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

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

reuters.com

Post reply on HN
Print view View original

121–130 of 161 posts

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

#121

Post by samsonradu »

bmelton wrote: post #85
luckylion wrote: post #56

Earlier quoted context omitted.

> So, how to we get out of this trap? Let it hurt. Unless investors feel it (and they only feel via the value of their investment), nothing will change, ever. Of course, you'll get plenty of people saying that it's unfair that this time they really have to live with the consequences of their risk management and that we should totally do that, starting tomorrow. But then you'll get the next cries next week when they'v…

I think that I agree with this ideologically, but the reason nobody lets that happen is because cumulatively, "retirement accounts" are the single largest "investor" on the stock markets. So in this case "screwing investors" basically amounts to destroying the life savings of the elderly.

I understand your point but it feels like it's not addressing the actual issue: Why did the elderly put their life savings into the S&P 500? And why does everybody encourage pumping all your life savings into stocks?

A possible answer is that people still believe risk-free 5%+ YoY returns is perfectly normal because of purely historical reasons and disregarding the current economic realities (growth rates) of the world. Considering the current demographics in many developed economies it's just not going to happen! How about bailing out their pensions instead of the companies?

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

#122

Post by edmundsauto »

WalterBright wrote: post #105
AngrySkillzz wrote: post #82

Earlier quoted context omitted.

Every HN thread on economics has a bunch of comments like these that are earnestly misinformed about economics. When commenting on something outside of your wheelhouse, please recall Socrates from the Apology: "I observed that even the good artisans fell into the same error as the poets; because they were good workmen they thought that they also knew all sorts of high matters, and this defect in them overshadowed the…

> earnestly misinformed about economics Economics is a weird discipline where everyone becomes an expert on it at age 15. I've even seen people confidently expound on economics when it's clear they don't even understand the difference between revenue and profit. In contrast, nobody is willing to argue with a physicist unless they are at least as educated in physics as their counterpart is. It's really a shame that al…

There are a number of subjects like this. I feel it has something to do with not making predictions about the future -- leaves no clear indication of good/bad decisions that are tied to skill.

The really interesting areas like this is something like fringe/doomsday religions, that do make predictions about the future. When these predictions inevitably fail to pass, the believers double down.

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

#123

Post by edmundsauto »

AngrySkillzz wrote: post #118
WalterBright wrote: post #105

Earlier quoted context omitted.

> earnestly misinformed about economics Economics is a weird discipline where everyone becomes an expert on it at age 15. I've even seen people confidently expound on economics when it's clear they don't even understand the difference between revenue and profit. In contrast, nobody is willing to argue with a physicist unless they are at least as educated in physics as their counterpart is. It's really a shame that al…

This is basically my point. Didn't particularly mean to criticize davidxc, more the tendency for people on HN to assume that because they're good at programming they must also know a lot about economics, the stock market, and etc.

To be fair, there might not be anyone who can opine on economics and be correct. It's all either survivor/hindsight bias, or making indistinct, unverifiable predictions.

Economics happens to have high stakes, so people flock to it. Nobody really knows what's going on.

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

#124

Post by diob »

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…

You've put into words what I was thinking about the other day.

I always hear folks say "Weird there was no inflation after the 2008 stimulus" or even experts try to claim that there is none.

But it's not about inflation of everyday consumer goods, it's about the massive inflation in things that consumers don't purchase regularly (things like houses). And at this point, I think we've done a lot to essentially price regular consumers out of that market.

Think about that. We've priced regular folk out of things that build wealth. It's going to lead to something terrible down the road. Even more terrible than what we're already living in.

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

#125

Post by mrosett »

bobthepanda wrote: post #108
davidxc wrote: post #94

Earlier quoted context omitted.

I never said that P/E ratios in the US are "too high". I said that they've been higher in recent years than in past history. This is, as you said, because the amount of money chasing investment opportunities is increasing. I agree that the reasons for this are complex, but one significant reason that the amount of money chasing investment opportunities is increasing is central bank stimulus (not just in the US, but w…

> I also never made the claim that the counterfactual of no stimulus would have been better To be fair, that wasn't the only option. There was the debate in 2007/08 about how much of the stimulus should be monetary vs handouts directly to taxpayers vs infrastructure. There's some who believe that the "infrastructure" portion was too small of the pie, hence the stomach for things like "Infrastructure Week" from Trump…

In the abstract, I liked the idea of spending it on infrastructure, but over the ensuing decade I’ve become deeply skeptical of the ability of the US government to effectively spend more money. California high speed rail and the NY subway are exhibits a and b.

