Big news from the Fed yesterday with the announcement that it will be doing a twist.
The Fed said that it would invest $400 billion in long-term Treasury securities over the next nine months, using money raised by selling its holdings of short-term federal debt, in an attempt to drive down interest rates on mortgage loans, corporate bonds and other forms of credit.
The idea is that these lower rates will help corporations to undertake projects since they will be able to cheaply obtain capital. It also hopes that consumers will use these lower rates to buy new cars, houses, etc.
Do you guys think this latest foray into the market by the fed will work? The markets appear to not think so with the Dow down 300 pts on its open......
WTF is an extra 1% drop going to do? Interest rates are already at the lowest possible low in the last 50 years.
Just like Obama's Jobs bill, this will do jack shit. The consumers who actually have the ability after the collapse to buy cars, houses, refinance have already done so. Its not like consumers are sitting on the sidelines right now just waiting for the chance that the interest rates go even lower, and the people who haven't been able to buy goods aren't just magically going to be able to start buying these goods now because the 4% rate went to 3.2%. Hell, there should be absolutely no reason interest rates are this low right now other then they are artificially being kept there.
I know Ben knows this shit. He studied Japan his whole career. I, and I assume the market, dont know what the hell he is doing.
This makes absolutely no sense. The guys at the Fed really are out of ideas.
Yes.. but Ben's pretty much btw a rock and a hard place. I at least appreciate how there was no form of LSAP/Tarp2 initiated...DXY should get nice boost from this.
As for rates...its absolute bullshit that reinvesting BACK into MBS (what the fed will do w proceeds) will somehow stimulate any sort of demand from people to take out mortgages at lower rates. There is no demand for mortgages AT ANY LEVEL. The consumer is in a de-leveraging mode and only worries right now about paying bills and living paycheck to paycheck.
Most succint explanation of why the Fed has failed stimulating demand, once again. Note from RBCCM sent out this AM:
If you think the latest iteration of Fed intervention will do anything to stimulate the housing market, we would say don’t hold your breath. Low rates have done nothing to revive home sales and the relationship between mortgage rates and sales since the bubble peaked in mid-2006 has decidedly broken down. The “reinvesting” of MBS proceeds in fresh MBS paper will do NOTHING to change this reality. It’s still more about deteriorating confidence in housing as a viable investment (LOW MORTGAGE DEMAND), increasingly tighter mortgage lending standards and exceedingly conservative appraisals.
Wow, time to refinance. Again.
Market's down like 4% now at halftime. Geez, we are going for a ride today...
wait, wait...what?!
central planning doesn't work?!
command economics don't work?!
the twist is a dance and not a fiscal policy?!
fuck if only someone had alerted me that...
http://www.youtube.com/embed/Qid_WGBrQjA
arent interest rates already so low - lending more capital to banks will not incentivize them to lend out to people, companies etc. hmm, could we possibly increase interest rates to stimulate the economy---because banks will see a benefit to loaning the shit tons of money they've received from the fed....instead of hoarding it for themselves.
Not to mention a flat curve pretty much destroys most banks' business model
They taking bad loans off bank's hands.
midas great video i'm still laughing, what is that from
http://www.youtube.com/embed/4ZiBEV3UIrU
I wish Obama would try to succeed. This always failing is starting to bore me. I keep hoping for change and all I get is his wife trying to tell me what to eat.
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