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Comment by ryndbfsrw | Hacker News Reader

3.85 million more Americans filed for unemployment last week and the stock market barely moved. Its because your Fed is printing money to buy up assets and corporate junk bonds.

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

This is also the sign of the kind of plumbing that is baked into the US system - protect capital when things go belly up and allow labor to hit the reset button through unemployment and wage cuts. Flood the market with cheap credit and then eventually growth comes back. It’s a rehash of the financial crisis response because it’s the only sort of response the USA is configured for.

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The stock market barely moved because every investor with a brain already knew that more people would be unemployed this week, 3 weeks ago.

bingo. Stocks are forward looking - by 10 to 20 years, depending on the valuation model.

The idea that companies should be worth half of what they were last year because of a 18-month long pandemic is kind of idiotic, which is why the liquidations in mid-march were a great buying opportunity.

...the only exception being companies that might be forced into bankruptcy - such as retail, restaurants, travel, etc.

Tech (NASDAQ) has almost entirely recovered... which is reasonable.

I think a lot of commentators are angry that many shareholders are not experiencing the same pain they are, and therefor attribute it to some sort of social evil.

Misery loves company.

How come the stock market is not pricing in the catastrophic pandemic that will hit us 2039. Or the massive earthquake of 2027.

That's just BS, you can make up any number on that timeframe.

As an investor, I am obviously baking in those events in my decision making. I am also assuming an all-in-with-all-the-bazooka-firing response - Fed printing money, Congress enacting stimuli, smart people coming up with vaccines etc - which will recover the asset prices (at least in nominal terms) within 2-3 years.

20 year forward looking? Maybe across the market and across broad indexes & ETFs, but there is no way you can tell me that they're looking that far ahead intelligently -- one only needs to look at 2008, or the huge volatility over the last couple months.

Oil futures, for example, are only going out about 2-5 years.

We knew there was going to be wicked unemployment down the line in Feb/March. Now it's here and no one is surprised -- and that was baked into the stock price, on top of Federal cash bailouts that make the unemployment numbers less relevant.

Oil futures go out to exactly the expiration date of the futures contract.

Equity shares go out as far as you like. What makes the later years worth less is the discount you put on future cash - according to the time-value money principle.

ie. future years are discounted proportionately dependent upon the expected inflation/discount rate.

So yeah, 20 years is normal.

How many of those people are really “unemployed” though? (Not a rhetorical question.) Lots of people are furloughed so they can collect unemployment, and both they and their employers expect them to return to work when the shelter orders are lifted.

That's a good distinction to make - but it's also unclear.

Will people go back on cruises in the same amounts? Will they pack a small enclosed bar or nightclub this winter?

Will companies that automate more functions today, re-hire those workers when this is over?

Some portion of those jobs may never return. It's very very hard to tell how many.

When all you have is a hammer...

The Fed has a twin mandate (price stability, maximum employment) and two tools to satisfy it with: rate adjustments and liquidity injection (QE). That's just about it. They aren't allowed or configured to do much of anything else.

If those two tools stop working or produce distorted results, they can't switch tools. They have to keep banging the hammer or choose to do nothing.

What we are seeing here is a failure of Congress and the Presidency, not the Fed. The Fed is doing the only thing it can possibly do in this situation. It has no more tools.

Completely agree. The Fed is one of the few institutions that has bipartisan support so its allowed to fulfil its mandate and the 'plumbing' so to speak works well when its trying to pump money into markets. But as we've seen getting money into people's pockets is more challenging in the USA as that bit of infrastructure wasn't seen as needing investment due to the way USA normally reacts to market shocks. (And by infrastructure I think of benefit systems running 50 year old bits of cobol, sending benefit payments via cheques, patchworks of state benefits instead of universal coverage etc.)

Nonsense. Money isn't getting into people's pockets because the political will isn't there. If it was an influential Bloc screaming for assistance, they would get it, and the details would be worked out later. Where there's a will there's a way, and where there's no will there are a bunch of phony excuses.

If the people protesting the lockdowns instead protested to demand immediate, and sustained benefits, and supporting policy, until the lockdowns are lifted under we may see different results. Of course, for that to work the protests must end entirely if demands are met.

Instead we get more reality TV. I keep going to bed every night wondering when I'll wake up from bassackwards nightmare.

I feel like a lot of Americans won't ask for help because they fear it will mean that others who are not just like them might also get help, and that quite a bit of it boils down to latent (and even assumed and subconscious) racism.

