Federal Reserve pledges asset purchases with no limit to support markets

Even if the US could allow US companies to default for a year without penalty, the Chinese companies expecting coupon payments wouldn't receive the funds they use to operate. They would then have to default on their Chinese obligations.

If Chinese companies can't pay their debts in China, China faces huge pressure to devalue or inflate. They're unlikely to adopt the forgiveness rule. Emerging markets are at the end of this game of crack the whip.

The response to 2008 wasn't a problem in isolation, but continuing that policy into 2010-2019 was. Rates even started going up slightly a year ago, but then got nipped in the bud to keep the stock bubble rising.

I'm willing to agree that at this current point, these bailouts seem quite prudent. The problem is that after the crisis is over, the hazardous financial and business practices that necessitated the bailouts will never be reigned in, but allowed to continue thus necessitating another bailout in the future.

There is a certain truth in that the ballooning housing prices in many places have a lot to do with availability of credit to the buyers. At the same time, if you're planning to build a new house, you'll find that the costs of building itself are also high. Quite simply, building requires lots of labor, and labor today is much more expensive than it used to be in the old days. To build a house under modern standards and code, you're going to spend at least $200k, probably more. It definitely will take a decade if not two before a typical American family can save up as much, especially while making rent payments at the same time.

> Some of this is inevitable, and desirable--risk-taking is the driver of all economic progress. But how much? How far do we take it? Are we actually creating a society worth living in when the "risk-takers" are all rich multinational corporations?

In truth, the real risk-takers are millions of regular people, who don't build any significant savings to weather the storm. I find it strange to complain about moral hazard of government or Fed bailing out businesses by loaning them money, when at the same time individual people are given various kinds of unemployment insurance, child benefits, subsidized housing etc. These might be right thing to do, but they create even bigger moral hazard, and it should be recognized before complaining about businesses getting some government support. Can you imagine government instituting a "loss of profits insurance" program, where every business must pay in some percentage of profits, and which will pay out replacement of profit should something happen, the same way unemployment insurance works? Or a program where government simply gives cash to businesses that are owned or employ people government decides are worthy of support, the same way child benefits work?

The equity holders are eating the losses; have you seen the stock market?

> Now, the Fed provides a third option: the holders of U.S. dollars, whose currency is devalued as money is printed to paper over the void which was opened up by the pandemic. And so the charade will continue.

Money is being temporarily created and lent, in exchange for collateral (bonds) to avoid a lack of liquidity caused by decreasing asset values and more hesitant lenders. Once things go back to normal, the money will be destroyed since corporations will return the money in exchange for the asset again. The net currency devaluation is 0.

Too big to fail, eh? If that were true, there is no point having technical bailout as a possible state for companies to be in. Just remove it as a legal option and given them a permanent exception from having to do anything if the situation arises.

The justification is flimsy. If the businesses were any good they wouldn't need a bailout. They'd get new owners ad carry on as before. Capitalists are perfectly capable of putting an operation on ice for a few months for all that it would be painful and disruptive. Businesses go bankrupt because they are bad businesses and the economy is signalling the resources should be redeployed.

I can agree that the bailouts are going to happen; but these bailouts have been set in stone since 2008. Once 'give money to the wealthy and powerful to preserve the status quo' was identified as an acceptable solution it was going to become the default solution to any and all crisises. Someone could have come up with a better plan in the last 10 years but there was no incentive to.