Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one • Hacker News Board

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#41

Post by ntsplnkv2 » Sun, Apr 12, 2020, 6:36 PM UTC

pirocks wrote: post #39

anonuser123456 wrote: post #12

Earlier quoted context omitted.

You're asking me,(general tax payer) to give you money to ride out the storm, but you get all the private gains in the future while I take the risk now. There is a much more fair way to do this. Firms simply issue new stock and sell it to the market. Firms get the capital they need, the general tax payer isn't holding the bag.

I find it interesting that this entire thread seems to be about fairness. Whether something is fair to corporations/people really shouldn't be the point. It should be about keeping people alive and having a functioning/prosperous economy. I'd much rather have that than a "fair" economy.

A propped up fake economy that continues to grow income inequality?

Fairness matters in an economy and government. If less people have faith in its institutions it will begin to break down.

There needs to be a trade off.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#42

Post by lopmotr » Sun, Apr 12, 2020, 6:39 PM UTC

devit wrote: post #16

Well, not really: bailouts punish people and business who incurred costs to operate in a way that would allow them to pause their economic activity for months (cancellable supply/rent/employment contracts, cash reserves, etc.), and favors those who did not do so. In general, a society where it is possible to pause all economic activity at any time is going to be much more robust than one that doesn't, and is going to…

There's a balance between everything being JIT to everyone living in a self-sufficient bunker their whole life. More agility is better for developing the economy and technology and efficiency and all sorts of good things while more preparedness is better for surviving freak events. I think we need some of both. The JITters might not survive a disaster and the survivors might not produce much value, but both keep civilization going.

You see the conflict between these two directions with agricultural protectionism. Countries often pay to keep their agriculture industries local however inefficient they are. That's bad for the economy but good for resilience against disaster.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#43

Post by anonuser123456 » Sun, Apr 12, 2020, 6:39 PM UTC

pirocks wrote: post #39

anonuser123456 wrote: post #12

Earlier quoted context omitted.

You're asking me,(general tax payer) to give you money to ride out the storm, but you get all the private gains in the future while I take the risk now. There is a much more fair way to do this. Firms simply issue new stock and sell it to the market. Firms get the capital they need, the general tax payer isn't holding the bag.

I find it interesting that this entire thread seems to be about fairness. Whether something is fair to corporations/people really shouldn't be the point. It should be about keeping people alive and having a functioning/prosperous economy. I'd much rather have that than a "fair" economy.

Nothing about raising capital prevents a functioning economy.

The point is that people have been conditioned to believe we must use public money to save private interests.

If you want long term functioning markets, shareholders have to hold the bag. Otherwise the Bernie Sanders crowd will get bigger and bigger...and rightfully so. And eventually the system will topple via revolution (political or otherwise).

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#44

Post by [deleted] » Sun, Apr 12, 2020, 6:39 PM UTC

davidxc wrote: post #13

The statement about the lack of inflation from QE and other stimulus programs from 2008 is pretty questionable. There's been little inflation as measured using usual consumer price indices, but the construction of those indices is typically fairly focused on consumer goods and underweights the assets that rich people tend to invest in (stocks, real estate, bonds, etc). The QE and stimulus programs from 2008 were sign…

[deleted]

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#45

Post by throwawayjava » Sun, Apr 12, 2020, 6:40 PM UTC

devit wrote: post #16

Well, not really: bailouts punish people and business who incurred costs to operate in a way that would allow them to pause their economic activity for months (cancellable supply/rent/employment contracts, cash reserves, etc.), and favors those who did not do so. In general, a society where it is possible to pause all economic activity at any time is going to be much more robust than one that doesn't, and is going to…

> For instance, if everyone stores several years worth of food and water at home

1. That wouldn't allow us to pause all economic activity. Not even close. Not even remotely close. Notice that 0% of the economic damage caused by coronavirus could have been prevented by stockpiling food and water.

2. Lots of economic activity is not possible to pause. Think about e.g., large construction projects or any manufacturing process. There's an enormous amount of economic activity that just can't easily be paused, at varying timescales. At the short timescale, for example, you can't simply stop pouring a foundation and come back to it later. On a longer timescale, you simply can't restart an oil well at $0 cost. These facts aren't due to bad planning. They're due to the fundamental laws of physics. And for any given type of disaster scenario, even the most resilient and localized supply chains might be disrupted. In fact, it's not really clear that localized or even redundant supply chains/processes would make you more resilient in any given scenario. There are likely fundamental tradeoffs and, even if not, individuals and small firms simply can't plan for every possible apocalypse.

3. That level of food/water stockpiling would be enormously expensive. Stockpiling would become a nontrivial drag on GDP, not only through unproductive resource allocation but also due to new frictions (e.g., moving 2 states over now becomes a five figure investment).

4. Like it or not, most folks simply don't have the means to stockpile at that scale. A waitress working 80 hours a week will never be able to afford the space and continuous investment necessary to maintain a multi-year food and water stockpile. Heck, even the largest firms with the best margins have to take on some existential risk in order to operate. At some point, the choice is between extreme resilience and having a given sector of the economy.

