When Fed policy is not really liked

Discussion in 'Stock Market Forum' started by WaveWage, Sep 20, 2015.

  1. WaveWage

    WaveWage Well-Known Member

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    Is Federal Reserve making market more vulnerable? This is what some economists says and I would like to bring in this forum their point of view, so they can be challenged and we'll perhaps know the truth or not out of it.
    Some economists says that the Federal Reserve is the problem. The Quantitative Easing + low interest rates it is doing is not like free money, meanwhile market believe so and get wrong on it. The end result would be that the market is weaker than what we see. Finally, they predict a decline that should be enough important to take a look on it.
    What is your opinion on it? What's the difference between "printing money" and the Quantitative Easing done with the low interest? Are markets that weak?
     
  2. petesede

    petesede Guest

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    Quantitative easing causes a drop in the bucket as far as money creation. Yes, printing money and low interest rates are a recipe for inflation, but there are many more ingredients. There is absolutely no signs of inflation in the next 6 months. Until there starts to be some signs of inflation, then all this anti-fed hyperbole is just people complaining for nothing. The fed should be commended for taking advantage of world events to keep the USA economy growing without inflation.

    These guys are just too politically motivated. If the Fed raised interest rates, then they would complain about the Fed stiffling growth.
     
  3. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Markets tend to react / overreact to lots of things, and are often difficult to analyze. Securities often do the same, and are generally easier to analyze. I prefer to focus more on securities than overall markets, and to focus more on the longer term than the short term.

    Re the fed, some even believe the fed should be abolished. But yes, it is not normal nor desirable to have the "free money" emergency status on forever or even for many years as a new normal.

    Printing too much money, borrowing too much, pumping too much money into the economy via excess asset purchases, and other forms of government over-involvement will have consequences. We've seen this before - at least part of the great recession was due to previous fed over-easing for too long.

    Things have certainly gotten better over the last 7 years, but they obviously aren't that great. Otherwise, we would have interest rates several points higher. Commodities being so deflated is also worrisome.

    But to still have zero rates after 7 years is unreal. I think the fed is too involved in things it shouldn't be such as stock market swings. I think they are also somewhat politicized. Yellen strikes me as weak - just look at the way she allows people like Elizabeth Warren to push her around during testimony.

    View these market selloffs due to fed policy and various other issues as good times to buy good companies cheaper than they'd normally be.
     
  4. WaveWage

    WaveWage Well-Known Member

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    I can see that markets tend to over-react, especially when conditions are a bit though, and this is what makes this volatility we don't really want but we expect.
    But here I tried more to analyze arguments than market reactions overall. I don't know if I was clear enough about it, but I wondered if some are even unhappy of the Quantitative Easing because it is not as profitable as other levers for the same purpose of borrowing money to the markets.


    I am like you on this one however, the quicker it is done, the better it is because left too long, it wouldn't feel so good. But when Fed state it will do it this year, if they are respecting their insights, I feel like that one month less or more isn't that worrisome.
     

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