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Norwegian was struggling financially before COVID 19. This isn't surprising. Norway has one of the world's most robust social support systems. I'm confident that they will deploy it well here.

You're just making things up. We couldn't have increased interest rates if we wanted to because Europe had to hold their rates low to deal with their debt crisis. If we moved ours out of step then it would have caused appreciation in the dollar and likely would have damaged US manufacturing. The US lower middle class likely would have been hurt if we did what you just suggested.

Yes, inequality is a massive economic problem. Yes, we need to find a way to fix it. Spouting poorly formed conspiracy theories about financial markets is not the way to do it. We weren't holding rates low to inflate equity markets. The fed doesn't care about equity markets more than any other economic gauge. We were holding rates low because we were trying to minimize unemployment and there were no signs of inflation.

When we started getting nervous about inflation, we started increasing rates, and selling off the balance sheet. That didn't go terribly well which is we stopped.

The fed is a completely apolitical institution that works very hard to monitor and assist the economy. They are academics, not billionaires. Their sole purpose is to make sure that you have a job and don't have to worry about the price of milk increasing 200% in a week.

Both of those things have been called into question this week, neither is because the fed didn't increase interest rates quickly enough.

I'm not going to assume anything about your political leanings, but I do want to address this. I have heard a lot of Bernie supporters spouting the theory that you just told me. The irony of that is that he wants to put labor reps on the fed. You know what labor reps would push for? Super low interest rates to weaken the dollar and increase manufacturing activity. Their position is completely contradictory.

Too late for what? This was going to happen no matter what the fed did. If the mkt blew up because of inflation then your argument would make sense. That's not what happened.

wtf are you talking about? They were raising interest rates and rolling assets off their balance sheet for the better part of 2018.

Sorry, I want to clarify quickly that appleiigs is right that it isn't cost of insuring cash so much as depository risk. When I say cash, I mean currency as opposed to debt/equity, not physical bills.

No, it's not foolish. We need to keep markets liquid to avoid a lending crisis. That's why the fed announced asset purchases. They don't do them all at once. They buy steadily over a period of time to help keep prices stable. That's very important.

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.

That's kind of the thought, yes. Negative rates should not be sustainable for any significant period of time and most interest rate models are built on that assumption.

Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This has caused material demand and supply side shocks that we haven't seen in my lifetime or my parents' lifetime.

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.

Obama's admin let one of the world's foremost financial institutions fail and caused a mass market panic / giant economic setback. Their reasoning was entirely political and caused millions of people to lose their jobs. I'm independent, but claiming that Republicans cause recessions is pretty ironic considering the economic damage the last Democratic admin did.

We used to think that rates couldn't go negative for exactly the reason you just described.

Turns out that assumption was wrong for a few reasons a) holding onto money is expensive b) in many cases banks have incentive to hold government securities c) sometimes they are outright required to hold government securities d) this is related to (a), but there is risk in holding onto cash where government debt is in many cases perceived as risk-free.

The thought today is that rates can go only slightly negative for short periods of time, which we will continue to believe until some government tries to push the lower bound again.

The feds mandate is to maximize employment, stabilize prices, and moderate long-term interest rates.

A big part of that is trying to avoid the 'bust' part of a boom-bust cycle.

As evidenced by your post, the fed should not be accountable to the public because the public cannot be expected to spend anytime trying to understand what they do and their methods of action.

The problem is that fed action isn't enough. We need policy changes to keep SMEs above water. The White House and Congress have not taken appropriate action. Trump acted like he was going to take action on Friday, the markets ripped higher, and everything he announced was worthless, but that wasn't clear until markets closed.

You're right, and they made a lot of changes that are necessary to keep the global economy functioning over the next few months. I did not mean to imply that they shouldn't be taking action.

I am very skeptical about cutting rates again. There are much more effective actions that could be taken at the policy level. The fed is doing what it can, but it doesn't have the right tools to lead the charge on this.

Asset purchases will help to stabilize markets

- 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.

