With very little fanfare, this Covid policy quietly got the chop.
The tide comes in, the tide goes out.
So, very quietly last week, the US Fed called the top on the EZ Money era.
When Covid hit, the world’s policy makers pulled literally everything they had out of the hat.
No idea was too crazy… or too expensive.
Like what?
Like how about the US Fed bailing out the US share market?
This is one thing they did that didn’t get the attention it probably deserved. Early on, the Fed announced that they were purchasing corporate bonds.
(Remember bonds, like equities or shares, are just another debt instrument. Buying bonds, buying shares, same same. It all supports the company and its share price.)
So the Fed just printing a whole stack of money, and bought corporate debt with it.
Of course, they weren’t saying it was to bail out the share market. It was to “ensure liquidity and proper functioning.”
But this is just white-wash.
Imagine you have a lemonade stand and you’re not selling any lemonade. Your dad comes out and says that he’s going to provide liquidity to the lemonade sector to ensure proper functioning on the lemonade market.
He buys some lemonade.
It’s exactly like that.
(No, exactly.)
And from the start of Covid through to end of 2020, that’s what the Fed did. They printed money and bought lemonade from America’s biggest companies.
Now, however, they’re looking to offload what they bought.
From The New York Times:
The Federal Reserve’s first-ever foray into the corporate bond market will come to a final close in coming months, with the central bank announcing Wednesday that it will sell off its exchange-traded fund investments and direct bond holdings.
The sales, which a Fed official said the central bank expects to complete by the end of the year, will finish off a program that was the first of its kind. The Fed announced in March 2020 that it would begin buying corporate debt using its emergency lending powers. The manoeuvre was an effort to unfreeze the flailing bond market as panic, inspired by the then-unfolding pandemic, threatened to keep American companies from renewing their debt or borrowing more.
The announcement worked almost instantly, restoring investor faith in the market and helping it to begin functioning again.
… The corporate bond effort was perhaps the most controversial of the Fed’s 2020 relief programs, drawing criticism from some Democrats who felt that the central bank was helping big companies more than smaller ones and households. Some critics even argued that the program had effectively “bailed out” companies, although the program worked indirectly, helping to reopen choked markets.
Pfft. Whatever. It was a bail out. It was a government promise to support the share market no matter what.
I’m genuinely surprised people aren’t angrier about it.
But that’s the way the world works.
And at the end of the day, this isn’t going to make a huge difference. The bailout was small, especially compared to the Godzilla like spending program that Biden’s unleashed on the economy.
So it won’t move the needle much.
But the lesson’s been learnt. Markets now that if the doo-doo hits the fan, the government has it’s back.
So much for free markets.
JG
Rob Smith says
I liked some analogies you give!
The other blogger too.
The lemonade stand.
The rich guy on the super-yaght.
Your Quote. “Thats the way the world work’s”
It is head in the sand time for people over 50 . Give or take a few years!
Or there general interest in world politics . IQs. Not below 103 I believe that’s what the Victorian police lowered their level to. Apparently to get more recruits! I think a few slipped under the rader!
I mean seriously I didn’t aligne myself to Jimmy Hendrix line in one of my favourite songs.
All along the watchtower . “There are some amongst us who believe life is but a joke”
But whatching those police officers arresting the pregnant woman in her home, In Ballarat. Handcuffing her in front of her children and taking her away for posting on Facebook protesting about the lockdown!
Those tree’s in that forest I could only see as a young man. I can see so clearly now!
That book Sharri Markson is writing about the virus lab leak. Would be about as long as my observations of that being part of the world’s elites agenda. Regarding removal of Trump for not being onboard with the Paris climate change agreement!
Being a neutral here in Australia. Getting and seeing both sides and not replying on CNN MSNBC. Democrats propaganda! FOX Republicans same! There was no theory. Just full
Blown Conspiracy! No BS.
So looking at all the vile hate comments on those media outlets! Obviously breaking community guidelines on YouTube. But not removed!
It was when youtube banned me! For no vile hate bullying comments just my observations on what was a soft coup! A world Cabal of elites taking the American people’s right of their choice of president and government elect!
Then I could only draw one conclusion as a unbiased observer. I was around the money!
When YouTube banned me. They sent me a notice and at the bottom said if I had any complaints about it I responded with! My Brother the lawyer will be litigating this as a clear act of being” Uncontionable behaviour” and will be seeking damages of 100 million dollars! I am sure they had a giggle about that! But they lifted the ban immediately .
No BS. But they ban and remove most of my comments.(shadow banned me). Yes They don’t want people the majority (sheep) knowing the truth! Me calling the virus the ” The get rid of Trump Virus”!
Some people who realised I was Australian told me to mind my own business!
My response was .
Collateral damage. Lost job carnt be with my dying Mother . Destroying the city I was born in ! Not the Suburbs where you guys are in Ivanhoe. Born Lonsdale and Swanston Street! A real Melburnian, we can see BS from Aurthers seat to the White House.
All to remove Trump! So yes the tree’s are easy to see now !
Then there’s our religion AFL! We love our Melbourne Storm boy’s to! Alot of us!
The collateral damage is not quantifiable!
PS. “Where the hell is Durham”! 🙂
??????