Re:Fed to buy junk bonds, lend to states in fresh virus support
by chii on Thursday April 09, 2020 @11:15PM
(#22829657)
loss of liquidity is a loss of confidence by those holding the wealth/capital.
I think the FEDs doing these injections will distort the price of money in such a way that risky activities would be seen as less risky, and so spirals into further illiquidity when something bad hits the fan (again), and the FEDs will need to inject again.
The businesses failing needs to happen. The capital losses needs to happen. Like a forest fire - new growth can't come if the old capital doesn't die (i.e., those controlling the old capital is constantly being protected from downsides, which this illiquidity represent).
Re:Fed to buy junk bonds, lend to states in fresh virus support
by millstone on Friday April 10, 2020 @01:11AM
(#22830175)
We are not in a period of moderate correction, trimming non-viable deadweight. We are in a mass economic extinction of healthy and successful businesses.
I think the FEDs doing these injections will distort the price of money in such a way that risky activities would be seen as less risky, and so spirals into further illiquidity when something bad hits the fan (again), and the FEDs will need to inject again.
The businesses failing needs to happen. The capital losses needs to happen. Like a forest fire - new growth can't come if the old capital doesn't die (i.e., those controlling the old capital is constantly being protected from downsides, which this illiquidity represent).