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Thread: Fed to buy long-term U.S. government debt

  1. #1
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    Default Fed to buy long-term U.S. government debt

    http://www.reuters.com/article/topNe...edName=topNews

    WASHINGTON (Reuters) - The Federal Reserve on Wednesday vowed to pump an additional $1 trillion into the U.S. economy in an aggressive bid to battle a deep recession, partly by buying government bonds for the first time since the 1960s.

    Concluding a two-day policy meeting, the central bank said it would buy up to $300 billion in longer-term Treasuries to bring down borrowing costs, harkening back to a program called "Operation Twist" that ran from 1961 to 1965.

    The decision caught many off guard and jolted markets.

    While the Fed had said it was considering such a move, it had downplayed it in recent weeks. As recently as March 6, New York Federal Reserve Bank President William Dudley had said buying longer-term government debt was not the most efficient way to ease credit market strains.

    The price of U.S. government bonds surged after the announcement, with yields taking their biggest one-day tumble since 1987. Stock prices also shot higher, while the dollar plunged.



    wow pretty crazy move. Who knew this would actually happen, especially after being downplayed for so long?

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    You can already see the effect on the dollar.

    $1.229 right now. Unless Canada does the same thing, the USD is going to sink even further.

    The biggest problem is the US right now is getting staying away from Deflation.

    They are doing a good job by printing $800 Billion of money... Haha, they might head to ridiculous inflation.

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    .
    Last edited by kaput; 04-03-2019 at 07:43 PM.

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    Originally posted by kaput
    Sounds big. For those of us who don't understand finance and economics, what does this actually mean?
    By buying back the debt, they yields (payouts) to foreign investors is lower. This in turn pushes them to get out of the US market and currencies, driving the USD lower.

    They are doing this to help open up the credit markets to get the economy moving again.

    The risk is that because no one is buying anything, companies will have to scale back production due to not being able to sell. This drives prices down and also drives profits down.

    Profits dropping means stock prices dropping. That leads to deflation which is uncontrollable. You can't lower interest rates below zero in order to stimulate spending. The only way to do it is to print more money and start infrastructure "make work" projects.

    Printing money generally leads to inflation, usually rapid inflation.

    The US is stuck between a rock and a hard place.

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    Wow...

    Hey at least our Dollar is up
    CAD/USD 0.8138 + 0.0112 (+1.4%)

    Today lol.
    2011 Mercedes C63 AMG //2009 Mercedes C350 SOLD //2008 BMW 335i SOLD //2006 Mercedes C Sold// 2002 BMW M3 SOLD// 2004 Porsche C4S SOLD// 2006 Audi S4 SOLD// 2005 Audi 1.8T SS SOLD// 2004 Subaru STi SOLD// 1994 LHD Toyota Supra SOLD//1993 LHD Mazda RX-7 SOLD // 2002 Honda S2000 SC SOLD// 2004 Range Rover SOLD//

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    Originally posted by JAYMEZ
    Wow...

    Hey at least our Dollar is up
    CAD/USD 0.8138 + 0.0112 (+1.4%)

    Today lol.
    It will be up for a while.

    We have two things happening at the same time.

    1. This Fed announcement. As long as the Canadian Government doesn't follow suit (I expect it won't), we should hover at about the $1.20 range (my guess).

    2. Oil prices are rising. OPEC cut production and the summer driving season is upon us. A rise in oil prices will elevate out dollar.

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    Hyperinflation here we come!

    Zimbabwean dollars will be nothing compared to the US dollar.

    $1 Trillion US is the entire GDP of Canada for one year. I'd expect the CDn dollar to eventually raise at least 5 cents or 5% on this news. This may be the nail in the coffin for Canadian manufacturing.

    China will not be happy with the US. Chinese investments (freaking huge) in the US are now instantly worth less.
    Last edited by ZenOps; 03-19-2009 at 10:41 AM.
    0.5 gram microsd delivered by 12,000 pound combustion vehicle and driver.

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    Saweet, I'll be able to grab an Evo VIII for even cheaper now
    In reference to Rob Anders:
    Originally posted by ZenOps
    Hes not really that bad...

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    Can't wait for cheap cars again.

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    honestly, I'm going to buy a decent ride from the US this summer if the Canadian dollar gets to be back on par.
    Destroying anti-US trolls and idiots like broken_legs since 2009.
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    unreal and interesting youtube video on the feds buying up the treasury.
    Destroying anti-US trolls and idiots like broken_legs since 2009.
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    Like I said above. Rock and a hard place.

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    I think the more America watches Fox News the dumber the nation gets.

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    As dumb as fox news is, there is nothing wrong with what he is saying. Although, I don't get what the other guy is saying at the end.

    The fed is literally making money out of thin air. It is a slippery slope.

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    ^ I really respect and like Glenn Beck. He's always got some great points. And on this, he's right on.
    So Benyl, you're saying that the only thing the US should do/should have done, is to stop spending a let us slide deep into a recession and with more tax cuts, allow the private sector to spend its way back into a healthy economy? Cause that's why Beck is advising if I'm correct.
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    I am not saying anything.

    I am explaining what is going on and how there isn't much they can do.

    Both outcomes of this situation are bad in my opinion.

    Printing money probably isn't the smartest thing to do.

    By the way, I do not respect Glenn Beck as he is a bit of a sensationalist. However, what he is saying here isn't wrong.

