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The Looming Bank Collapse

theatlantic.com

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Re: The Looming Bank Collapse

#101

Post by vsareto »

mrep wrote: post #97
vsareto wrote: post #84

Earlier quoted context omitted.

>I love the idea that the entire global economy is fake, artificial and zombie-like, because it doesn't operate the way you think it should. A reasonable person would take a step back and question their premises and understanding. The new part is the expectation that governments will prop up companies during bad economies. This is bewildering to anyone with a naive view that believes America is a purely capitalistic…

The only companies the government is propping up are the airlines and small businesses by mainly paying for their payroll to keep people employed through the CARES act [0]. In what way is the government protecting large companies? [0]: https://en.wikipedia.org/wiki/CARES_Act

Exactly, it's protecting large airlines from going under. This means there's less risk here than if the government had not intervened. Any future pandemic will likely result in a similar response, therefore, airline stocks have reduced risk of becoming worthless.

At a basic level, if you removed all demand for airlines, you'd say "well, airlines don't look like a great investment". But now the demand matters less during disasters because demand isn't actually keeping the company alive as in most businesses.

Re: The Looming Bank Collapse

#102

Post by throwaway1777 »

solatic wrote: post #3

It doesn't matter if the banks crash again if the Fed will just bail everybody out again and push stock market inflation even higher than it is now. It's clearly unsustainable, but the question is, how and why will the bubble burst? The author posits one option, of political intervention precluding another bailout. But the Federal Reserve is non-political precisely to shield it from attempted short-term political mac…

Yeah, until there’s a better market to invest in than the US or an attempt to dethrone the dollar as the reserve currency I don’t see anything changing no matter what the fed does with QE and bailouts.

Re: The Looming Bank Collapse

#103

Post by cryptica »

QuesnayJr wrote: post #53
burlesona wrote: post #42

Earlier quoted context omitted.

This is the insanity of zero interest rate policy. It’s so hard for me to understand why the economists and fed officials don’t see this.

It's not that we don't see it, but we don't agree. I honestly don't have the energy to try to explain it here anymore -- the conversation always turns unpleasant, and I need a place on the Internet where I can avoid thinking about economics for a while.

>> the conversation always turns unpleasant

Rationalizing the irrational tends to be unpleasant.

I think it's a complete fabrication that people are dependent on the financial system and that we need economic stability. People enjoy drama and they are able to recover from any economic failure. Even total failure.

Too big to fail is total BS. If a solar storm wiped out all records of bank accounts and all records of all financial holdings, the economy would quickly recover. The number of new opportunities that this would create would be unprecedented.

From the perspective of most people, the best feature of capitalism is not its ability to provide sustenance (even communism can do that), it's its ability to provide hope for something better... Unfortunately these days our modern version is not true capitalism, it's crony-capitalism and it doesn't yield much hope - You are given a place in society and the only way you can get something better is by doing something deeply unethical and then earning hush money from your corporate masters.

We are heading towards a dystopian surveillance capitalist future. Even if the economy crashes permanently and never recovers, that future doesn't look so bad compared to what would happen if we stay on course with current monetary policies.

Re: The Looming Bank Collapse

#104

Post by missedthecue »

apta wrote: post #77
hpkuarg wrote: post #76

Earlier quoted context omitted.

A moral argument against the time value of money? Isn't that like legislating that the value of pi is 3?

It's a moral argument against the inherent exploitation involved in usury. No one denies the time value of money, it's about how to extract that value morally and ethically, and not at the expense of the needy.

A loan is when someone sells money. The interest is the profit to compensate for the risk. Is all profit, (including that derived from selling labour) to be thought of as theft?

Should everyone sell everything at cost to avoid "exploiting" others?

Re: The Looming Bank Collapse

#105

Post by mrep »

gridlockd wrote: post #24

"There are more than $1 trillion worth of leveraged loans currently outstanding. The majority are held in CLOs." To get some perspective, the FED recently added almost three trillion dollars of "not QE" to the balance sheet, mostly because of COVID-19. They'll be bailed out. "But this time, the bailout proposal will likely face stiffer opposition, from both parties" Doubtful. Everything can be blamed on the virus thi…

What part of the FEDs balance sheet [0] are you concerned about getting bailed out because it is pretty much entirely composed of the US government's own debt through US treasury securities and citizens homes through mortgage backed securities?