I wouldn't have said this 10 years ago. 10 years ago I thought racism was dead except for a few crackpots and maybe a few rural areas. The seemingly out of nowhere explosion of it in otherwise more contemporary settings on the Internet prove this is wrong and it's still very much alive. I don't think it ever died. It just became something you don't talk about in polite settings or in mainstream media. All it took was a few Youtube blowhards and trolls to challenge the taboo and it was back with a vengeance.

Other than racism the rest is self-righteousness: "I'm responsible and hard working, so sure I could deserve help, but what about those people over there? If they're in trouble they must be lazy or stupid."

I've got a bit more hope in the median American than you I think. I don't expect racism to disappear entirely. It's an extension of a natural reaction to change or experience. It takes education, and good experiences to counter racism. Some people are just stupid, but even they aren't beyond help. Those who are should be imprisoned.

Anyways, if you care to know, I suspect that people etal have merely forgotten how much power to effect change we have when we unite towards a common goal. If every person claiming unemployment started protesting tomorrow for: [weekly stimulus money no delays no excuses, 100% free to consumer health care and treatment extended into single payer after covid19, and policies preventing repossession, evictions, foreclosures, and garnishment due to un/under-employment] then I would bet everything I own that you would see our politicians act with a swift decisiveness, to either effect a nationwide tianemin square or capitulate to the will of the people. I fully expect capitulation, but realize we have an absentee president.

Agreed. I should have included political will as part of the infrastructure. I was highlighting how the Fed is geared in such a way that makes it very difficult for it to automatically deliver support to anything other than large institutions/finance etc given the patchy nature of US benefit systems. If political class deemed it necessary it would exist but they don’t so it doesn't.

Traditionally, the two tools were rate adjustments and setting the reserve ratio.

Traditionally, the RR was never touched. The last adjustment was in in 1992, when it was lowered from 12 to 10%.

Nowadays, QE has become an even more important tool than rate setting, which is mind boggling to me. I worked at the Fed when Greenspan passed the baton to Bernanke, and while I understood that Bernanke was an expert at what to do when rates approach zero, I'm still stunned by the rapid shift.

It's not just the US, it's every major nation. Companies are massively overleveraged across the board. Not being overleveraged a competitive disadvantage. It's the new normal.

> it's every major nation

No, Countries in Europe are providing fiscally sourced replacement to wages/salaries. For example Denmark is paying 80% of an employees salary if the company does not lay them off. This is a drastically different intervention than what the US is doing.

I am talking about what happened for the past decade, not just the response to the crisis right now. Europe is doing everything the US is doing - and more.

That's because a ton of European countries already have unemployment so generous that it's essentially the same or better than what the US is doing without having to do any changes.

A sincere question - do you see any other country handling this crisis in a demonstrably superior way? If so, can you please share the details?

The Feds mandate is to maintain low unemployment. They keep the credit markets flowing to keep the unemployment from becoming 10x worse than it already is.

That's a funny thing to say since you can't get 10x worse than it is--we're already at 25% unemployment. Maybe you can say 2x?

Depending how you calculate it, that's not necessarily true. Reported unemployment numbers are calculated as a percentage of people who are actively working or seeking work. It's possible for the denominator to increase for some reason (like more people needing to find work due to state and federal aid drying up).

Said another way, the current workforce is 25% unemployed. If that corresponds to 5m out of a potential workforce of 25m, but the workforce increased to 100m, unemployment could increase 10x to 50m, while only doubling as a percentage.

And I just looked it up and these numbers are totally detached from reality, but I've written too much to delete now, so I'm just going to publish it! (And besides, I think it's still useful to question what's behind statistics)

Part of the issue is that the Bureau of Labor Statistics reports six unemployment numbers, all with different standards for what constitutes 'unemployment.' All of these numbers are useful, but often people throw around different numbers without explaining which unemployment number they're actually talking about, which can result in seeing wildly different numbers.

Source: https://www.bls.gov/lau/stalt.htm

75% is working right now but if it gets 10x worse then 7.5% will be working.

Uh, if 7.5% of people have jobs, there will have been riots and civil disturbances for months, food shortages, utility failures, limited medical care, and so on as the employment rate plummets.

It’s not possible to have 7.5% employment without total chaos, might as well be 0% in your (impossible) example.

2x more unemployment might be 10x worse, economically. It's not linear.

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