You're saying that the money comes entirely from selling debt instruments. What happens if bonds and treasuries aren't sold in sufficient amounts to cover government spending? The Fed buys them. That's where the "printing" occurs. When the Fed buys bonds and treasuries and doesn't resell them but takes that money out of the system that's Quantitative Tightening. When the Fed sells bonds and treasuries putting an excess of liquidity into the marketplace and driving down interest rates that's Quantitative Easing. We've been in QE for about 13 years now but the Fed overreacted to the pandemic and "printed" way too much in the last two years. And we're all paying for it. The markets got used to easy money under QE. They're crashing under QT. Doesn't mean it'll last forever and we'll never have a good investment environment again. But it's going to take awhile to clear out all the deadwood. Something that should have been allowed to happen after 2008 but it's politically damaging to stretch out recessions. Now they have no choice.
dow jones
- Thread starter Jkloc420
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Up In Smoke
Well-Known Member
Short answer as I'm heading out the door to the gym, yes. There are treasury auctions nearly every day and the Fed determines how many and how much in order to cover it's needs.
Wally
BrownCafe Innovator & King of Puns
Dow, S&P 500 fall for a fourth day, major averages end August with losses
The major averages booked losses for August, sharply trimming their gains from the summer rally.
Up In Smoke
Well-Known Member
I think you have it backwards. When the Fed buys bonds, treasuries and securities, they are putting money into the economy. This process is QE. Since 2008, this has been paired with lowering interest rates, which makes money more affordable and stimulates borrowing. When the Fed raises rates and sells it's positions (most times at a loss) that process is referred to as QT. The Fed has somewhere in the area of 9 trillion dollars of securities on it's balance sheet and wholeheartedly this month will start the process of selling off it's positions. I don't believe the treasury just prints money out of the clear blue sky. If this was true, the value of our dollar would drop significantly. Looking back at previous administrations when "printing money" occurred you see the dollar's value increase. 1982-1984 when massive spending occurred, 2001-2002, 2016, 2018-2019 and finally 2021-22. The treasury controls the money supply and the Fed controls it's circulation.
Up In Smoke
Well-Known Member
Easy money. I would like to see another 4-5%. Only a few of my options are in the money.
Not what was explained to me by an economist. The Fed removes money from the supply by buying treasuries and not reselling them. With less money on the open market interest rates rise. Selling bonds and increasing money supply lowers rates. And in the last two years the Fed increased our money supply by more than the previous 10 combined when it also was increasing the supply.
Up In Smoke
Well-Known Member
Looks like the US money supply peaked around the 2020 election and has fallen significantly since then.
Up In Smoke
Well-Known Member
Tried to post the graph of US M2 Growth, but it wont go. The graph will show money supply MOM for the last 80 years.
I suspect you've enjoyed the upside of the stock market for the last 10 years or so and refuse to believe we're in a precarious position due to the Fed making mistakes. Just a matter of tweaking things to get us back on track.
They got a curb inflation or it going get really bad
Up In Smoke
Well-Known Member
Thank you
Up In Smoke
Well-Known Member
Up or down, there's money to be made. I'm not a buy and hold investor. I prefer a choppy 8-10% yearly market.
Wally
BrownCafe Innovator & King of Puns
‘The psychology has changed so quickly’: Why stock-market lows may be retested as S&P 500 enters its weakest stretch of year
With summer winding down, the stock market is set up for a potentially shaky fall.
www.marketwatch.com
Up In Smoke
Well-Known Member
I guess my bet on oil going back over $100/ barrel may be a loser. At $82, we are lower than 2018 prices now.
Up In Smoke
Well-Known Member
I had to look up heating oil because I wasn't sure who still used it. Looks like nearly 90% of the US usage comes from 5 states in the northeast. In the central US we are on either natural gas or LP.
It's not going to be cheap no matter what.
I might have to open my fireplace back up and steal a bunch of wood off of @MECH-lift
Up In Smoke
Well-Known Member
How did we ever survive 2008 and 2014, when the average price was nearly the same and wages were 50%-60% of today.
