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.

Are you optimistic about the wealth transfer implications of their activity?

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.

It's foolish because it's literally impossible to avoid a heavy recession or depression when people are told to stay inside and do nothing.

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.

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.

> 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.

Isn't that the same thing we were told in 2008?

> 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.

There's no possible way this could go wrong.

Given the guy that I just responded to called liquidity injections foolish, you should want to take your chances with the fed.

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.

Why not 1921? In 1920-1921 there was a major worldwide crash on the relative scale of 1929 but nobody ever talks about it because the fed did very little and we bounced back (the government actually did a few things that probably hurt). In 1929, the fed did all sorts of policy gyrations and we got a depression.

No, the world is much more interconnected than in the 30s. This can get a lot more ugly if it lasts multiple months. People were also a lot more used to rough conditions in the 30s and the general population is totally unprepared today. This will either pass in 1-2 months at most or we are looking at revolution or military dictatorship.

But at the same time, what percent of the population was in food distress prior to the crash of 1929, what percent had no access to medical facilities whatsoever, or could wind up in a situation where nobody was checking in on them and they couldn't put out an ask for help?

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.

> No, the world is much more interconnected than in the 30s.

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.

> Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s.

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.

The policy understanding in 1933 (still early in the depression) was... Well... Primitive, to say the least.

Though sometimes I wonder exactly how much policy makers sophistication has evolved

https://youtu.be/JUvm9UgJBtg