced having ZERO effect. I don’t remember any of the rounds of QE being that large. They’re going to have to do more, and that doesn’t bode well for the dollar. You also didn’t mention the waves of bankruptcies and layoffs heading our way. We are all heavily debt-leveraged, personal and business/corporate. Defaults are going to have a cascading effect.
Senior Member
Well, yeah, but I don't think you need any specialized knowledge to realize that there's little an institution of monetary policy can do on it's own to stop a pandemic and the ensuing crisis of confidence. The Fed is making the right moves that it can - ensure liquidity for businesses and financial institutions. The Great Depression this is not, if for no other reason right now than the Fed is actually being proactive. Supply-side measures only go so far, though. We do need consumer-side stimulus from the government and more of a sense that the government in general has a handle on this (which they don't) for the Fed's moves to have a greater impact.
Caveat - the people selling/trading right now that don't absolutely need to are probably going to regret it. There are a fair number of people who have no better choice than to turn some of their portfolio into something more liquid/stable now. If you don't need a higher short-term guaranteed return, then there's no need to be selling broader mutual fund and 401(k) assets and ETFs - some quality ETFs are a bargain right now, even if the market dips another 2,000 points. Do what you want with individual stocks, but I wouldn't be buying them for the next few months. Gold is still too high at $1600.
Senior Member
So I don't like when the government does this kind of thing.
However I can tell you this. Mortgage rates were set to rise drastically. Banks were starting to run out of money to lend.
Rates have now stabilized and banks are going to continue.
ETA: Just for the record this is a major oversimplification of what happened. And has more to do with Mortgage companies than banks and how they warehouse loans.
Last edited by kwelz; 03-13-20 at 15:18.
Tell my tale to those who ask. Tell it truly; the ill deeds along with the good, and let me be judged accordingly.
Senior Member
I generally agree with the above. Though it may be wishful thinking as my policy is to try to ride this type of thing out.
I mostly in institutional class age targeted funds plus an extra side of cash. (Very low fees due to my investment size.) And another 1/3 roughly in a pension I track as a current lump sum cash value, but I could take as an annuity if desired. If that also drops, I'll be bluesing some. More incentive to ride things out.
My fund portfolio is beating my friends professionally managed portfolio, with my age targeted funds almost exactly matching his actively managed investment once the 1% active management fee is accounted for.
If it continues to crash I could be a sad puppy, my understanding is that actively managed can usually do better in falling markets then well managed funds.
I was kind of hoping that if we start looking deflationary that gold and silver would come down some. But I think the nervousness is keeping it out.
Banned
Much of what has been said here will age very badly. I believe this is the “reset” some of us have been anticipating. Nothing I’ve seen out there has been effective or positive or promising.
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