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Started By
Message
Let's Discuss Monetary Policy and The Fed
Posted on 4/13/17 at 2:34 pm
Posted on 4/13/17 at 2:34 pm
The Vice President of the Fed in ATL came into Orange Beach to give an "economic update" yesterday.
Adrienne Slack.
I asked her about the $1.4 trillion worth of student debt and the default rate of over 10% ($160 billion). Asked her if a bubble was coming. She said she could not comment on bubbles, because "you can't see them coming". She then said that the three sectors of the people she spoke to who were concerned were "educators, students, and housing".
She tried to go to the next question (she took one after me, who was the second to ask), but I pressed her, and stated that there is over $150 billion in bad debt out there, and you don't see that as a concern. She restated her previous BS.
Below is a statistic slide she shared during her 20 minute presentation, and it is truly frightening.
The Fed "bought" bad debt in 2008 for the first time in history, and has nearly 800x more on their books than a decade ago.
When pressed for a timeline about when and if they would unload the debt, Mrs. Slack could "not give a definite timeline or even say if we will reduce our book".
Now, the answer should not surprise you.
But, the fact she shared this with an audience was surprising IMO.
This does not look good at all.
Adrienne Slack.
I asked her about the $1.4 trillion worth of student debt and the default rate of over 10% ($160 billion). Asked her if a bubble was coming. She said she could not comment on bubbles, because "you can't see them coming". She then said that the three sectors of the people she spoke to who were concerned were "educators, students, and housing".
She tried to go to the next question (she took one after me, who was the second to ask), but I pressed her, and stated that there is over $150 billion in bad debt out there, and you don't see that as a concern. She restated her previous BS.
Below is a statistic slide she shared during her 20 minute presentation, and it is truly frightening.
The Fed "bought" bad debt in 2008 for the first time in history, and has nearly 800x more on their books than a decade ago.
When pressed for a timeline about when and if they would unload the debt, Mrs. Slack could "not give a definite timeline or even say if we will reduce our book".
Now, the answer should not surprise you.
But, the fact she shared this with an audience was surprising IMO.
This does not look good at all.
9
Posted on 4/13/17 at 2:37 pm to BamaCoaster
Thanks Obama.....
Posted on 4/13/17 at 3:12 pm to BamaCoaster
She's right, nobody can predict exactly when a bubble is coming. Neither can you. You can't give me a date nor can you tell me with 100% certainty that a bubble burst will occur in your lifetime.
Second, you really can't expect her to tell you what the Fed plans to do in the future. That's not a decision up to one person and it's dependent on the economic circumstances.
Second, you really can't expect her to tell you what the Fed plans to do in the future. That's not a decision up to one person and it's dependent on the economic circumstances.
Posted on 4/13/17 at 3:19 pm to cahoots
quote:
She's right, nobody can predict exactly when a bubble is coming. Neither can you. You can't give me a date nor can you tell me with 100% certainty that a bubble burst will occur in your lifetime.
True.
But, one can look with the rising default of student loans (12%) as well as the continued rise in tuiton (9% in the past couple years), stagnation of wages, and increased amount of student debt (up to an average of $34,000) and not see an issue.
Also, one cannot honestly assess that chart and not see an issue with the rise of debt carried on the books by the Fed and see an issue, correct?
Posted on 4/13/17 at 3:20 pm to BamaCoaster
That is A LOT of money out there they have dumped since 2008.
I know where most of it is at.
If the Bank still owns the property that has fallen into bad debt; the market picks back up and the price of the property rises back par or above the loan; why aren't they selling the bad debt back to the bank and the bank issue another mortgage on the property and make their profit? I know there are regulations and laws out the arsehole on just about everything and do not expect it to be different here, but I did expect the FED to sell that Mortgage Debt back to the banks eventually.
I know where most of it is at.
If the Bank still owns the property that has fallen into bad debt; the market picks back up and the price of the property rises back par or above the loan; why aren't they selling the bad debt back to the bank and the bank issue another mortgage on the property and make their profit? I know there are regulations and laws out the arsehole on just about everything and do not expect it to be different here, but I did expect the FED to sell that Mortgage Debt back to the banks eventually.
Posted on 4/13/17 at 3:25 pm to BamaCoaster
quote:The chart you posted doesn't show "debt carried on the books by the Fed."
Also, one cannot honestly assess that chart and not see an issue with the rise of debt carried on the books by the Fed and see an issue, correct?
The chart shows assets the Fed owns.
Eta: Your OP doesn't discuss monetary policy like your title says. Are you planning on starting a discussion about monetary policy in another post?
This post was edited on 4/13/17 at 3:29 pm
Posted on 4/13/17 at 3:30 pm to LSURussian
quote:
LSURussian
So, the light blue portion, the "agency debt and MBS"...that is an asset?
