Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

America’s banks are missing hundreds of billions of dollars

economist.com

Post reply on HN
Print view View original

391–400 of 450 posts

Re: America’s banks are missing hundreds of billions of dollars

#391

Post by robertlagrant »

ClumsyPilot wrote: post #327
robertlagrant wrote: post #257

Earlier quoted context omitted.

> Growing inequality without growing GDP means you became poorer. For example: Bill Gates comes along with Microsoft, and sells Windows to businesses worldwide, who all benefit. Why is GDP not growing? And even if it magically doesn't grow, how has that made me poorer?

Why are you conflating growth in inequality during the pandemic with entrepreneurship? Did GDP grow during the pandemic? Did dozens of Bill Gates's spawn? How did you even get the idea that Bill gates has increaeed inequality? Thousands of people were able to get a well paid job or start a business, inequality probably decreased on average.

Bill Gates increased inequality by having a giant amount of money relative to almost everyone else.

Re: America’s banks are missing hundreds of billions of dollars

#392

Post by slowturtle »

netcan wrote: post #267
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

I disagree with everything but the conclusion. I'm dubious that the "Fed's money printer" had much of an effect on inflation. It certainly didn't cause the SVB or other banks to go under. The rate increases did that... in this case. I don't think the particular path matters much. People tend to moralize banking, and post failure we tend to hunt for moral culprits. But... the historical fact is that banks fail sometim…

> I'm dubious that the "Fed's money printer" had much of an effect on inflation. It certainly didn't cause the SVB or other banks to go under. The rate increases did that..

The rate increases were an attempt to combat the inflation caused by the massive increase in money supply during the pandemic due to the government stimulus. There were no new goods or services justifying all the stimulated activity. SVB was drunk on the seemingly permanent zero interest rates (like everyone else) and invested in long term government bonds. Then the unthinkable happens—rate increases for the first time in over a decade, and those investments go boom. This is all about people getting used to cheap money.

Re: America’s banks are missing hundreds of billions of dollars

#393

Post by AnimalMuppet »

DebtDeflation wrote: post #190
nostromo wrote: post #31

1. The government requires banks buy their debt and hold it as reserves because it's considered the safest investment. 2. The government decides that, oops, it printed too much money in 2020/21 and is causing inflation, so it raises rates very quickly. 3. New treasuries yield 4 or 5 times as much in interest as the ones from 1-2 years ago. Why would anyone want to buy those old treasuries near face value now? 4. The…

I'm getting tired of the "those Treasury bonds they bought are completely safe, if they just wait 10+ years until maturity, they will get 100% of their principal back" narrative. There are MANY different types of risk. Credit risk is but one type, and that narrative tries to convince people that it is the ONLY type of risk. In this example, you have both interest rate risk (price of an existing bond moves inversely t…

> in the case of SVB they made a conscious decision to abandon most of their hedges a year or so ago.

Just as everyone started talking about inflation coming back? Just as it began showing up in the actual data? That's when they deliberately decided to stop hedging? That's insane. "Deserves to lose" is the only non-profane way I know of expressing how incredibly unwise that decision was.

And maybe how immoral. They may have made that decision then because everyone could see inflation coming, and therefore the price of hedging the risk went up. If so, they threw away the bank (and the stockholders' money) for one year's increased profit. Madness.

Re: America’s banks are missing hundreds of billions of dollars

#394

Post by geysersam »

naasking wrote: post #348
geysersam wrote: post #212

Earlier quoted context omitted.

Thank you for this. The ill-defined nature of inflation is an extremely important and often overlooked fact. Another interesting problem with the concept of inflation: Thirty years ago, what would've been the "consumer price" of a modern smartphone? Millions, easily. Same goes for many other technologies that have fallen in price rapidly. (Big screen TVs, speakers, computers, anything with a screen, a CPU or a wirele…

> Thirty years ago, what would've been the "consumer price" of a modern smartphone? Millions, easily. Sure, but how many of them were there? Zero. Volume has to be accounted for.

But how are you going to compare prices between two periods if you don't include the same items in the "market basket"?

Re: America’s banks are missing hundreds of billions of dollars

#395

Post by disgruntledphd2 »

brabel wrote: post #271
disgruntledphd2 wrote: post #215

Earlier quoted context omitted.

