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(Sky.com)   IMF pleads with the Federal Reserve to keep buying bonds like they're going out of style. Claims that poor bankers could lose $2 trillion if interest rates spiked and caught them holding existing low-yield bonds   ( news.sky.com) divider line
    More: Asinine, Federal Reserve, International Monetary Fund, interest rates, Janet Yellen, government bonds, Treasury Secretary Larry Summers, quantitative easing  
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687 clicks; posted to Business » on 09 Oct 2013 at 11:04 AM (4 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



20 Comments     (+0 »)
 
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2013-10-09 11:15:57 AM  
"...  For when the plebs discover that they can vote themselves bread and circuses without limit and that the productive members of the body politic cannot stop them, they will do so, until the state bleeds to death, or in its weakened condition the state succumbs to an invader-the barbarians enter Rome."

Robert A. Heinlein
 
2013-10-09 11:21:51 AM  
wasn't there a scandal not too long ago about people rigging the bond market?   fark the bankers.
 
2013-10-09 11:23:54 AM  
Serious question here:  Is this loss $2 trillion already made that you are physically siphoning from their possession over the next few years? or is this one of those things where they haven't actually made the money yet and the final net profit on the investments will be $2trillion less than what it was going to be previously?
 
2013-10-09 11:24:32 AM  
So basically, if you don't continue with your perpetual bailout, they're going to need another bailout?

Seems legit.
 
2013-10-09 11:24:38 AM  
That's unbelievable.
 
2013-10-09 11:25:28 AM  
I wouldn't want to be sitting on a long-duration fixed income portfolio in this market. Unless I were short said portfolio.
 
2013-10-09 11:26:18 AM  
The problem with the Heinlein quote is that the Bread and Circuses were given by the Emperors to keep the popular support not voted by the people.  They were smart enough to know that nearly a million hungry people in the middle of the city with only a double cohort to protect it, maybe 20,000, was very dangerous.  It was also a symptom of what caused the fall of Rome, the farms of the Empire were consolidated under large landowners and worked by slaves and the former farmers had no where else to go.  Interestingly those large landowners were also exempt from taxation.
 
2013-10-09 11:35:28 AM  

Driedsponge: Serious question here: Is this loss $2 trillion already made that you are physically siphoning from their possession over the next few years? or is this one of those things where they haven't actually made the money yet and the final net profit on the investments will be $2trillion less than what it was going to be previously?


I'm going to go with C) a huge number they pulled out of their collective asses specifically to scare people, knowing no one in the Beltway or corporate media would seriously question it.  They literally did that last time.

DarkLancelot: the farms of the Empire were consolidated under large landowners and worked by slaves and the former farmers had no where else to go. Interestingly those large landowners were also exempt from taxation.


That's a neat trick!  Let's try that too!  I mean, again!
 
2013-10-09 11:44:06 AM  

AngryDragon: So basically, if you don't continue with your perpetual bailout, they're going to need another bailout?


Well, yes.  You see, basic economics tells us that when there is an economic decline, central banks must stimulate the economy through interest rate cuts.  Which locks in investments at low interest rates.  Which then lose money when interest rates inevitably go back up.  Which then causes another economic decline.  Which necessitates further interest rate cuts.  And when you can't cut interest rates any more, because they're already at zero, you do Quantitative Easing to pull rates even lower.  Which causes bond yields to drop to the floor, which results in inevitable huge losses if interest rates ever return to anything approaching  'normal.' etc.
 
2013-10-09 11:45:43 AM  

bromah: wasn't there a scandal not too long ago about people rigging the bond market?   fark the bankers.


So all of your retirement money and savings are in gold and diamonds in a jar buried in the back yard?
 
2013-10-09 11:50:07 AM  
What if the Federal Reserve are the only ones buying US Treasury Bonds?
 
2013-10-09 11:50:23 AM  
paragraphfilms.files.wordpress.com
 
2013-10-09 12:02:10 PM  
Jump, you farkers.
 
