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Strategies & Market Trends : The Art of Investing
PICK 45.84-1.6%Nov 3 4:00 PM EST
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Arran Yuan
To: The Ox who wrote (1413)10/16/2020 2:21:12 PM
From: Sun Tzu1 Recommendation  Read Replies (2) of 10505
 
Then you misunderstood what the article said.

What he said, and there are numbers to prove his point, is that the Fed calculated the amount of QE based on the shortfall in GDP. Based on that and based on Fed's own statements, there is still a need for another $3.5T of QE.

Now the Fed cannot just print money. The money they print has to go to the member banks in the form of T-Bill purchases or goes to the government in the form of government borrowing. But the Fed cannot just print money and keep it in their own vaults. And even if they did, it would have no effect on the economy,

This was the problem that he raised. That without the stimulus spending there is no mechanism for the Fed to print more money b/c there is nowhere for it to go to. Which is why he is guessing that the Fed has been begging the congress to pass a stimulus bill.

The other problems that he raised is that when the Fed holds its auction for the T-bills, (1) a lot of foreign holders may rush in to sell their T-bills back to the Fed. And that the banks may not be meeting the reserve requirements to barrow more money (I suppose the Fed can find a loophole around this one).

Finally, the Fed has the option to buy more bonds (they've built themselves a borderline illegal loophole for that). These would be the mortgage bonds and/or the AAA corporate bonds. And this is what the Fed may end up having to do. But there is limit to that as the Fed is already holding a very big chunk of mortgage loans.

If you want to dispute the above points and I'll be happen to hear what you have to say. For example you could show (if you have the numbers) that we don't need any more spending and that the economy is on its way up without the need for a stimulus bill. Or you could point out an alternate means for QE that doesn't involve government borrowing or T-bill auctions.
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