Adding some further nuance to this point:

- Many other rates in existing contracts are tied to the fed funds rate so things like existing mortgage and student loan payments may get smaller as a result of this action

- This will only work for new contracts insofar as credit risk does not materially increase (which it will in an economic downturn); banks will increase consumer spreads against the fed funds rate on a go-forward basis

This is not going to help

- It takes two years for monetary supply changes to fully propagate through the economy

- Cutting rates to 0% has not been effective in Japan or Europe

The fed does have a role to play here

- They can provide liquidity to the market

- They can serve as a backstop in a time of crisis

DC needs to get their shit together

- Eliminating Trump's tariffs would do more to increase long-term investment than cutting rates to 0%

- They should have created targeted lending program to help businesses that need short-term cash flow assistance yesterday; the next best time to do it is right f*ing now

I don't agree. There are three things that normal investors should be doing right now:

1 - Assess how you feel. Are you upset by the loss of value? Then you make be more risk averse than you thought. It might be wise to reconsider your asset allocation after this emergency is over. However, it's not wise to redo your allocation while the VIX is above 20ish.

2 - Check in with a financial adviser. This is a good reminder that your financial portfolio matters, and it is smart to use this as a prompt to check in on your financial health.

3 - This is the most important one, but you can't do it if you're not good on #1 and #2. REBALANCE YOUR PORTFOLIO. If you are allocated to risky and riskless assets then it is time to make sure that your allocation is still where you want it to be. It probably isn't. If your allocation to riskless assets is higher than you normally would like then you should sell riskless and buy risky.

Why is #3 so important? Because it allows you to collect a liquidity provider premium. Purchasing risky assets in volatile markets a) stabilizes the markets b) takes the advantaged side of the transaction. A lot of research stands behind this idea. Rebalancing in volatile environments is an easy and reliable way to outperform your peers over the long run.

This has introduced credit risk to impacted businesses as well. Credit risk means we could see less liquid debt markets which could decrease employment, investment, and long run GDP growth. All of this especially concerning given that the fed has only 1 - 2 more pulls at monetary supply via interest rates before they have to introduce more QE.

There are too many connections here to simply discount the long-run risk to the economy which is why you're seeing a sell off.

PwC's audit lead gave a great interview on Bloomberg the other day that I thought summed this situation up well. Paraphrased: Those that have been fixing their roof while the sun is shining are going to be just fine, but a lot of businesses didn't do that.

Businesses with high leverage, unsteady cash flows, flaky customers, and inefficient cost structures could be in trouble here.

I'm a buyer in this market, but I'm a buyer precisely because I have a long horizon. There's no guarantee that we get back up to these rich valuations any time soon.

Free money doesn't help if nobody is willing to borrow it. US government needs to have targeted lending programs for impacted industries ready to go.

Your hot take is wrong. Cash flows are absolutely going to be impacted here. Initially, the thought was that this was only going to be a supply-side shock, but people are planning to completely hunker down, not booking flights, not traveling to work, taking time off.

This is going to be a large, if transitory, problem. Buy a little bit of the dip every day, and get ready to eat some losses in Q2. Summer is coming.

You're betting against all of documented history. Also, your concern shouldn't be interest rate risk. Your concern should be a reversal in perceived credit risk. You benefited from a flight to quality. While these can persist much longer than one would expect (see LTCM), you will eventually lose.

Congrats, but you should sell out of that before prices come crashing back down to earth, which they inevitably will after the covid-19 scare passes. It might be a couple of months, but history says that you're going to lose all of that money again over the next two years.

You've just discovered the Sharpe ratio. The part you're missing is that bond prices are just as volatile as equity prices in risk-on environments.

This is a fun and directionally interesting comparison, but it's ultimately meaningless.

Cash flows with different durations can't be used in carry trades so this cannot be exploited even if you have a hypothesis about the relative risk of each asset.

Convexity increases the price of high duration cash flows which drives down yields of instruments such as the 30 year treasury.