Fed Says It Will Begin Buying Corporate-Debt ETFs on Tuesday

[Dan Warnick + 6,100]

This seems to be an incredible piece of news.  But I can't get my head around the bigger picture on it.  Can someone here explain, in layman's terms, what the major impact of this action is?  I'm not implying it is necessarily a bad thing, but why does it seem to bode so bad as to leave me with a dull ache in my gutt?

Fed Says It Will Begin Buying Corporate-Debt ETFs on Tuesday

(Bloomberg) -- The Federal Reserve said a facility designed to purchase eligible corporate debt from investors will launch on May 12, bringing a key part of the U.S. central bank’s emergency coronavirus lending program online following weeks of anticipation.

The so-called Secondary Market Corporate Credit Facility will begin purchases of eligible exchange-traded funds invested in corporate debt on Tuesday, the New York Fed said Monday on its website. It was first announced in March and has played an important role in keeping financial markets relatively calm since then.

(more at the link)

[canadas canadas + 136]

It could be because the risk that the business or investor orginally took on is now being taken over by the government FED so that they are off the hook. These seem to be very big and rich companies and investors who are are not being left to fall for taking such a big risk. Everyone else though will have to bear big debt and portfolio losses because their investments are too small to matter to anyone but themselves. These big shot institutional investors cannot really lose because someone bigger than them has their back.  Who ever said that this multi-tiered system wasn't rigged?  There is always money to be found to resue the big guy. As they say, "Welfare for the rich and capitalism for the poor".  It is funny how some of the biggest opponents of poor people receiving a paltry few thousand in welfare support may be one of the biggest recipients of billions in corporate welfare. 

Edited May 12, 2020 by canadas canadas

[Dan Warnick + 6,100]

2 hours ago, canadas canadas said:

It could be because the risk that the business or investor orginally took on is now being taken over by the government FED so that they are off the hook. These seem to be very big and rich companies and investors who are are not being left to fall for taking such a big risk. Everyone else though will have to bear big debt and portfolio losses because their investments are too small to matter to anyone but themselves. These big shot institutional investors cannot really lose because someone bigger than them has their back.  Who ever said that this multi-tiered system wasn't rigged?  There is always money to be found to resue the big guy. As they say, "Welfare for the rich and capitalism for the poor".  It is funny how some of the biggest opponents of poor people receiving a paltry few thousand in welfare support may be one of the biggest recipients of billions in corporate welfare. 

Thanks.  That was my basic read on it too.

[specinho + 475]

6 hours ago, Dan Warnick said:

This seems to be an incredible piece of news.  But I can't get my head around the bigger picture on it.  Can someone here explain, in layman's terms, what the major impact of this action is?  I'm not implying it is necessarily a bad thing, but why does it seem to bode so bad as to leave me with a dull ache in my gutt?

Fed Says It Will Begin Buying Corporate-Debt ETFs on Tuesday

(Bloomberg) -- The Federal Reserve said a facility designed to purchase eligible corporate debt from investors will launch on May 12, bringing a key part of the U.S. central bank’s emergency coronavirus lending program online following weeks of anticipation.

The so-called Secondary Market Corporate Credit Facility will begin purchases of eligible exchange-traded funds invested in corporate debt on Tuesday, the New York Fed said Monday on its website. It was first announced in March and has played an important role in keeping financial markets relatively calm since then.

(more at the link)

I am not sure if this is correct but.............. if the fed is buying from the creditors, then, they will own relevant debtors companies in time??......... something like tax lien??

[Jason Martin + 58]

Or another way to look at it would be to think of the whole thing as a trough for pigs. You throw a lot of garbage (money) into the trough and the pigs eat it. Whatever they can't eat, you scoop out and compost. To the pigs the slop is life, to the farmer, it's just detritus and a means to an end.

Money is really a process, and debt and credit are really processes, and the purpose is to fatten the pigs. The market is really a kind of simulation, the money that is in the system is really like a digital currency in a video game. If things get out of control, you just tweak some levers, put some more money in, take some debt out. 

The reason for this is that money is not the objective. Who cares about debt? No one really. Do you think any of America's "creditors" ever expect to be repaid? Come on. 

Show me the Shylock who will keep lending to an degenerate gambler who can barely service the vig...

Credit and Debt and money don't matter. It's just cud. It only matters to the cows. The point is the milk.

Or think of it like this. If you have kids, get out the monopoly board, distribute the money, play the game. When the game ends, just reset the board and the money and repeat. The point of monopoly is not to make money, the point of monopoly is to give the kids a good time and distract them so they'll stop bothering you while you cook dinner.

Just because it's a game, doesn't mean it doesn't have deadly consequences, in fact, it is the great game - the deadliest game. Nations and peoples are just pieces on the board. 

This is not really a conspiracy, it's just a natural progression. Think of how little kids play peewee football? And then they maybe end up on the highschool team, and then maybe on the college team, and then they play for the NFL.

In the game of wealth, you graduate up the levels until you play the game beyond money (money is really like the flags in touch football, where a tackle is grabbing the flag from the belt). This is the level at which "debt" disappears down a hole and everyone pretends like it's all okay. Because it is. Because it was never real to begin with. It was just monopoly money.

This doesn't mean they won't bring up the debt to do something interesting, it will just be like the quarter quell in the Hunger Games, they'll just make it up, remind us of all the debt, and use that as an explanation for changing the rules of the game. 

 

[canadas canadas + 136]

If the FED can spend trillions buying up all of this private debt to make investors and speculators debt free at any time then why does it not do the same with government public debt too?  Is it only here to serve one kind of interest over another?  

[SUZNV + 1,197]

On 5/26/2020 at 8:07 AM, canadas canadas said:

If the FED can spend trillions buying up all of this private debt to make investors and speculators debt free at any time then why does it not do the same with government public debt too?  Is it only here to serve one kind of interest over another?  

IMHO, when Fed buy private debts, it wants to freeze up the stock market from collapse, keep the finance sector flowing. If stock market collapse now then everyone lose: finance, coporates, employees, government. A kind of pressing pause button, wait for the lockdown and covid over and resume. It prevents foreign country to buy US tech when  the stock market collapse, massive lay off after lock down which lead to less federal taxes. Boost up the confident and prevent panic sells. 

Buying public debt will encouraging public fund raiding teams from house, senates and government to bail out the lobbying industries like healthcare/pharmacy or expanding public sector or creating costly war (who knows which party will win the election) and make treasury bond yield reduce (government less desperate for money). It is an inefficient investment and undermine Fed power. Starving the government will create incentives for government to make wise policy to lift up the economics for tax income or increase tax when the time is right.

Edited May 29, 2020 by SUZNV

[notsonice + 1,266]

when Fed buy private debts ??? this started en masses again last fall when the repo markets froze up. The Fed stepped in and took over the overnight lending markets that finance all things private. The virus has ended any hope that the private capital markets will be able to fund or shoulder the risk of corporate debt in the next couple years. What is happening now makes the GM bailout look like childs play.