5. I can't find the problem you're trying to solve with multi-year food/water stockpiling. I'm having trouble figuring out what scenario would only last a few years, and would result in substantial destruction/disruption of the agricultural sector, but would not result in either a) also damage stockpiled food/water or b) trigger extinctions/mass-deaths that aren't possible to prevent through stockpiling. Literally no massive natural disaster or attack I can think of fits that bill. Not blight. Not super volcanoes. Not pandemics. Not nuclear war. Not bioterror. In none of those scenarios would stockpiling likely be particularly helpful at a multi-year timescale. Maybe in some of those scenarios stockpiling buys you a full growing season, if all of the other stars perfectly align.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#46

Post by quotemstr » Sun, Apr 12, 2020, 6:42 PM UTC

davidxc wrote: post #13

The statement about the lack of inflation from QE and other stimulus programs from 2008 is pretty questionable. There's been little inflation as measured using usual consumer price indices, but the construction of those indices is typically fairly focused on consumer goods and underweights the assets that rich people tend to invest in (stocks, real estate, bonds, etc). The QE and stimulus programs from 2008 were sign…

Another way of looking at it: consumer goods (as measured by CPI) have radically dropped in price relative to non-CPI goods over the past few years (perhaps driven by automation and optimization of global supply chains) while, at the same time, the general price level has risen as we've exploded the money supply.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#47

Post by watwut » Sun, Apr 12, 2020, 6:42 PM UTC

AnimalMuppet wrote: post #32

twblalock wrote: post #20

Earlier quoted context omitted.

Businesses were never expected to be able to totally shut down for months at a time. It’s not reasonable to suggest that businesses who can’t handle that have been irresponsible or are less deserving of help.

Not reasonable, and also not useful. That's probably 90% or 95% of businesses that were not able to pause like that. We're going to want a lot of those businesses. And the ones that are able, some are by luck or circumstance rather than wise design. Should we reward the luck as well as the design? "Don't help them" seems like throwing out ten babies with the bathwater.

I mean, that logic is applied to individuals that for example get sick or simple exist in bad economy. They dont get bailout while consequences on them are disastrous. I think that anger over companies being bailed out with no conditions placed on those money is pretty much about that.

Individual get homeless, but the company wont even have to go through bankruptcy and restructuralization. It gets free money instead.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#48

Post by api » Sun, Apr 12, 2020, 6:42 PM UTC

option wrote: post #35

davidxc wrote: post #13

The statement about the lack of inflation from QE and other stimulus programs from 2008 is pretty questionable. There's been little inflation as measured using usual consumer price indices, but the construction of those indices is typically fairly focused on consumer goods and underweights the assets that rich people tend to invest in (stocks, real estate, bonds, etc). The QE and stimulus programs from 2008 were sign…

yes, basic consumer goods didn’t see much inflation. But what about housing, education, even stuff like cars and travel. Of course, other factors are at play too, but abundant “cheap” money certainly increase prices of those

The fact that the most common inflation numbers (AFAIK) don't include real estate makes them worthless.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#49

Post by api » Sun, Apr 12, 2020, 6:43 PM UTC

grey-area wrote: post #22

davidxc wrote: post #13

The statement about the lack of inflation from QE and other stimulus programs from 2008 is pretty questionable. There's been little inflation as measured using usual consumer price indices, but the construction of those indices is typically fairly focused on consumer goods and underweights the assets that rich people tend to invest in (stocks, real estate, bonds, etc). The QE and stimulus programs from 2008 were sign…

We're about to find out what global QE to infinity does. I'd expect more events like the recent boom in stock prices in spite of massive global unemployment and the wave of unrest nicknamed the Arab spring which came after 2008 and had origins in economic disruption. Revolutions often come after the unbearable has passed. Even if we quickly overcome the virus the global economic impact of the lockdown and QE will be…

Based on past experience post-dot-com-bust-bailout and post-2008-bailout:

Prepare for the $1.5M starter home financed by an 0.08% interest 90 year no money down mortgage, $800k student loans at 0% interest, and business lines of credit at 2% to any business that has shown any revenue at all in the last month and that can produce one mammal capable of fogging glass. Any mammal with provable respiration will be able to get a car loan and a credit card.

Go long on real estate, stocks, bonds, Bitcoin, Litecoin, Dogecoin, all the shitcoins that don't even work, gold, oil, cow farts, and pogo stick futures.

Expect more monstrously overfunded "unicorn" startups that lose massive amounts of money and produce very little. These are basically Ponzi schemes targeting the very rich and venture funds.

Wages however will continue to stagnate. Everything always goes up but wages.

As a result of wage stagnation in 2024 or 2028 another even more asinine Populist than Trump will be elected; whether they are "right-wing" or "left-wing" will depend on which side is able to produce a louder demagogue and better memes. Meanwhile the rich will build orbital bases and prepare to leave the planet.

Re: Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one

#50

Post by mindslight » Sun, Apr 12, 2020, 6:45 PM UTC

pirocks wrote: post #39

anonuser123456 wrote: post #12

Earlier quoted context omitted.

You're asking me,(general tax payer) to give you money to ride out the storm, but you get all the private gains in the future while I take the risk now. There is a much more fair way to do this. Firms simply issue new stock and sell it to the market. Firms get the capital they need, the general tax payer isn't holding the bag.

I find it interesting that this entire thread seems to be about fairness. Whether something is fair to corporations/people really shouldn't be the point. It should be about keeping people alive and having a functioning/prosperous economy. I'd much rather have that than a "fair" economy.

The problem is that during good times, the narrative switches to not regulating "private" enterprise. The financial schemers extract wealth under the guise of "earning" it, while it's all justified by saying that the market will regulate itself.

Yes, not doing a bailout would be imprudent. But this is apparently the only time we get any say. When we don't get to reform irresponsible business/fiscal practices in good times, but they have us over the barrel in bad times, the predictable outcome is spite.