U.S. suffered worst quarterly contraction on record

[jardiniere]

deleted

 

[civilwarbuff]

Explain why the Fed had to start printing money in Sept. 2019 before the virus was ever around. Why was liquidity a problem? How was the corporate bond market at that time?

No citations?.....just questions?....with no basis? We can all ask questions all night long....

Obama’s 2009 Recovery Act Kicked Off Over 10 Years Of Economic Growth

2% is not growth....that barely maintains the status quo.....

 

[FreeinChrist]

No citations?.....just questions?....with no basis? We can all ask questions all night long....

2% is not growth....that barely maintains the status quo.....

Check post #39

And read
The Fed has been injecting hundreds of billions into markets since September's rate crisis. Here's why it might not be enough to calm lending conditions. | Markets Insider

The Federal Reserve has been injecting capital into the financial system for weeks to calm money markets. But the actions are prompting worry among analysts, portfolio managers, and even Democratic primary candidates.

The central bank is looking to boosting liquidity after the short-term funding rate spiked to 10% from 2% overnight in mid-September. The rate dictates how expensive it is for banks to access quick capital, and the unexpected jump symbolizes volatility in the usually-stable lending market.

The spike prompted the Fed to start injecting capital through overnight market repurchase agreement operations - also known as "repos" - on September 17. The Fed also began monthly purchases of $60 billion in Treasury bills on October 15 to keep its key interest rate within an intended range.
​

The Fed - What Happened in Money Markets in September 2019?

Strains in money markets in September seem to have originated from routine market events, including a corporate tax payment date and Treasury coupon settlement. The outsized and unexpected moves in money market rates were likely amplified by a number of factors. First, these events occurred against a backdrop of increased Treasury outstanding and reduced reserve balances. Reserves were at a multi-year low, which reduced liquidity, while Treasuries outstanding were at an all-time high, which led to increased borrowing demand. Second, borrowing demand in the repo market proved to be highly inelastic, which along with the persistence of trading relationships in the triparty segment, led cash borrowers to pay up significantly to secure the funding they needed. Lastly, on the lending side, uncertainty about cash flows and market conditions was a factor contributing to the reluctance of lenders to increase their lending in response to higher rates. For banks, this reluctance may have been exacerbated by frictions due to supervisory and regulatory factors, including their internal risk management practices, which may have prevented them from lending their excess funds to take advantage of higher rates. These factors appeared to have contributed to acute pressures on money market rates in September. Ongoing analysis may help us better understand how pressures emerged and spread across different money markets.​

 

[civilwarbuff]

Check post #39

And read
The Fed has been injecting hundreds of billions into markets since September's rate crisis. Here's why it might not be enough to calm lending conditions. | Markets Insider

The Federal Reserve has been injecting capital into the financial system for weeks to calm money markets. But the actions are prompting worry among analysts, portfolio managers, and even Democratic primary candidates.

The central bank is looking to boosting liquidity after the short-term funding rate spiked to 10% from 2% overnight in mid-September. The rate dictates how expensive it is for banks to access quick capital, and the unexpected jump symbolizes volatility in the usually-stable lending market.

The spike prompted the Fed to start injecting capital through overnight market repurchase agreement operations - also known as "repos" - on September 17. The Fed also began monthly purchases of $60 billion in Treasury bills on October 15 to keep its key interest rate within an intended range.
​

The Fed - What Happened in Money Markets in September 2019?

Strains in money markets in September seem to have originated from routine market events, including a corporate tax payment date and Treasury coupon settlement. The outsized and unexpected moves in money market rates were likely amplified by a number of factors. First, these events occurred against a backdrop of increased Treasury outstanding and reduced reserve balances. Reserves were at a multi-year low, which reduced liquidity, while Treasuries outstanding were at an all-time high, which led to increased borrowing demand. Second, borrowing demand in the repo market proved to be highly inelastic, which along with the persistence of trading relationships in the triparty segment, led cash borrowers to pay up significantly to secure the funding they needed. Lastly, on the lending side, uncertainty about cash flows and market conditions was a factor contributing to the reluctance of lenders to increase their lending in response to higher rates. For banks, this reluctance may have been exacerbated by frictions due to supervisory and regulatory factors, including their internal risk management practices, which may have prevented them from lending their excess funds to take advantage of higher rates. These factors appeared to have contributed to acute pressures on money market rates in September. Ongoing analysis may help us better understand how pressures emerged and spread across different money markets.​

Hmmmmm....wonder if this had anything to do with it:
Fed hikes interest rates, sets three increases for 2019
.....and how does fed rates affect liquidity?.....
Liquidity Is the Lever That Controls Your Finances
Basics of Liquidity
High liquidity occurs when there an institution, business, or individual has enough assets to meet financial obligations. Low or tight liquidity is when cash is tied up in non-liquid assets, or when interest rates are high, since this makes it expensive to take out loans.1 (my bolding)


High liquidity also means there's a lot of capital. Capital is the difference between assets and liabilities. It measures the financial cushion available to an institution to absorb losses. Assets include both highly liquid assets, such as cash and credit, and non-liquid assets, including stocks, real estate, and high-interest loans.


