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Pyrrhic Victory

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Re: Pyrrhic Victory

#41

Post by roenxi »

pjc50 wrote: post #31
roenxi wrote: post #3

Two parts of this short and powerful piece really leapt out at me: > all under the auspices of a hard line Republican administration > Washington under any administration will have no choice but to bail out all the state and local agencies and every insolvent pension scheme wholesale There are underlying problems being forced to the surface by COVID that go deeper than political parties. Somewhere between the 1970s a…

> running up debt literally does not matter. The creditors don't seem to mind it either, happily buying hundred-year bonds with near-zero interest rates. Also remember that every "saving" is also a "debt" on the other side of somebody's ledger. Quite a lot of that corporate and government debt is "savings"; $270 billion of it is owed to Apple alone. http://thewire.fiig.com.au/article/2018/04/24/how-apple-inve... > Th…

> How, exactly?

[0] Uber, an 11 year old company, IPO-ed in 2019, losses were >1/3 of their $14 billion revenue that year.

There is a level of crazy afoot there. The shares being worth money to anyone is alarming, and indicative that something is very broken. Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from'

> Also remember that every "saving" is also a "debt" on the other side of somebody's ledger.

And if the money on the debt side isn't used prudently, both the debtor and saver end up with nothing at the end of a sad story. The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor. What the loan is used for in real terms (useful infrastructure, vanity projects, wasted, etc) matters.

I don't mind what the accounting identities do if I get a nice place to live, cheap electricity and lots of food. But the loans at the moment aren't going towards big construction in desirable areas, nuclear power plants and securing food supplies.

[0] https://en.wikipedia.org/wiki/Uber

Re: Pyrrhic Victory

#42

Post by chadash »

pjc50 wrote: post #31
roenxi wrote: post #3

Two parts of this short and powerful piece really leapt out at me: > all under the auspices of a hard line Republican administration > Washington under any administration will have no choice but to bail out all the state and local agencies and every insolvent pension scheme wholesale There are underlying problems being forced to the surface by COVID that go deeper than political parties. Somewhere between the 1970s a…

> running up debt literally does not matter. The creditors don't seem to mind it either, happily buying hundred-year bonds with near-zero interest rates. Also remember that every "saving" is also a "debt" on the other side of somebody's ledger. Quite a lot of that corporate and government debt is "savings"; $270 billion of it is owed to Apple alone. http://thewire.fiig.com.au/article/2018/04/24/how-apple-inve... > Th…

> How, exactly? What "long term decisions" would not have been worse off if the 2008 bailouts hadn't been made and a large chunk of Western retail banking had gone insolvent, tying up accounts until it could have been resolved? There is an important difference between "this business is no longer viable", and "this business is perfectly viable in the future but is experiencing a temporary shock which its cashflow and trade credit cannot cover".

I think that OP is referring to people who have decisions that would help them weather a bad storm such as 2008 or the pandemic. Let’s say I’m a small bank that is extra extra conservative with my balance sheet and only makes responsible loans, etc. In theory, 2008 or 2020 comes along and my business is hurt but I’m still fine because of my caution. And long term I am in a great position because my competitors are soon going out of business... except they aren’t because the government props them up.

This is essentially what’s happening to Warren Buffett right now who has a war chest is billions of dollars saved up during the good times that he’s ready to invest now. But it’s not as viable a strategy because the government props everyone up.

Yes, a lot of these are viable businesses in the long term if they can just be helped now. But if the government protects them on the downside many would argue that they should get more of a share of the upside as well.

Re: Pyrrhic Victory

#43

Post by gerikson »

onion2k wrote: post #26
kwhitefoot wrote: post #22

Looking at those pictures from Norway I'm struck by how different our countries actions have been during this crisis. Here hardly anything is boarded up (even business that have failed or gone online-only just have an A4 notice in the window explaining the situation and apologizing for the lack of service), and even when things were at their worst there were still people in the streets, a lot of shops, offices, and i…

Same for the UK. Nothing is boarded up here. I read the article thinking "How to I invest in American plywood manufacturers if there's a second wave?"

Assuming there are any domestic manufacturers of plywood left.

According to this first-hit google result, in 2017 82% of world plywood production was in Asia

https://www.wbpionline.com/features/global-plywood-industry-...

Re: Pyrrhic Victory

#44

Post by pjc50 »

roenxi wrote: post #41
pjc50 wrote: post #31

Earlier quoted context omitted.

> running up debt literally does not matter. The creditors don't seem to mind it either, happily buying hundred-year bonds with near-zero interest rates. Also remember that every "saving" is also a "debt" on the other side of somebody's ledger. Quite a lot of that corporate and government debt is "savings"; $270 billion of it is owed to Apple alone. http://thewire.fiig.com.au/article/2018/04/24/how-apple-inve... > Th…

> How, exactly? [0] Uber, an 11 year old company, IPO-ed in 2019, losses were >1/3 of their $14 billion revenue that year. There is a level of crazy afoot there. The shares being worth money to anyone is alarming, and indicative that something is very broken. Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from' > Also remember that every "saving" is also a "deb…

> Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from'

Uber appear to have $7.6bn debt, reading off the balance sheet. Quite a lot for a company which shouldn't need much to cover operating cashflow.

But who are the investors? It's bloody Softbank again.

> The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor.

Softbank also managed to lose a lot of money on WeWork. Given that one of their main backers for this is the Saudi government and royal family, whose capacity to "live it up" is already pretty high, I'm going to make an alternative argument: the rise of global inequality and lack of wealth taxes means that the only way left to channel money back to the general public is through Potemkin investments.

