Fed guts rates to zero, launches massive QE5

Finally awake!

Meanwhile, at Martin Place. ZZZZzzzzzzzzzzzzzzzzz….

AUD skyrockets….

David Llewellyn-Smith
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Comments

      • happy valleyMEMBER

        But probably a waste of time as all this only signals total desperation, annihilates any residual confidence in the Fed and signals the end of the financial system is near?

        • ErmingtonPlumbingMEMBER

          Yep,…the trickle down effect is becoming increasingly hard to sell to the Plebs.
          Wonder how a yellow vest movement in the US will work with such a heavily armed population.

          • Exactly.

            We are on a war footing and peoples response is –

            “lets give corporations money !!!! That will fix it for sure – they will borrow it o start new big projects and pay off debt which will employ people”

            Its just so inane – it really is mind blowing how dumb it is. Its like fighting the second world war by saying

            “The only way to defeat these Germans is by giving the ANZ bank a billion dollars”

            Lol – what ? No.

            Go out and do wartime projects – right now.

    • Bahahahaha.
      Thats just it isnt it.
      Whatever they do now, the virus will bleed it dry for next 6 months.

  1. From this announcement It does seem like the front running of interest rate cuts trade (bonds) is over.

    Where to now, I wonder. Maybe back to pure cash/very short bonds (still USD), to wait for a time when equities or other assets fall enough to be truly attractive?

    • Depends what you’re comparing to. AUD?

      For mine – I would say so. Planning to rebalance for even more USD exposure.

    • That’s the $700bn question. Money printing generally leads in one direction only- but if everyone’s doing it then you have competitive devaluation merry-go-round.

    • Good question. The USD is the safe haven currency. However, right now the AUD seems to have dropped in line with the effects of this virus which makes me wonder if the opposite will be true (AUD will regain against USD) once this virus resolves.

  2. I realise that QE involves supporting the prices of bonds so that the Fed will buy them, if not sold on the market.

    But is the Fed also using its money printing powers by buying stocks to support the market?

      • thank you, Mega. I guess there is more wealth seeking to earn its keep than I thought. When there are usually more buy orders than sell orders, markets will tend to keep going up – until the fundamentals no longer make any sense and risk overcomes any sense of valuation

  3. Gotta love how people think the Fed is doing this to “help” people AFTER the experience of watching the Federal Reserve over a decade help Wall Street using these very same techniques.

    It is an impressive bit of Pavlovian training and indoctrination when people applaud Fed actions with a demonstrated, and very recently too, track record of helping the rich get richer.

    And if you question them, they insist that there is no alternative (TINA). Make the rich richer or the economy gets it!

    Why wake up the RBA if we are hoping they will do something similarly not in the interests of the general public.

      • Congressmen: Let us see your evidence that the trickle-down economics will work this time.
        Fed: You don’t need to see our proof.
        Congressmen: We don’t need to see your proof.
        Fed: The post 2008 QEs are not the counter examples you are looking for.
        Congressmen: The post 2008 QEs are not the counter examples we are looking for.
        Fed: We can go about our business.
        Congressmen: You can go about your business.
        Fed: Move along.
        Congressmen: Move along… move along.

    • People love seeing rich people succeed!! It is in their DNA. I mean, just look at how people worship Hollywood stars, music stars and sport stars, not those who actually do any meaningful and productive work.

      Trump is popular for a reason.

    • Exactly – QE is purely an instrument of corporate wealth. The last decade has shown that it is not an instrument of social economic wealth – purely about corporations greed – not a healthy economic tool, in fact the opposite.

      The direct effect of Quantitative Easing is 18 months of French Riots – thats all there is to it.

  4. Forget bobbing, the poo is rocketing up and down like the entire sh!thouse was loaded into a trebuchet and fired into a tornado.

  5. There’s obviously no shortage of money or will in America. They have just decided to declare war upon a falling stock market instead of the virus.

  6. BigDuke6MEMBER

    I’d love to say this is bullish for my gold but its so manipulated the price just grinds away…

  7. And my whole team just got laid off. I knew we were at risk given the nature of the business, but FMD that was quick. I should have seen it coming when we were all told to work from home this week.

    • JimsCB – are you happy (waiting for lucrative severance package from a place you hate) or sad?

      Also what industry, etc?

      • Not really sad, just really worried. We are a tech start up in the early development stage and most of the team took equity in the business. The plan is to start back up in 6 months. But a lot can happen in the interim so I’m going to plan for the worst.

    • Diogenes the CynicMEMBER

      First of many cuts coming. Bank branches aren’t going to be needed much if everything is closed.

      • This – which ones to keep open is being crunched as we speak – the ones they close (majority) – will they ever open again??

        • Lenny Hayes for PMMEMBER

          Probably depends on mortality rates amongst the elderly.

          Aren’t most physical branches still around to service that demographic ?.

  8. The charts I am looking at this morning has the AUDUSD continuing its path down into the red.
    Not skyrocketing.
    If the RBA cut also then we can expect more red.
    As I understand it this is about the Eurodollar shortfall mainly.
    Unless the Fed inject this liquidity then offshore Eurodollar borrowers who need USD will have to liquidate USD assets (mainly financial) to get their hands on the USD cash they need.

    • Yes. This is fundamental at present. I would call it a primary effect. I am also watching for secondary effects that might cause spikes here and there. Volatility is exciting!

      Edit: should have added, at this late stage in the game, an RBA cut to zero will be a secondary, not primary effect