- The fed became a huge driver of liquidity from from 2016-2018
- There was a noticeable increase in market toxicity when they started letting assets roll of their balance sheet in 2018
I'm more optimistic about the impacts of their role as a liquidity provider than I am about their role holding down the effective overnight borrowing rate.
I'm likely on the younger side of the hacker news demographic and I still believe that this is the right action to take at this moment.
We might be stuck paying it off for awhile, but I would rather deal with an inflated fed balance sheet than an entire generation of Americans coming of age during a giant economic pullback.
The odds of this action working out well now are slim to none. Then when it's actually needed they will have to do it again. You'll end up with the same non recovery recovery where people are barely getting by but certain asset classes are inflated to the moon.
They had to do rate cuts now because it takes a long, long time for them to work (measured in years rather than months). That was a preventative measure, not a band-aid.
Look, guys, I promise you the fed knows wtf they're doing. These guys live and breath to be ready to respond to these type of emergencies.
We should be far more worried about (the lack of) policy responses from DC. DC has no idea wtf they're doing, and it shows.
Isn't that the same thing we were told in 2008?
There's no possible way this could go wrong.
If the fed hadn't announced that action last night then the hell that would have rained down on Monday would have gone down in history with Lehman and Black Monday.
So a lot of things have changed, at least in the US, that make the infrastructure of resilience possible in a way that was specifically impossible in 1930.
More, yes, but not much more. Agriculture, commodities, finished manufactured goods and finance were all global markets before WWI. The re-integration of markets only overtook that period in the 90s, after the fall of the Soviet Union and before that the demise of Bretton Woods and managed trade.
This seems unlikely. The Fed does not seem to be on track to contract the money supply by 30% causing a wave of bank collapses, and leading to a trade war that means international trade collapses this time. They may not pursue optimal policy but every macroeconomist knows that that would be a bad idea. The joys of limited data are a better appreciation of history than microeconomics.
Though sometimes I wonder exactly how much policy makers sophistication has evolved