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

#126

Post by pjmorris »

chewz wrote: post #67

> “Colonel Cargill was so awful a marketing executive that his services were much sought after by firms eager to establish losses for tax purposes. His prices were high, for failure often did not come easily. He had to start at the top and work his way down, and with sympathetic friends in Washington, losing money was no simple matter. It took months of hard work and careful misplanning. A person misplaced, disorgani…

Thank you. It's been too long since I read this, putting it in the 'to read' pile.

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

#127

Post by rapind »

edmundsauto wrote: post #122
WalterBright wrote: post #105

Earlier quoted context omitted.

> earnestly misinformed about economics Economics is a weird discipline where everyone becomes an expert on it at age 15. I've even seen people confidently expound on economics when it's clear they don't even understand the difference between revenue and profit. In contrast, nobody is willing to argue with a physicist unless they are at least as educated in physics as their counterpart is. It's really a shame that al…

There are a number of subjects like this. I feel it has something to do with not making predictions about the future -- leaves no clear indication of good/bad decisions that are tied to skill. The really interesting areas like this is something like fringe/doomsday religions, that do make predictions about the future. When these predictions inevitably fail to pass, the believers double down.

Because economics isn't a real science. As soon as someone starts talking about it like it is a science my bullshit alarm rings and I politely extract myself from the conversation.

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

#128

Post by yourapostasy »

bmelton wrote: post #85
luckylion wrote: post #56

Earlier quoted context omitted.

> So, how to we get out of this trap? Let it hurt. Unless investors feel it (and they only feel via the value of their investment), nothing will change, ever. Of course, you'll get plenty of people saying that it's unfair that this time they really have to live with the consequences of their risk management and that we should totally do that, starting tomorrow. But then you'll get the next cries next week when they'v…

I think that I agree with this ideologically, but the reason nobody lets that happen is because cumulatively, "retirement accounts" are the single largest "investor" on the stock markets. So in this case "screwing investors" basically amounts to destroying the life savings of the elderly.

> So in this case "screwing investors" basically amounts to destroying the life savings of the elderly.

Equity markets are not supposed to be so timid that they hide behind the skirts of grandma and cling to grandpa's legs. The picture is more like they're holding a gun to your grandparents' heads. I'd look into a one-time stimulus program that recaps just those elderly's retirement accounts to decouple equity markets' hostage-taking of a vulnerable section of the population, move the interest rate to a level that re-kindles the bond market's retirement linkage, and let the capitalists sort out a real capital market.

I'm done with so many companies boasting they're uber-capitalists, but multiple times in my life they avail themselves of taxpayer-backed funding for loan terms I'd never in my dreams get as a private individual or small business. And they just did it again.

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

#129

Post by jrs235 »

fountainofage wrote: post #119
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.

This is the solution. Have the firms issue stock and the government purchase the stock. Obviously make it ultra-preferred with no one else getting preference before the government gets paid. If firms don't like that deal, they can either get their own funding from the private markets or go out of business.

I don't want my tax dollars supporting million dollar executive salaries and bonuses for executives and management that I think are doing a questionable job. Are we going to have the government dictate salary and bonus reductions and maximums too?

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

#130

Post by WalterBright »

edmundsauto wrote: post #123
AngrySkillzz wrote: post #118

Earlier quoted context omitted.

This is basically my point. Didn't particularly mean to criticize davidxc, more the tendency for people on HN to assume that because they're good at programming they must also know a lot about economics, the stock market, and etc.

To be fair, there might not be anyone who can opine on economics and be correct. It's all either survivor/hindsight bias, or making indistinct, unverifiable predictions. Economics happens to have high stakes, so people flock to it. Nobody really knows what's going on.

We do know a few things, such as attempts to repeal the law of Supply & Demand fails again and again. We also know there is no Free Lunch, as every effort to implement one has failed.

It's like I am no physicist, but I know that anyone who claims he's invented a Perpetual Motion machine is either a fraud or made a mistake.

Post reply on HN