That's a nice gesture, but not really in it together. In it together would be rent forgiveness. The bookstore and restaurant have lost business, their customers aren't deferring payments with a gradual payback.
What about the landlord's loan payments?
The loanlord (bank) has enough money to defer payments for a few months. They might have to skip the huge bonuses for a bit and cut back on lavish perks and parties. A small sacrifice. The Fed could temporarily ease up on the reserve rule a bit to help.
But everyone will end up poorer if we let mass bankruptcy to wash over the economy. Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. A little collective sacrifice and collaboration goes a long way when everyone is sinking together.
> Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. And the value of all that will help get them a higher price when they sell the company. Investors too scared to snap up these bargains? Cool- the government buys it and nationalizes it. A little collective sacrifice and collaboration goes a long way all the time -…
In normal times we have the bankruptcy courts to facilitate an orderly wind down and prevent fire sales. Its called the automatic stay, it prevents creditors from taking any action against a company in the zone of insolvency to seize assets, restrict credit or in any way gain a first mover advantage. In a crisis of the current scale, the normal system can not handle the volume of bankruptcies.
I would be ok with the government buying companies to preserve value but most American leaders are morally opposed to this type of intervention so it is basically impossible to do what you're suggesting.
Yes. That is the whole concept of lender of last resort. The goal is to avoid a panic fueled fire sale where prices become decoupled from anything resembling fundamentals and instead collapse as everyone acts in concert to irrationally unload otherwise valuable assets. By acting in this capacity the government can allow the market price seeking mechanisms of capitalism to operate on an appropriately longer time horiz…
>By acting in this capacity the government can allow the market price seeking mechanisms of capitalism to operate on an appropriately longer time horizon. This makes it sound like the Market is primary to the State, where observation/history very much paints things as being the other way around. I don't know as one should even be talking about the Market doing anything in this case seeing as the preconditions for it'…
Thats a valid point, I am not suggesting the Market is primary in all things, merely the narrow function of price setting. In the US, the Market is primary for price setting in ordinary times. Very rarely does the US government set prices. You're right though, when push comes to shove, unstable market conditions such as War, financial panic, the Government has stepped in to mandate setting stable prices. Still it would be better if the government can create stable market conditions.
Sure you can. You stop rent. You stop mortgage interest. You pause mortgage principal. You do that across the board for every rental, contract, and debt obligation in America. In 90 days, it expires, and everything starts back up again. https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs...
And how do people who make incomes on collecting on obligations (landlords, pensioners, etc.) buy new things, like food and medicine?
International obligations, where governed by US law, get placed on hold too. Ideally, other countries join in the regime. If not, you're just talking about a much smaller amount of debt (US debt held under foreign jurisdictions). Mortgage-backed securities generate no income for a couple of months.
If you stop paying other countries, the goods stop flowing. Or are you going to swing the military dick around to force people to give you stuff for free?
Nope. The world floats on net terms. Companies extend terms frequently. Doing so is not as big of a deal as you are making this out to be.
You ask them. If they say no, then they can't pay rent. "OMG everyone is going to totally take advantage of this!" Not everyone, but yes, plenty of people and business will. "OMG that's unfair." Yes, I acknowledged that from the start. The whole point of my argument is that this might still be preferable to the alternative, it might still be better than sticking to what's 100% fair, because collectively we might emer…
Ok. Im a (small) landlord. None of my tennants claim to be able to pay rent. How am I buying groceries this month?
Are you seriously a landlord with no cash reserves? What happens if you have an unexpected repair at your property?
You’d buy groceries with your emergency fund. As a self employed person it is your responsibility to do this for yourself.
I don't mean to be rude but relying on collecting month-by-month rent from your tenantS to buy your groceries seems like poor financial management. You've bought an asset which is not returning as expected for the time being, but has for the past n years. What do you expect now, a bailout?
not all landlords are rich and/or have rent as their entire income in normal times. my friend is a "landlord", in the sense that she rents out the spare room in her house to help pay the mortgage. now her entire industry is shut down and her tenant isn't getting paid either. no matter how responsibly they manage their finances, most people can't handle suddenly having multiple sources of cashflow go to zero.
They can always sell their property and rent for a while to weather the storm. Relative to the tenant, at least they have something to sell.
Ok. Im a (small) landlord. None of my tennants claim to be able to pay rent. How am I buying groceries this month?
Are you seriously a landlord with no cash reserves? What happens if you have an unexpected repair at your property? You’d buy groceries with your emergency fund. As a self employed person it is your responsibility to do this for yourself.
To be clear, i'm a hypothetical landlord. Not actually a landlord.
> You’d buy groceries with your emergency fund. As a self employed person it is your responsibility to do this for yourself.
Its everyone's responsibility to have an emergency fund. Why is the answer that the landlord should rely on his/her fund instead of the tennant relying on their fund to pay rent?
Ok. Im a (small) landlord. None of my tennants claim to be able to pay rent. How am I buying groceries this month?
Same way that your tenants who cannot work will buy groceries. Either private charity, savings, or government intervention would have to cover the income gap to keep people alive in this time of crisis.
I think that fundamentally what I'm trying to criticize, is the original proposal shifted all the burden from one class of people to another class. And then assumed that the problem just goes away, without having to do anything expensive like the government providing emergency funding. But its not that simple - its not like debt holders can neccesarily just take the hit. They have things they need money for. They have people they employ who need to get paid. Sure, there is a certain amount of a hit that can be taken - but ultimately money has to come from somewhere or your just shifting which class of people are totally screwed by this, which doesnt solve anything.