Posted on 4/13/17 at 3:30 pm to BamaCoaster
Yes, an asset for the Fed. A liability for the issuing entity.
This post was edited on 4/13/17 at 3:36 pm
Posted on 4/13/17 at 3:41 pm to BamaCoaster
quote:
BamaCoaster
You should direct your questions to the Board of Governors of the Fed.
Posted on 4/13/17 at 3:44 pm to LSURussian
quote:
LSURussian
You are the board's expert on monetary policy.
What do you think about the federal reserve's "increased assets"?
A necessary evil?
A sound experiment?
A good move?
Posted on 4/13/17 at 3:56 pm to BamaCoaster
It had to be done to avoid a long lasting global depression.
Just curious, you were invited to attend a discussion led by an officer of the Atlanta Federal Reserve District bank. What industry do you work in and what specifically concerns you about the growth in the Fed's balance sheet?
Just curious, you were invited to attend a discussion led by an officer of the Atlanta Federal Reserve District bank. What industry do you work in and what specifically concerns you about the growth in the Fed's balance sheet?
Posted on 4/13/17 at 3:57 pm to LSURussian
How is the bad debt they sold to the FED for par (when it was worth shite) equal to any liability? It is a sold product. There is no liability for the issuing party of the Mortgage Back Security unless there is a contract that they must buy it back at a undetermined/indefinite future date i.e. when the market picks back up to par.
The FED has a liability whenever they increase the money supply, but when they buy any asset they either sell off another asset first--i.e. sell a short term security--to buy a long term security which could have a nil effect on their liabilities or it could decrease their liabilities.
What I want to know is WHEN are they going to start unloading the MBS and suck in some of the excess money that is in the system to allow interest rates to begin normalizing once again?
I know where all that money is at
The FED has a liability whenever they increase the money supply, but when they buy any asset they either sell off another asset first--i.e. sell a short term security--to buy a long term security which could have a nil effect on their liabilities or it could decrease their liabilities.
What I want to know is WHEN are they going to start unloading the MBS and suck in some of the excess money that is in the system to allow interest rates to begin normalizing once again?
I know where all that money is at
Posted on 4/13/17 at 4:25 pm to reo45
quote:Where is that on the chart posted and how much is it? You obviously don't understand debt instruments, aka, bonds, which the Fed buys.
How is the bad debt they sold to the FED for par
quote:Incorrect.
There is no liability for the issuing party of the Mortgage Back Security unless there is a contract that they must buy it back
quote:Nope. By buying assets the Fed increases the money supply. If the Fed couldn't buy an asset without first selling an asset the money supply would not increase. Those transactions would cancel out the effect on the money supply.
but when they buy any asset they either sell off another asset first-
quote:The Fed doesn't have to sell the MBS it owns. MBS are self-liquidating as the principle & interest of the underlying mortgages in the bonds are paid down.
What I want to know is WHEN are they going to start unloading the MBS and suck in some of the excess money that is in the system
quote:The process of raising interest rates has already begun. The Fed has increased the benchmark Fed funds rate twice in the last 90 days and three times in the last 15 months.
to allow interest rates to begin normalizing once again?
quote:Doubtful.
I know where all that money is at
Posted on 4/13/17 at 5:02 pm to LSURussian
quote:
of the Atlanta Federal Reserve District bank. What industry do you work in and what specifically concerns you about the growth in the Fed's balance sheet?
I coach soccer
I was appointed by the ex AL governor to "reform drug policy"
I own an insurance agency
I write op-eds for al.com
I am concerned that the almighty fed is putting band aids on the economy and that they will be ripped off sooner than later. I work in a tourist destination, and my clients will be hurt when and if shite hits the fan.
QE infinity and student loans will hurt my generation for quite some time, in my opinion.
And, exactly wtf does it matter what I do?
Can a layman and American not be interested in monetary policy?
Posted on 4/13/17 at 5:30 pm to BamaCoaster
quote:
default rate of over 10% ($160 billion).
It's worse. 18%.
quote:
tated that there is over $150 billion in bad debt out there, and you don't see that as a concern. She restated her previous BS.
She's probably right because student loan debt can't be charged off like other debt and their are no investment derivatives on student loan debt. Borrowers are obligated for life to pay down their student loans. They cannot be forgiven through bankruptcy so there is no instant and massive charge off that would cause liquidity probably akin to the 2008 finical crisis due to MBSs.
quote:
Below is a statistic slide she shared during her 20 minute presentation, and it is truly frightening.