> nuclear power plants

If we want to talk long-term prudence, something with a massive decommissioning liability that's uninsurable is probably not it.

Re: Pyrrhic Victory

#45

Post by pjc50 »

orbifold wrote: post #33

It is interesting how different countries and cultures deal with the same challenge. Streets were pretty empty and shops were closed for maybe a month here in Germany. Now (almost) everything is open again, the streets are full. Unemployment rose somewhat but not catastrophically. The images and videos we get from the US feel apocalyptical in contrast.

The "libertarian" states implemented the worst possible solutions: a lockdown that was big enough to damage businesses, but not early enough or thorough enough to actually limit the spread.

Re: Pyrrhic Victory

#46

Post by tclancy »

RobertoG wrote: post #24

"That policy will work for as long as the rest of the world continues to accept US dollars as something other than pieces of funny green paper…" What a nonsense. Like if the USA is the only one doing it. Everybody is doing it and at the same time. I hope this help some people to dispel this myths about the "public debt" and living to the grandchildren expense. What markets are covering this public debt when everybody…

I think you missed the point. If the current administration, or possibly some other dumb one in the future, undermines US credibility where other countries unpeg from the dollar, we are going to turn into a shithole country pretty quickly.

Re: Pyrrhic Victory

#47

Post by cinquemb »

wazoox wrote: post #21

The FED is buying out every asset in existence, that means that there aren't any markets, any prices, everything is state-owned and the economy is entirely socialized, and it's now the "USSA". Stock markets are surfing the wave to grab as much as possible before the inevitable crash and collapse. No wonder the IMF head said we need a "Great Reset". This can't end well...

Yup, it never ends well, and more and more people incentivized to tell one otherwise right up until that moment lol

Re: Pyrrhic Victory

#48

Post by chewz »

pjc50 wrote: post #31
roenxi wrote: post #3

Two parts of this short and powerful piece really leapt out at me: > all under the auspices of a hard line Republican administration > Washington under any administration will have no choice but to bail out all the state and local agencies and every insolvent pension scheme wholesale There are underlying problems being forced to the surface by COVID that go deeper than political parties. Somewhere between the 1970s a…

> running up debt literally does not matter. The creditors don't seem to mind it either, happily buying hundred-year bonds with near-zero interest rates. Also remember that every "saving" is also a "debt" on the other side of somebody's ledger. Quite a lot of that corporate and government debt is "savings"; $270 billion of it is owed to Apple alone. http://thewire.fiig.com.au/article/2018/04/24/how-apple-inve... > Th…

>> The persistent bailouts are making losers of people who make good long term decisions

> How, exactly?

Keeping interest rates very low is hurting people who are saving money. Not just in banks also via pension funds[-], retirement schemese, life insurance.

It pushes savers into taking risky bets with real estates or stocks or even direct consumption (spending money instead of saving them is very risky bet on the future of events).

[-] The pensions will be low because 1) compound interest on riskless part of one's pension assets is low 2) Other assets that one will be purchasing with retirement money will be grossly inflated with cheap money chasing yields, via consumption etc.

Re: Pyrrhic Victory

#49

Post by RobertoG »

tclancy wrote: post #46
RobertoG wrote: post #24

"That policy will work for as long as the rest of the world continues to accept US dollars as something other than pieces of funny green paper…" What a nonsense. Like if the USA is the only one doing it. Everybody is doing it and at the same time. I hope this help some people to dispel this myths about the "public debt" and living to the grandchildren expense. What markets are covering this public debt when everybody…

I think you missed the point. If the current administration, or possibly some other dumb one in the future, undermines US credibility where other countries unpeg from the dollar, we are going to turn into a shithole country pretty quickly.

"other countries unpeg from the dollar.."

I don't know what that means. In the current international arrangements all the important currencies are floating against each other all the time.

The value of the dollar (respect other currencies) comes from being the currency of one of the most valuable economies in the world.

Re: Pyrrhic Victory

#50

Post by roenxi »

pjc50 wrote: post #44
roenxi wrote: post #41

Earlier quoted context omitted.

> How, exactly? [0] Uber, an 11 year old company, IPO-ed in 2019, losses were >1/3 of their $14 billion revenue that year. There is a level of crazy afoot there. The shares being worth money to anyone is alarming, and indicative that something is very broken. Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from' > Also remember that every "saving" is also a "deb…

> Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from' Uber appear to have $7.6bn debt, reading off the balance sheet. Quite a lot for a company which shouldn't need much to cover operating cashflow. But who are the investors? It's bloody Softbank again. > The saver loses out more, because they could have been living it up with more resources, rather than direc…

And Softbank were willing to try this insane strategy because they know as well as everyone else that anything exposed to the stock market is being buoyed up by high debt levels. Uber IPO-ed. People are valuing it with a large positive value.

If you entertain the idea that a big bubble (3-5 years long) could ever happen, Uber being allowed to continue operations is an eyebrow raiser. There are risks that much of the effort that should be going in to securing a prosperous future is being misdirected.

> If we want to talk long-term prudence...

I would like, in my old age, to have twice as much electricity available as when I was young. I don't really care how. But it isn't going to happen because I wished hard. We need to invest in physical changes to the world that will make life better for people. Particularly in things that aren't oil.

Look at the amount of construction that is going on in China. That is what is physically possible. That sort of activity could be usefully replicated in the West.

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