I think so. I believe that this is the reason EU banks have been ok so far, as they do need to hedge interest rate risk.

EU banks are ok? Didn't Credite Suisse just go under and had to be forcedly saved by its main competitor?

Yeah, I almost added CS to the original post, but their problems were relatively unique to them, rather than being an extreme case of a common problem, like regional banks in the US (who didn't need to hedge interest rate risk).

Re: America’s banks are missing hundreds of billions of dollars

#396

Post by geysersam »

robertlagrant wrote: post #220
geysersam wrote: post #201

Earlier quoted context omitted.

Fact remains that wealth inequality has increased enormously over the last decades. This is a big economic issue that deserves journalistic coverage. If you don't want to frame it in terms of "evil" or "profiteering" that's fine. But this issue is important. The expected consequence of inequality is reduced economic output (in terms of utility). It leads to inefficiency. I feel this is a perspective that's not stress…

Can you elaborate? How does the existence of a rich person somewhere else reduce my economic output?

The ideal market maximizes utility production because economic actors expose their utility gain by pricing commodities. The assumption is that price and utility are similar.

But when there is wealth inequality this assumption breaks down. A person with large wealth can offer higher prices for less utility compared to a less wealthy individual.

This biases markets to satisfy wealthy individuals, overall reducing total utility production.

Re: America’s banks are missing hundreds of billions of dollars

#397

Post by scotty79 »

AnimalMuppet wrote: post #335
baremetal wrote: post #263

Earlier quoted context omitted.

>Those calculations are very tricky in conflict with the obvious huge increase in living standards since the 70s. People used to be able to buy a house and raise a family on one salary. Tell me where exactly the standard of living went up since the 70s. Sounds nice though.

Well, let's see. That family with one salary probably also only had one car. That car needed a tune-up regularly, and was lucky to make it to 100,000 miles. They had a house, but it was a small house by current standards - maybe 1000 square feet. They had one landline phone - no cell phones, and certainly no computers. The breadwinner could retire at 65, but the median age of death was 68. They could afford medical c…

> They had one landline phone - no cell phones, and certainly no computers.

I have no idea why those are mentioned. Do we somehow pay for development and manufacturing of those with exorbitant rents and mortgages?

When people talk about standard of living they talk about living, not various forms of entertainment brought on by sheer technological progress.

If you want to mention technology mention things like washing machines, dryers, dishwashers and fridges. Those contribute to standard of living. Not whether people figured out how to do astral projections or whatnot cheaply.

Re: America’s banks are missing hundreds of billions of dollars

#398

Post by naasking »

Workaccount2 wrote: post #374
naasking wrote: post #337

Earlier quoted context omitted.

> The trouble is that a large chunk of the media has basically lied about this and told people that no, they'd be able to consume just as much as before if it wasn't for the evil profiteering corporations and the mega-rich stealing from them Not a lie at all, corporate profits are the largest driving factor behind inflation over the past couple of years: https://www.epi.org/blog/corporate-profits-have-contributed-...

Corporations are always greedy and always trying to maximize the amount of money they can get for their goods and services. This has been true since forever. Corporations raising prices is a response to inflation, not the cause of it. When the levy breaks and the town floods, don't blame the river for being a river. Blame the engineers that built the levy.

> Corporations raising prices is a response to inflation, not the cause of it.

Sorry, that's wrong. Corporations are taking advantage of the perception of supply chain disruptions to excuse price gouging. Supply chain shortages led to a 1-2% bump in inflation pushing it to 3-4%. Corporations then bumped prices 3-4% which raised inflation even more, pushing it to 7-9%.

If corporations were raising prices in response to increases in costs, their profits would remain flat or only slightly increase. That's not what the data shows.

Re: America’s banks are missing hundreds of billions of dollars

#399

Post by naasking »

geysersam wrote: post #394
naasking wrote: post #348

Earlier quoted context omitted.

> Thirty years ago, what would've been the "consumer price" of a modern smartphone? Millions, easily. Sure, but how many of them were there? Zero. Volume has to be accounted for.

But how are you going to compare prices between two periods if you don't include the same items in the "market basket"?

By comparing median total living costs to reflect what's typical. A cell phone and computer are indispensable today, a land line not so much, for instance.
Post reply on HN