We're going the wrong way
(...with apologies to Kara Thrace)
Today the Federal Reserve announced it would buy up to $300 billion in US Treasury notes and up to $750 billion in other debt instruments such as mortgage-backed securities. See U.S. Stocks Gain, 10-Year Treasury Yields Fall Most Since 1962
Ya know, this is a tragic choice, and a tragedy waiting to happen. Why? In short, it's a repeat of the very same easy credit policies that got us to where we are in the financial markets, stock markets, and economy / job markets. So why is the extension of credit, too much of which killed our credit markets, supposed to now fix them? I think the answer this time matches the answer last time -- it will help for a while, then it will turn and take away more than it created.
So if this move helps us recover about 20% of the stock market losses, taking the DJIA back to, say, 8000, won't this whole repeat of tactics turn on us and take away 50% again, moving the DJIA down below 4000?
Yes, it will. There will be two differences the second time. First will be how fast it happens -- instead of taking 18 months to lose 50% of market value, it'll probably only take one month.
Second, it'll be the death of the international financial system, where foreign countries & banks buy US Treasury notes (which is how the Govt finances a huge portion of its spending), that will be the focus of failure. If I try to describe what kind of mess that will create, I'll just make myself look hysterical. Let's just say the Depression of 1932 will be mirthfully wishful thinking compared where we'll wind up.
Btw, for those reading this, you've only got a few months (less than 6 I think) before this all happens again. If you don't have the safest of banks to keep some cash reserves in, and/or stuff some under your mattress (figuratively), you'll wind up doing without money when this falls out again.
Today the Federal Reserve announced it would buy up to $300 billion in US Treasury notes and up to $750 billion in other debt instruments such as mortgage-backed securities. See U.S. Stocks Gain, 10-Year Treasury Yields Fall Most Since 1962
Ya know, this is a tragic choice, and a tragedy waiting to happen. Why? In short, it's a repeat of the very same easy credit policies that got us to where we are in the financial markets, stock markets, and economy / job markets. So why is the extension of credit, too much of which killed our credit markets, supposed to now fix them? I think the answer this time matches the answer last time -- it will help for a while, then it will turn and take away more than it created.
So if this move helps us recover about 20% of the stock market losses, taking the DJIA back to, say, 8000, won't this whole repeat of tactics turn on us and take away 50% again, moving the DJIA down below 4000?
Yes, it will. There will be two differences the second time. First will be how fast it happens -- instead of taking 18 months to lose 50% of market value, it'll probably only take one month.
Second, it'll be the death of the international financial system, where foreign countries & banks buy US Treasury notes (which is how the Govt finances a huge portion of its spending), that will be the focus of failure. If I try to describe what kind of mess that will create, I'll just make myself look hysterical. Let's just say the Depression of 1932 will be mirthfully wishful thinking compared where we'll wind up.
Btw, for those reading this, you've only got a few months (less than 6 I think) before this all happens again. If you don't have the safest of banks to keep some cash reserves in, and/or stuff some under your mattress (figuratively), you'll wind up doing without money when this falls out again.