Wednesday, 29 April 2020

"Pumping trillions of [newly-minted] dollars into corporate credit & high-yield debt will further distort markets already shaped by a decade of easy-money policies. The result will be an acceleration of two economy-wide transfers of wealth: from the middle class to the affluent and from the cautious to the reckless." #QotD


"The Fed [i.e., the US central bank] will deploy more than $1.45 trillion in support of investors in leveraged assets—more than double the size of the 2008 Troubled Asset Relief Program, and over $7,000 for each working-age American. That includes $750 billion to purchase recently downgraded junk bonds and bond exchange-traded funds—an unprecedented intervention in the private credit markets.
    "Pumping trillions of dollars into corporate credit and even high-yield debt will further distort markets already shaped by a decade of easy-money policies. This is no abstract concern. The result will be an acceleration of two economy-wide transfers of wealth: from the middle class to the affluent and from the cautious to the reckless.
    "The transfer from the middle class to the wealthy continues a trend begun in the wake of the [dot-com crisis that has accelerated ever since].
    "But bankruptcies among highly leveraged businesses often pose surprisingly little risk to employment. More often than not, creditors choose to keep businesses staffed even when restructuring to retain value for the long-term. By preventing these bankruptcies, the Fed is doing more for equity holders and junior creditors than for employees."
~Sam Long and Alexander Synkov as corrected by Mish in his post 'Third Major Transfer From the Middle Class to the Wealthy'

2 comments:

  1. https://www.congress.gov/bill/116th-congress/house-bill/748

    ReplyDelete
  2. Check the summary: first introduced in House on 24 Jan 2019 - https://www.congress.gov/bill/116th-congress/house-bill/748

    ReplyDelete

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