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

#71

Post by AnimalMuppet » Sun, Apr 12, 2020, 7:04 PM UTC

tracer4201 wrote: post #23

throwawaysea wrote: post #14

Earlier quoted context omitted.

GP is making the point that in this case, the government caused the insolvency of these businesses in significant part through authoritarian closures, not through the irresponsibility of those running the business. Therefore the government (taxpayers) owe them recompense to make them whole.

I don’t agree with this perspective. The cost of keeping bars open, for instance, is much higher on society as a whole because of how it would lead to the virus spreading. I don’t see how that makes the public responsible to help these businesses. When your business does well, you reap the benefits, not me. The belief is you’re entitled to it, because you’re the one who took the risk. So how is it now that we allow y…

Sure, but if I own a bar, and I shut it down as part of stopping the plague, and the plague stops but I go bankrupt, you reap the benefit, not me.

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

#72

Post by stdbrouw » Sun, Apr 12, 2020, 7:05 PM UTC

lowdose wrote: post #15

the-dude wrote: post #6

In The Netherlands, our government reserved a special € 100 million for startups, because they are not eligible for the normal relief program because these startups have no revenue and "their succes is measured differently". In the grand scheme of things, € 100 million is peanuts of course. Still I found it baffling. I should also mention these are loans, but if the startups fail the government is still holding the b…

There is no default in the Netherlands, so the entrepreneur is always holding the bag.

There is. https://business.gov.nl/starting-your-business/choosing-a-bu...

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

#73

Post by [deleted] » Sun, Apr 12, 2020, 7:06 PM UTC

throwawaysea wrote: post #14

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.

GP is making the point that in this case, the government caused the insolvency of these businesses in significant part through authoritarian closures, not through the irresponsibility of those running the business. Therefore the government (taxpayers) owe them recompense to make them whole.

[deleted]

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

#74

Post by AnimalMuppet » Sun, Apr 12, 2020, 7:09 PM UTC

wtvanhest wrote: post #10

The biggest moral hazard is in colleges. The boards of colleges justified higher expense structures in the name of trying to win a zero sum rankings game. The best case for them is a lot of people wondering why they are paying $30k a year to watch online lectures while inflation wipes out the debt. The worst case for schools is a total restructure due to lower revenue and donations due to students unwilling to overpa…

I think the future is a series of online courses that have objective pass-fail, and somebody with recognized authority to issue degrees in X if you pass X's set of courses. And it's cheap - maybe $100 per class. And there's different classes competing to be in the set for X, and there's competing outfits with the authority to issue degrees.

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

#75

Post by duxup » Sun, Apr 12, 2020, 7:10 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

I wonder about cars.

There are cheaper new cars...but people seem to choose cars with an ever inflating numbers of features.

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

#76

Post by AnimalMuppet » Sun, Apr 12, 2020, 7:10 PM UTC

armada651 wrote: post #18

amiantos wrote: post #11

Earlier quoted context omitted.

The article seems to be about how the political response from conservatives seems to be muted, making the point that all their talk about small government, no regulation, and the evils of socialism appear to vanish the moment the people who need government assistance are millionaires and not common folk.

While I definitely don't make a habit of defending conservatives, when they were concerned about the fed "picking winnners" the winners the fed picked were generally the millionaires.

But if the government picks winners, they might pick the wrong millionaires, instead of "all millionaires".

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

#77

Post by jariel » Sun, Apr 12, 2020, 7:12 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…

This is upside down.

Storing several years of food is hugely expensive and a waste of resources. Companies should not be stocking capital and supplies for 1 in 100 years Black Swans.

We could end up in a several years long pandemic or war. Should every family have a bunker, 5 years of non-perishables, weapons, bio gear, medicine, generator, generator parts etc?

It's much more efficient to have a smart restructuring program for when calamity hits and to smartly reallocate resources, capital for the new re-alignment.

Because of the system-wide effects, we are facing - even insurance is not the best product.

The 'moral hazard' is not in the bailouts themselves, but the terms of them and how exactly the bailouts are enacted.

For system-wide events that are impossible to predict, what we need is dynamic leadership (policy, action, financing).

Some parts of the system need more resiliency than others which is why we have regulations, strategic investment, reserves. And after this event those will be adjusted as well hopefully.

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

#78

Post by michaelmrose » Sun, Apr 12, 2020, 7:13 PM UTC

tathougies wrote: post #65

HarryHirsch wrote: post #37

Earlier quoted context omitted.

Wimbledon took out a pandemic policy year after year. Turns out they were stupid to do so, they could have invested the insurance premium in the stock market and waited for their bailout.

Wimbledon is a one time (well annual...) event. I doubt anyone would insure a company making billions in revenue against a pandemic -- an inevitable outcome in a lot of ways.

If it happens once every 20 years then the money earned by investing 20 years of premiums just have to pay for it. Alternatively the company could spend 20 years socking away money instead of issuing large bonuses.

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

#79

Post by AnimalMuppet » Sun, Apr 12, 2020, 7:13 PM UTC

twblalock wrote: post #66

watwut wrote: post #47

Earlier quoted context omitted.

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.

This is a totally different situation. Businesses are failing because of the government. Therefore the government should compensate them.

Well... in this situation, individuals are also going to be failing because of the government. Therefore...

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

#80

Post by legolas2412 » Sun, Apr 12, 2020, 7:14 PM UTC

twblalock wrote: post #59

fastball wrote: post #54

Earlier quoted context omitted.

Globalism doesn't really encourage redundant regions – it encourages all production of a certain type of good to be done in a single region and then traded with other regions for maximum efficiency.

Globalism encourages production of goods in multiple regions which are efficient at the production of a particular product. For example, globalization is why Toyota manufactures cars and car parts in 18 countries, rather than just in Japan. Under localism, Toyota would only manufacture in Japan.

> globalization is why Toyota manufactures cars and car parts in 18 countries,

Definitely not. It is because of tax incentives under protectionist policies. A perfect free-market globalized world would actually see cars being manufactured in just one place for maximal efficiency.