As evidenced by the global financial crisis of 2008, banks historically fail when they lack liquidity, capital, or both. This is because banks can't remain solvent when they don't have enough liquidity to meet financial obligations or enough capital to absorb losses. For this reason, the Federal Reserve has tried to boost liquidity and capital at banks since the global financial crisis.

 

[SimplyMe]

You mean till the pandemic brought it to a halt, right?
Obama Wins The Gold For Worst Economic Recovery Ever
https://www.investors.com/politics/commentary/obama-recovery-is-worst-in-postwar-history/
7 Facts That Show Obama’s Economic Recovery Has Been AWFUL
.....and etc and etc.......

I don't think those articles help you the way they think you do. For example, let's go through the "7 facts":
1. "The Obama recovery has had a record number of quarters where economic growth has been two percent or lower." This one somewhat pans out -- other than the comment they end this point with: "There has not been a single year under Obama in which the annual growth rate has been at three percent, which is unprecedented for an American president." The problem is that Trump hasn't had a 3% growth rate, either -- instead Trump's best year is no better than Obama's best year (2.9%).

2. "The average real GDP growth of recoveries rate prior to the Obama recovery was 4.3 percent." Again, while Trump hasn't gone below 2% (then again, he wasn't recovering from a recession), he hasn't hit 3% and two of Trump's years he was under 2.5%. This applies as much to Trump as to Obama.

3. "The most recent labor participation rate was 62.7 percent, with slightly more than 94.5 million Americans out of the work force." This is a stat that is also horrible under Trump -- odd that Trump trumpeted it so much when running for President and promptly dropped it since. It did get as high as 63.4% under Trump but was still historically low, at least prior to the virus. For all the talk of "greatest economy in history" and "lowest unemployment," he only improved the labor participation rate 0.7% -- it was still well below what it was at the start of the 2008 recession.

4. "The number of jobs created under the Obama economy has not kept up with the working age population." This is largely the same point made above but using different wording -- and Trump didn't substantially change the numbers. In fact, more jobs were created in Obama's last three years than were created under Trump in his first three years (so all pre-virus).

5. "There has been a decline in business startups and investment." Again, like most others in this list, this has not improved under Trump (again, prior to the virus) -- despite the tax breaks for businesses and the removed regulations.

6. "There has also been a decline of real household family income." Two points here. First, they limited data only to 2014, in fact, it increased in every year of Obama's second term (after recovery from the recession) and set a record in 2016 for the highest ever. Second, while it has continued to increase in Trump's first two years (2019 numbers aren't available, that I can find), setting new records, but the increases appear not to be any better than what occurred under Obama.

7. "There has also been a spike of Americans on food stamps." This one is actually false. It is true that Food Stamp usage spiked during the recession but they started coming down before this article was published -- I might have actually given Trump this one if they hadn't tried to "fudge" on this one. Trump has lowered use of food stamps, though he also made them tougher to qualify for. The problem here is they are judging Obama because more Americans were on food stamps in 2016 than before the recession. From what I saw, Trump had not brought them back down to 2008 levels.

Apparently, rather than having the "best economy in history," as Trump has repeatedly tried to claim, he is merely a part of the "Worst economic recovery ever."

 

[FreeinChrist]

Hmmmmm....wonder if this had anything to do with it:
Fed hikes interest rates, sets three increases for 2019
.....and how does fed rates affect liquidity?.....
Liquidity Is the Lever That Controls Your Finances
Basics of Liquidity
High liquidity occurs when there an institution, business, or individual has enough assets to meet financial obligations. Low or tight liquidity is when cash is tied up in non-liquid assets, or when interest rates are high, since this makes it expensive to take out loans.1 (my bolding)


High liquidity also means there's a lot of capital. Capital is the difference between assets and liabilities. It measures the financial cushion available to an institution to absorb losses. Assets include both highly liquid assets, such as cash and credit, and non-liquid assets, including stocks, real estate, and high-interest loans.