    Tax cuts aren't the answer. You need to tax the rich to get out of this problem, which I believe Obama will start doing. People making over $250K / year are likely to see higher taxes soon. I am fine with that, because they can afford it.

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    ^ to play the side of the rich, why would they invest in American business' and industries if they get taxed more here? I'm not sure taxing the rich is fair..
    the top 1% pay 40% of all income taxes, and the top 10% of earners pay 70% of all income taxes.

    To be in the top 1% of taxpayers you've got to have adjusted gross income of just under $400,000. Obama defines "rich" as those making at least $250,000, and that would consist of roughly the top 2% of income earners.


    As a rule of thumb, the top 2% of taxpayers are probably paying close to 50% of all income taxes, which in 2006 totaled a bit over $1 trillion. Federal revenues for calendar year 2008 were $2.4 trillion, just about exactly the same as they were in 2006, so it's safe to assume that total income taxes haven't changed much since 2006. (Corporate taxes are a little over $300 billion, and payroll taxes are about $650 billion.)

    It's hard to keep track of all the new spending Obama is proposing, but between the stimulus bill, universal healthcare and bank bailouts—plus his call for a general increase in the federal budget of 8.5% for the next year—it could easily add up to an extra $300 billion a year for many years to come. Do the math: the "rich" are currently paying about $500 billion per year in income taxes, and he presumably wants them to pay an additional $300 billion—a 60% increase in their tax burden. That is just about impossible in my book. Something has got to give.

    http://scottgrannis.blogspot.com/200...s-already.html
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    Last edited by 01RedDX; 10-17-2020 at 02:55 PM.

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    Originally posted by 911fever
    ^ to play the side of the rich, why would they invest in American business' and industries if they get taxed more here? I'm not sure taxing the rich is fair..
    the top 1% pay 40% of all income taxes, and the top 10% of earners pay 70% of all income taxes.

    To be in the top 1% of taxpayers you've got to have adjusted gross income of just under $400,000. Obama defines "rich" as those making at least $250,000, and that would consist of roughly the top 2% of income earners.


    As a rule of thumb, the top 2% of taxpayers are probably paying close to 50% of all income taxes, which in 2006 totaled a bit over $1 trillion. Federal revenues for calendar year 2008 were $2.4 trillion, just about exactly the same as they were in 2006, so it's safe to assume that total income taxes haven't changed much since 2006. (Corporate taxes are a little over $300 billion, and payroll taxes are about $650 billion.)

    It's hard to keep track of all the new spending Obama is proposing, but between the stimulus bill, universal healthcare and bank bailouts—plus his call for a general increase in the federal budget of 8.5% for the next year—it could easily add up to an extra $300 billion a year for many years to come. Do the math: the "rich" are currently paying about $500 billion per year in income taxes, and he presumably wants them to pay an additional $300 billion—a 60% increase in their tax burden. That is just about impossible in my book. Something has got to give.

    http://scottgrannis.blogspot.com/200...s-already.html
    Well, it sounds crazy how much of a percentage they pay until you look at how much they have. Actually it's pretty much right in line. The top 1% pay 40%, but they also control 40% of the nations wealth.

    And taxes aren't going to rise 60% because of the money being spent. It's not a direct relationship between the yearly budget and the yearly taxes. The national debt went up nearly 5 trillion dollars this decade and the tax rates didn't increase one bit.

    So while this all spells trouble down the line, your math is pretty wrong.

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    I love how the Fed creates a trillion dollars, then basically buys shit from itself. What I really want them to do is start reporting M3 again, I'd love to see where we're at now.

    Gold shot up but stalled. If it really starts to run and the USD falls apart, inflation will become a major concern. Hopefully they fed can raise rates then, after this whole credit mess is done with (If it ends).

    What I want to know is how the US is going to pay off all this debt. The national debt is easily above $40 trillion now.

    John Templeton said it was 30 Trillion and that was 2003.

    "Sir John also had a few words about debt -- a four-letter word that folks seem not to care about : "Emphasize in your magazine how big the debt is. . . . The total debt of America is now $31 trillion. That is three times the GNP of the U.S. That is unprecedented in a major nation. No nation has ever had such a big debt as America has, and it's bigger than it was at the peak of the stock market boom. Think of the dangers involved. Almost everyone has a home mortgage, and some are 89% of the value of the home (and yes, some are more). If home prices start down, there will be bankruptcies, and in bankruptcy, houses are sold at lower prices, pushing home prices down further." On that note, he has a word of advice: "After home prices go down to one-tenth of the highest price homeowners paid, then buy."
    Or about $50 trillion...

    David M. Walker, formerly the Comptroller General of the United States, and currently president of The Peter G. Peterson Foundation, has prepared “A Citizens Guide to the Financial Condition of the United States Government,” which is available online at www.pgpf.org and which notes that in 2007 the major fiscal exposures to the government amounted to $52.7 trillion dollars. The report observes: “The dollar figures used when discussing the federal budget are almost too large to comprehend. To translate the estimated $52.7 trillion in major fiscal exposures – our federal fiscal hole – into more understandable numbers, the U.S. Government Accountability Office (GAO) calculated the burden as equivalent to $175,000 per person living in the United States; $410,000 per full-time worker; $455,000 per household.”
    http://www.opinionfest.com/category/david-m-walker/
    Last edited by Canmorite; 03-20-2009 at 06:13 PM.
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    I do get great service there, especially when I mention my name, haha.

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