The treasuries and MBSs on the Fed's balance sheet where accumulated during the rounds of QE and Operation Twist. Those will all wind down in due time.
quote:
When pressed for a timeline about when and if they would unload the debt, Mrs. Slack could "not give a definite timeline or even say if we will reduce our book".
For bonds shouldn't that be when the bond maturity is up? For MBSs should't that be when the underlying mortgage is paid off or the charged off?
Posted on 4/13/17 at 5:32 pm to LSURussian
quote:
Where is that on the chart posted and how much is it? You obviously don't understand debt instruments, aka, bonds, which the Fed buys.
I think you misunderstood my question. I understand Bonds as well as anyone on here. I can guarantee you that. The legal jargon not so much, but the basic premise of bonds I understand as well as you. I guarantee it.
quote:
Incorrect.
How in the FRICK could there be any liability for the seller?? What the freak?? The only liability would be deception or concealing any information before selling the product/security: like any other product sold, i.e., Coffee is hot; don't spill on the label of a mcdonalds cup.
quote:
Nope. By buying assets the Fed increases the money supply. If the Fed couldn't buy an asset without first selling an asset the money supply would not increase. Those transactions would cancel out the effect on the money supply.
You once again TOTALLY misunderstood me.
quote:
Doubtful
Yes, I do. It is not rocket science. I know you folks like to think money is some foreign abstract idea that proles can't grasp, but it is so easy, well, as money. A lot was parked at the regional FED for years as they paid interest on the money so banks found it more profitable to keep the money parked at the regional federal reserve bank than to lend. A lot of the money went into the hot money overseas for awhile; a lot went into assets such as stocks and bonds. What? You think this shite made it to the streets?
quote:
The Fed doesn't have to sell the MBS it owns. MBS are self-liquidating as the principle & interest of the underlying mortgages in the bonds are paid down.
How many folks still paying off that debt when they walked away from their homes again? These magic tricks don't work. Not here. They may have a few honest debtors that are paying back some of that trash, but they aren't getting equal dollar for that trash. I don't care what fake numbers they report. I don't trust the FED as far as I trust you it seems who thinks they are the greatest thing since swiss cheese. No one buys dog shite (which is what these securities were) and magically makes them Lucky Charms. There are some Leprechauns at the FED I can give you that much.
You can take that act and that know it all attitude back to the circus clown.
Anyone who finds the FED as a worthy institution I have zero for.
Posted on 4/13/17 at 5:35 pm to BamaCoaster
Read a book, "The Creature from Jekyll Island" ... it explains everything in great detail. How it all started, how we got where we are and where it is going and how it will all eventually come crashing down.
quote:
One of the most influential and popular documents is 1994’s 600-page The Creature from Jekyll Island, written by author G. Edward Griffin. (You can read the full text here.) Building off decades-old theories on the Fed’s creation and its complicity in atrocity (financial or otherwise), the book soon enough took off as a best-seller. It recounts a secret meeting that took place in 1910 on Jekyll Island, a stretch of white-sand beaches and beautiful landscape off the coast of Georgia. It was an exclusive boys-club gathering of American financiers and politicians who wanted to shoot the shite on monetary policy.
Ron Paul—libertarian rock star, godfather of the Tea Party movement—blurbed and praised the book. “A superb analysis deserving serious attention by all Americans,” Rand’s dad wrote. “Be prepared for one heck of a journey through time and mind.”
Posted on 4/13/17 at 5:39 pm to BamaCoaster
quote:
QE infinity and student loans will hurt my generation for quite some time, in my opinion.
QE in terms of purchasing treasuries is bad IMO because the Fed then becomes and enabler for the federal government to spend more than it should (thus more debt) and to keep the interest rates low. If there wasn't a huge buyer of treasuries like the Fed during QE the interest rates would have hit a market equilibrium with the federal government's means to spend which is supposed to be based on the U.S. economy production (GDP). QE knocked those market forces out of whack.
Posted on 4/13/17 at 5:42 pm to reo45
quote:
How in the FRICK could there be any liability for the seller?? What the freak?
If the US treasury sells you a 10 year note with a par value of $1000 then the US treasury owes you $1000 in 10 years. That a liability to the seller (the US treasury). It's an asset for you.
Posted on 4/13/17 at 5:44 pm to GumboPot
quote:
QE in terms of purchasing treasuries is bad IMO because the Fed then becomes and enabler for the federal government to spend more than it should (thus more debt) and to keep the interest rates low. If there wasn't a huge buyer of treasuries like the Fed during QE the interest rates would have hit a market equilibrium with the federal government's means to spend which is supposed to be based on the U.S. economy production (GDP). QE knocked those market forces out of whack.
Bingo.
But, I'm sure Russian will counter that you don't know what you're talking about, since he knows all and is an actual economist.
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