[0]: https://www.federalreserve.gov/releases/h41/current/h41.htm

Re: The Looming Bank Collapse

#106

Post by missedthecue »

chishaku wrote: post #44
nknealk wrote: post #6

> I have a checking account and a home mortgage with Wells Fargo; I decided to see how heavily invested my bank is in CLOs. I had to dig deep into the footnotes of the bank’s most recent annual report, all the way to page 144... The total is $29.7 billion. It is a massive number. And it is inside the bank. To put $29.7B that into context -- Table 4 of the most recent 10K says that Wells has ~1.7 trillion dollars of e…

That's not the correct context. What does that $29.7 billion represent in counterparty or systematic risk?

Do you know what a CLO is...?

Re: The Looming Bank Collapse

#107

Post by voisin »

apta wrote: post #77
hpkuarg wrote: post #76

Earlier quoted context omitted.

A moral argument against the time value of money? Isn't that like legislating that the value of pi is 3?

It's a moral argument against the inherent exploitation involved in usury. No one denies the time value of money, it's about how to extract that value morally and ethically, and not at the expense of the needy.

What are you proposing as a solution? Is this a situation along the lines of “Democracy is the worst form of government, except for all the others”? People with capital need an incentive to provide it to people without capital. You can argue reasonably that the distribution of capital isn’t “fair” but to argue there should be no interest charged seems irrational. Help me understand your position.

Re: The Looming Bank Collapse

#108

Post by apta »

missedthecue wrote: post #104
apta wrote: post #77

Earlier quoted context omitted.

It's a moral argument against the inherent exploitation involved in usury. No one denies the time value of money, it's about how to extract that value morally and ethically, and not at the expense of the needy.

A loan is when someone sells money. The interest is the profit to compensate for the risk. Is all profit, (including that derived from selling labour) to be thought of as theft? Should everyone sell everything at cost to avoid "exploiting" others?

Selling money is unethical because of the inherent exploitation involved, by taking advantage of someone who is in need of it.

No one is saying not to make profit, just do it properly. You can rationalize interest as being compensated for risk, but it doesn't make any less exploitative. We have already seen how the economy keeps getting screwed, yet we don't learn.

Re: The Looming Bank Collapse

#109

Post by jessaustin »

throwaway_jobs wrote: post #28
Diederich wrote: post #20

Earlier quoted context omitted.

US native here. If I printed some $100USD bills, took them to the bank and tried to deposit them, they would have no value. The consensus is that you aren't allowed to print money. The United States Government prints money all the time. This money has value because there is a world-wide consensus that it has value. The simple fact is that there is and has been (for many decades) no safer place to park vast sums of mo…

> The United States Government prints money all the time. This money has value because there is a world-wide consensus that it has value. No the Government borrows against future taxes (consider that an accounts receivable), the borrowed money doesn’t have value because of consensus it has value because it is backed by future tax revenue. If the government did as you say and borrowed a trillion per taxpayer the syste…

Where do dollars come from? Many observers say that the Federal Bureau of Engraving and Printing manufactures them. These manufactured dollars are then distributed to banks and through banks to other firms and to the public. They are manufactured in the quantities necessary for efficient settlement of loans and other financial instruments. In particular, attention is paid to current goals for purchase of "Treasury" notes. These instruments are also manufactured by the USA government.

Obviously, an individual human can't operate like this. The USA government can, and has for decades. Remember the Gospels' admonition to "render unto Caesar."

Re: The Looming Bank Collapse

#110

Post by jessaustin »

atemerev wrote: post #48
catsdanxe wrote: post #40

Earlier quoted context omitted.

So what would a rational person do? Stockpile guns and food? Invest in gold?

Brace for impact. If and when the shit hits the fan, there will be no strategy _at all_ to keep the same economic levels. Everybody will suffer.

The assholes keep telling us this. If they believed it, one suspects they'd change their behavior.
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