Fed to buy junk bonds, lend to states in fresh virus support

Re:Fed to buy junk bonds, lend to states in fresh virus support by OscarCunningham on Thursday April 09, 2020 @11:58AM (#22823780)

Sellers will still be competing to sell to the Fed, and if the Fed openly announces that it's buying then the market knows that the surge of demand isn't introducing any new information about fundamentals.

EDIT: This doesn't mean the price won't rise. The purpose is to cause price rises, i.e. inflation. But they won't be overvalued; the true dollar value will have increased.

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Re:Fed to buy junk bonds, lend to states in fresh virus support by ghouse on Thursday April 09, 2020 @01:29PM (#22824999)

The fed is shifting risk from the free market (which the price is set to balance supply and demand) to the tax payer.

> the true dollar value will have increased. The very definition of inflation is to reduce the value of money. Can you help me understand how they're trying to cause inflation, but also increase the "true dollar value"

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Re:Fed to buy junk bonds, lend to states in fresh virus support by aaronblohowiak on Thursday April 09, 2020 @06:43PM (#22827964)

Why do you think the tax payer is on the hook? Where do you think the Fed’s money comes from?

The fed’s balance sheet impacts people who hold dollars, not people who pay taxes.

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Re:Fed to buy junk bonds, lend to states in fresh virus support by OscarCunningham on Thursday April 09, 2020 @07:46PM (#22828448)

Even then it only impacts them to the extent that it causes inflation, which at the moment it's failing to do.

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Re:Fed to buy junk bonds, lend to states in fresh virus support by OscarCunningham on Thursday April 09, 2020 @02:36PM (#22825746)

I mean the Fed's actions will increase the nominal value of bonds, but this increase will be due to inflation rather than because they're paying more than the rational valuation.

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