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Sat Oct 26, 2019, 05:22 PM

I apologize to you all in advance.

My understanding of economics is very basic.

I read the recent OP by White Tara:
"Opinion: The Federal Reserve is in stealth intervention mode" https://www.democraticunderground.com/111686841

It sounds as if a major disaster is about to hit us, but I don't understand enough about economics to even follow the Opinion piece author's argument. I tried looking up some of the terms used, but the whole thing is about as clear as mud to me.

Is anyone willing to offer a simpler explanation of what is going on and where the danger lies? Or can someone point me to a resource (hopefully not book length) that can explain what all of this means re: the current economy and the Fed?

All I've managed to glean from it so far is that the Fed is doing something in stealth mode to try to fend off a disaster.

Thanks in advance for any help.

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Response to Adsos Letter (Original post)

Sat Oct 26, 2019, 05:33 PM

1. Who knows, but if the Federal Reserve were in stealth mode, the big money investors

would have spotted it long ago and sold big chunks of stocks, driving market down.

I do think risk of recession is high, especially with trump in office, but we are due a recession anyway. That’s just the way things are unfortunately.

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Response to Hoyt (Reply #1)

Sat Oct 26, 2019, 05:46 PM

2. Thank you Hoyt.

I'm just trying to understand what the opinion piece author is talking about.

My wife retires in December (at last!) and we will have two defined benefit pensions; however, leaving the workforce with a major recession looming makes me a little nervous.

Thanks again for your response.

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Response to Adsos Letter (Original post)

Sat Oct 26, 2019, 06:08 PM

3. 100 billion in overnight injections is some serious $

If daily injections are needed, just like a junkie, we are headed for an emergency crash cart..and
hope that twenty’s don’t become twos...

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Response to pbmus (Reply #3)

Sat Oct 26, 2019, 06:20 PM

4. Thank you pbmus.

What is the Fed trying to accomplish by injections? Why are they necessary?

I admit that I'm woefully ignorant on these things. I would happily look at some kind of article, etc., rather than having someone take the time to give me an explanation.

Thanks again for responding.

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Response to pbmus (Reply #5)

Sat Oct 26, 2019, 06:24 PM

6. Thank you for your patience and the link. n/t

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Response to Adsos Letter (Reply #6)

Sat Oct 26, 2019, 06:24 PM

7. You are more than welcome...

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Response to Adsos Letter (Original post)

Sat Oct 26, 2019, 06:54 PM

8. From what I'm gathering, is that not enough liquidity in the monetary system to keep interest...

rates as low as they want them (the interest rates) to stay. Markets are driving interest rates up (or are trying to) since investors are demanding a higher rate of return for their invested funds. The Fed doesn't want this and are trying to keep within their 'targets', whatever they are. The Feds normally set targets of employment, targets of interest rate(s), etc., and if there are pressures from the marketplace on these targets, they will interject funds in an attempt to divert/stem the 'tide' so to speak. This is what IMHO am thinking, but they seem to be losing the game here, having to go in repeatedly, and inject more and more funds into the process (more funds they interject (i.e., more dollars by buying bonds, or vice versa, issuing more bonds to accumulate more dollars out of the system)).

Being that the economic system seems to be slowing down, people are probably holding on to their money more tightly, thus, less dollars floating around, causing liquidity issues. If there is not enough liquidity in the system, this can cascade through the entire system. Again, the Fed seems to be tight-lipped about what's going on, perhaps with the Chinese selling off their bonds, they are sucking dollars off the markets?

And Fed efforts to keep targets on tap may fail if the needed stimulus is not big enough or too late. I recall from my economic studies that something similar happened during the great depression, they tried to stem the failing stock market by massively purchasing stocks, but to little avail. Perhaps this is what the Fed sees...an upcoming falling stock market (which in a lot of people's minds is overdue, due to the age of the current economic cycle, being 10+ years old.

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Response to SWBTATTReg (Reply #8)

Sat Oct 26, 2019, 07:51 PM

10. Thank you, Thank you, Thank you SWBTATTReg.

That explanation helped me a bunch in simply understanding what is happening.

I took a Macro class in college, but that was decades go.

And thank you so much for taking the time to formulate that explanation and for typing it out.

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Response to Adsos Letter (Reply #10)

Sun Oct 27, 2019, 11:22 AM

12. You're welcome. There is a lot of discussions about whether the markets are going up or ...

going down. Some serious discussions but I think the overall feelings are that the markets have been going up for quite some time, 10-11 years.

There are some inflationary pressures in some areas of the Country in the Housing / real estate area, and there are some serious debt issues in the business area. Big possible bubbles waiting to burst.

The Chinese have been dumping treasuries (US government bonds, they brought these for savings) onto the markets too. The Russians also are starting to price their contracts in Euros (not dollars), but their economy is 5% the size of the US economy so this isn't a 'showstopper'.

I imagine due to rump's idiotic rumblings and making them the target of his ire constantly (plus rump is an idiot and if something happens, do you think he's going to be on top of his game should the markets go into a tailspin?). Confidence in how things are going is a big factor and they do measure this, and consumer confidence is going down.



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Response to Adsos Letter (Original post)

Sat Oct 26, 2019, 06:58 PM

9. I found a website that has a series of videos that explain the banking system in relatively

simple terms. (caveat - These videos relate to the British banking system although it is similar to the US.) These videos give background and context to help in understanding the moves the Federal Reserve is applying to the US money system. There are six videos and are fairly short so they won't take a lot of time. I hope they help.

https://positivemoney.org/how-money-works/banking-101-video-course/

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Response to alwaysinasnit (Reply #9)

Sat Oct 26, 2019, 07:53 PM

11. Thank you alwaysinasnit

I will give those a look.

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