As evidenced by the global financial crisis of 2008, banks historically fail when they lack liquidity, capital, or both. This is because banks can't remain solvent when they don't have enough liquidity to meet financial obligations or enough capital to absorb losses. For this reason, the Federal Reserve has tried to boost liquidity and capital at banks since the global financial crisis.

uh-huh, I know some about liquidity.
Your linked article from March 2018 talks about expected rate increases in 2019.
Did the Fed actually increase interest rates this year? nope

Federal Reserve Cuts Interest Rates for Third Time in 2019

The Federal Reserve cut interest rates on Wednesday for the third time this year, reversing nearly all of 2018’s rate increases as uncertainty from President Trump’s trade war and slowing global growth continue to pose risks to the United States economy.

The decision to cut rates by another quarter point despite rock-bottom unemployment and decent overall growth shows the extent to which Mr. Trump’s hot-and-cold trade war, paired with a tenuous global outlook, has put the Fed on the defensive. While the central bank was on a steady march to raise rates just a year ago, it has spent the past several months trying to insulate the American economy against those threats and keep a record expansion humming.

​

Historically, when the economy is good, interest rates are increased, which means small businesses have to think differently in regards to liquidity. They usually do not print money except to replace ruined cash when the economy is good.

But Trump's trade wars have caused problems and there is a problem with corporate debt.


Heck, even the pro-Trump NYPost saw a problem last October:

https://nypost.com/2019/10/14/feds-...text=If you print too much,are bound to go up.

Although there’s been no official announcement, the Federal Reserve has restarted QE — better known as Quack Economics.

You might know it better as Quantitative Easing, in which the central bank buys large amounts of government bonds or other assets to help stimulate the economy. There have been three of these QEs since the financial crisis more than 10 years ago. But the big question now: Is there a new crisis that has the Fed dusting off QE?

The Fed isn’t saying.

QE is simple to understand even though economists gave it a sophisticated name. Here’s how it works: The Fed electronically prints trillions of dollars in extra money, which it uses to purchase bonds and other securities.

This was supposed to keep interest rates low. And the low interest rates were supposed to help the economy grow.

Once the economy got going, the Fed was supposed to stop printing money. The economy would then stand on its own.

I used the phrase “supposed to” a number of times because QE didn’t quite live up to expectations. And there have been many vocal critics — myself included — who have argued that QE was just another version of the age-old money-printing schemes that have created enormous inflation problems in the past.​

They were printing and then a big problem came up with the virus.

The problem with printing trillions of money is that it is not well backed up - and we are looking at future devaluation and inflations.

 

[civilwarbuff]

Apparently, rather than having the "best economy in history," as Trump has repeatedly tried to claim, he is merely a part of the "Worst economic recovery ever."

Sorry, that title is claimed (and verified) to belong to Obama.....spin it as you will....

 

[wing2000]

Don't watch the news much?
Now I go to Kroger's and there is a sign that says 'masks required'.....

Did you miss the instructions of the last three months? Of course, if you were listening to the POTUS, I can understand your feigned confusion.

 

[wing2000]

That is pure speculation on your part. We are a different culture than those other countries where their governments exert far more control over their citizens than we do.....one size DOES NOT fit all.

Are we that much different, than say, Canada?

 

[civilwarbuff]

uh-huh, I know some about liquidity.
Your linked article from March 2018 talks about expected rate increases in 2019.
Did the Fed actually increase interest rates this year? nope

You do understand that fed rate increases do take some time to filter down to the economy, right? The impact is not immediate (unless you confuse the market for the economy) which tends to have a knee jerk reaction to things.

 

[civilwarbuff]

Did you miss the instructions of the last three months? Of course, if you were listening to the POTUS, I can understand your feigned confusion.

Did you not bother to listen to the interview?

 

[wing2000]

Did you not bother to listen to the interview?

I did. And I am well aware of the CDC's (and Fauci's) position in March. At the time, community spread was not thought to be widespread yet in the United States. There was a lot of other information that was unknown at that time, including the fact that up to a third of infected people can spread the virus unknowingly. So when r. Fauci states in his lead sentence:

"The masks are important for someone who is infected to prevent them from infecting someone else"

...he did so in the context in March. It's also a fact there was critical shortage of N-95 mask and people were starting to buy up the supply.

The CDC changed it's position by the beginning of April....yet, we continue to hear Facui said...as if people can't comprehend the advice will change as knowledge increases...

 

[SimplyMe]

Sorry, that title is claimed (and verified) to belong to Obama.....spin it as you will....

I wouldn't want to deny Trump the credit for which he is due.

 

[FreeinChrist]

You do understand that fed rate increases do take some time to filter down to the economy, right? The impact is not immediate (unless you confuse the market for the economy) which tends to have a knee jerk reaction to things.

Some time but the increases were not that huge. In fact, the rates were really low in 2018 even with some increase.

And no friend, I don't confuse the market for the economy. That comment convinces me that you are not really reading my posts. If you have, then it was disingenuous of you.