2013-10-09 12:08:41 PM  
So the International Monetary Fund and the Federal Reserve Bank are imbeciles because subby doesn't understand what the fark they're talking about. Good call. I nominate subby for President of ALL the moneys.
 
2013-10-09 12:15:05 PM  

Talondel: AngryDragon: So basically, if you don't continue with your perpetual bailout, they're going to need another bailout?

Well, yes.  You see, basic economics tells us that when there is an economic decline, central banks must stimulate the economy through interest rate cuts.  Which locks in investments at low interest rates.  Which then lose money when interest rates inevitably go back up.  Which then causes another economic decline.  Which necessitates further interest rate cuts.  And when you can't cut interest rates any more, because they're already at zero, you do Quantitative Easing to pull rates even lower.  Which causes bond yields to drop to the floor, which results in inevitable huge losses if interest rates ever return to anything approaching  'normal.' etc.


So, Iceland had it right in understanding that the only winning move is not to play.
 
2013-10-09 12:52:49 PM  

Talondel: AngryDragon: So basically, if you don't continue with your perpetual bailout, they're going to need another bailout?

Well, yes.  You see, basic economics tells us that when there is an economic decline, central banks must stimulate the economy through interest rate cuts.  Which locks in investments at low interest rates.  Which then lose money when interest rates inevitably go back up.  Which then causes another economic decline.  Which necessitates further interest rate cuts.  And when you can't cut interest rates any more, because they're already at zero, you do Quantitative Easing to pull rates even lower.  Which causes bond yields to drop to the floor, which results in inevitable huge losses if interest rates ever return to anything approaching  'normal.' etc.


Bingo. Banks are overloaded with long-duration bonds. And by and large, any dramatic pop in interest rates could significantly tighten up interbank lending. Cash-strapped banks (which there are still many of) will be forced to sell illiquid assets at prices way below their "book to myth" value and bam... Lehman all over again.

Of course this doesn't happen because the Fed has eliminated all moral hazard whatsoever and ensured that TBTF will continue exist.
 
2013-10-09 02:28:36 PM  

justinguarini4ever: Talondel: AngryDragon: So basically, if you don't continue with your perpetual bailout, they're going to need another bailout?

Well, yes.  You see, basic economics tells us that when there is an economic decline, central banks must stimulate the economy through interest rate cuts.  Which locks in investments at low interest rates.  Which then lose money when interest rates inevitably go back up.  Which then causes another economic decline.  Which necessitates further interest rate cuts.  And when you can't cut interest rates any more, because they're already at zero, you do Quantitative Easing to pull rates even lower.  Which causes bond yields to drop to the floor, which results in inevitable huge losses if interest rates ever return to anything approaching  'normal.' etc.

Bingo. Banks are overloaded with long-duration bonds. And by and large, any dramatic pop in interest rates could significantly tighten up interbank lending. Cash-strapped banks (which there are still many of) will be forced to sell illiquid assets at prices way below their "book to myth" value and bam... Lehman all over again.

Of course this doesn't happen because the Fed has eliminated all moral hazard whatsoever and ensured that TBTF will continue exist.


Nah, Dodd-Frank took care of that sort of problem.

/ I'm repeatedly assured
 
2013-10-09 09:33:43 PM  
Let me get this straight: when the elite win the "market lottery" they earned that money, and fark you for trying to stop them. But when the market turns against them, they want the government to manipulate things back in their favor? Fark that.
 
2013-10-09 10:09:11 PM  

russlar: What if the Federal Reserve are the only ones buying US Treasury Bonds?


The United States of America - a wholly-owned subsidiary of the Federal ReserveTM
 
2013-10-10 03:27:39 AM  
Meh.

I'm just glad that I'll never be involved in high finance.

Imma be po' for lyfe. And the hours spent playing with my dog or, admittedly, drinking myself into a stupor... Well I value those more than futile hours spent trying to play a game I wasn't invited to in the hopes I climb one rung over my compatriots.

I've already been almost turned communist by wise friends..... Maybe anarchist is next. Any money worshippers? Well they'll get no sympathy from me. fark 'em.
 
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