U.S. suffered worst quarterly contraction on record

 

[civilwarbuff]

Are we that much different, than say, Canada?

Yew, we are. The people of Canada depends

I did. And I am well aware of the CDC's (and Fauci's) position in March. At the time, community spread was not thought to be widespread yet in the United States. There was a lot of other information that was unknown at that time, including the fact that up to a third of infected people can spread the virus unknowingly. So when r. Fauci states in his lead sentence:

"The masks are important for someone who is infected to prevent them from infecting someone else"

...he did so in the context in March. It's also a fact there was critical shortage of N-95 mask and people were starting to buy up the supply.

The CDC changed it's position by the beginning of April....yet, we continue to hear Facui said...as if people can't comprehend the advice will change as knowledge increases...

Dr. Fauci Made the Coronavirus Pandemic Worse by Lying About Masks
Look at the date of the article.....6/16/2020.....not April.....not May......6/16/2020.....from msn no less....
https://www.washingtonexaminer.com/...that-people-distrust-authority......6/18/2020
c'mon....get your head out of the sand.....

 

[civilwarbuff]

I wouldn't want to deny Trump the credit for which he is due.

As I said.....spin it as you will.....

 

[civilwarbuff]

U.S. suffered worst quarterly contraction on record

Yep, it sure did. What else would you expect when a significant part of your economy is shut down?....Roses and champagne?

 

[jgarden]

Are we that much different, than say, Canada?

Canada shares 5,250 miles of border with the US and its citizens are allowed to take international flights into the European Union - Americans not so much!

UNITED STATES - July 31, 2020
************************************************
NEW CASES - 70,904

DEATHS - 1,402

CANADA - July 31, 2020
*************************************************
NEW CASES - 513

DEATHS - 6
*****************************************************************************************
Given that the US has 8.7 times Canada's population, the adjusted figures that would allow for direct comparisons -

NEW CASES - 4,463.1

DEATHS - 52.2

Coronavirus Update (Live): 17,998,419 Cases and 687,783 Deaths from COVID-19 Virus Pandemic - Worldometer

 

[disciple Clint]

Eventually they got PPE and vents after Trump finally used the Defense Production act.
Remember?
View attachment 282061


Nurses are wearing garbage bags as they battle coronavirus: ‘It’s like something out of the Twlight Zone’

Kay, a nurse at The Brooklyn Hospital who did not want to give her last name for fear of reprisals from relatives of patients who are not allowed to visit their loved ones, told CBS reporter David Begnaud, who was covered in a hazmat decontamination suit and large face shield. “It’s like something out of the Twilight Zone. I don’t think any of us going through it will ever be the same.”


“I’d like a mask like yours,” she said. “We should all have masks like yours, and that white suit you have on? What do I have on? What is this?” Begnaud said it looked like she was wearing a garbage bag. Kay replied, "It is a garbage bag.” Another nurse wearing the same kind of transparent trash bag said she took time off with symptoms of coronavirus, and came back to work after recovering.


​

That was in mid April.

Why Is There Still a PPE Shortage?

Back in April, after weeks of doctors, nurses, and other health-care workers wearing trash bags for gowns and using takeout containers as face masks, President Trump declared victory over the personal-protective-equipment (PPE) shortage. Complaints about a lack of supplies, he said, were “fake news.” And by May, Trump said masks, gowns, gloves, and other necessities were in “tremendous supply to almost all places.”

Now it’s July, coronavirus cases are surging across the country, hospitals are reaching capacity in hot spots, and complaints about a lack of PPE continue. Four months after it became clear that the U.S. would need an unprecedented amount of medical equipment to see its way through the pandemic, it is still not available.​

The ppe problem was cause by China buying the world supply before anyone knew what was going on. It also did not help that China was the primary maker of masks etc.

 

[FireDragon76]

I think it was going to happen no matter what but not this bad before Covid19. The Fed started printing money last September in order to increase liquidity so that big banks could lend to smaller banks (the repo market it is called, if I have that right).
The economy was being propped up for quite a while, but it was showing problems before Covid19 showed up.

What I fear is that the economy crashes more, and because of all the money printed,
currencies will devalue and inflation will be bad - like in the 70s.
Some friends on Facebook were commenting about having a hard time finding some canning supplies - which reminded me of the 70s and a shortage we had at that time because folks were trying to garden and can more. They were trying to do this, but it is hard without the supplies:

​

But one needs the way to preserve the food. It was a problem in the 70s and it is a worry if supplies are short. I hope it doesn't all come from China.

There are shortages all around in all sorts of things.

I noticed something similar recently as I am getting into pro audio (microphones, preamps, compressors). There's lots of stuff that's either inflated in price or simply unavailable. So I am making do with junk.