Seen everywhere in last U.S. crisis, moral hazard is nowhere in this one • Hacker News Board

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

#91

Post by lotsofpulp » Sun, Apr 12, 2020, 7:36 PM UTC

throwawayjava wrote: post #63

api wrote: post #48

Earlier quoted context omitted.

The fact that the most common inflation numbers (AFAIK) don't include real estate makes them worthless.

Shelter (rent and "owners' equivalent of rent") are included in the CPI.

The increasing volatility of future economic prosperity in most places, as well as concentration of burgeoning businesses into a few select cities is not factored into the CPI, and is probably not able to be factored.

The difference in probabilities of future life outcomes for living in certain prosperous neighborhoods and cities and the compound effect of children growing up in those is very material nowadays. This especially effects how much more housing and land costs in certain cities, and how much people are willing to gamble on it by leveraging more to "buy in" to those probabilities of future success.

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

#92

Post by twblalock » Sun, Apr 12, 2020, 7:37 PM UTC

AnimalMuppet wrote: post #79

twblalock wrote: post #66

Earlier quoted context omitted.

This is a totally different situation. Businesses are failing because of the government. Therefore the government should compensate them.

Well... in this situation, individuals are also going to be failing because of the government. Therefore...

Therefore they should be compensated too, and they are going to be. They get unemployment benefits and Federal money. The income tax due date was moved out, and many states have allowed people to stop paying rent and prevented evictions. There will probably be more help for people in the next relief bill the government passes.

People aren't being helped enough, but neither are businesses.

On the plus side, helping businesses can help people keep their jobs, so if you help businesses you also help their employees. People are focused on stock buybacks, but what we really ought to do is prevent businesses that receive aid from laying people off. (Of course, that does create the incentive for businesses to lay people off before they get the aid, but a smartly written law could require companies to hire those people back as a condition of aid, etc.)

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

#93

Post by redis_mlc » Sun, Apr 12, 2020, 7:39 PM UTC

AngrySkillzz wrote: post #82

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…

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…

AngrySkillzz: you're trying to sound informed, but you're not.

Economics is known as the "dismal science" for a reason, and your ECON101 rehash doesn't help anybody.

Stocks have a high PE today because interest rates have been low since 2008, so investors have no choice but to buy real estate or stocks.

Most European countries don't have functioning economies, so buying on Italian or Spanish exchanges is pure speculation.

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

#94

Post by davidxc » Sun, Apr 12, 2020, 7:40 PM UTC

AngrySkillzz wrote: post #82

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…

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…

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 worldwide).

The rise of asset prices definitely is a much more complex issue than just US policy, but I'd still argue that stimulus by the US is one of the causes, not only a symptom.

I agree with you that the US has been more successful in managing the 2008 crisis than the ECB, and that part of that was because we recognized that we needed stimulus earlier on in the crisis. But this doesn't contradict anything else that I said.

I also never made the claim that the counterfactual of no stimulus would have been better - I personally believe it would have been worse, since the economy and labor market would have likely went through a longer and more serious collapse. But again, this does not contradict what I said about central bank stimulus being one of the significant causes in the rise of prices in financial assets.

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

#95

Post by watwut » Sun, Apr 12, 2020, 7:40 PM UTC

twblalock wrote: post #66

watwut wrote: post #47

Earlier quoted context omitted.

I mean, that logic is applied to individuals that for example get sick or simple exist in bad economy. They dont get bailout while consequences on them are disastrous. I think that anger over companies being bailed out with no conditions placed on those money is pretty much about that. Individual get homeless, but the company wont even have to go through bankruptcy and restructuralization. It gets free money instead.

This is a totally different situation. Businesses are failing because of the government. Therefore the government should compensate them.

Government did not made virus. It merely failed to act on it - party because of trying to keep stocks up. American government (whether federal or local) was not exactly fast in giving out orders to close businesses or forcing restrictions or forcing people wear masks. It seems like for the most if United States and most of last months time, it was individuals, organizations and very local levels of government deciding to avoid contact (or pressuring each other to avoid contact).

The ones that are closed by government directly are restaurants and entertainment.

Individual health insurance being too expensive is also because of government. The levels of homelessness or how severe consequences of loosing job are is also something that is because of what government does.

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

#96

Post by clairity » Sun, Apr 12, 2020, 7:43 PM UTC

AngrySkillzz wrote: post #82

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…

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…

you can't make such a grandiose condemnation of "earnest misinformation" and then not make perfectly defensible arguemnts, lest you make the exact same mistake you condemn.

p/e ratios at historical highs is a statement that they've disconnected from their fundamentals, i.e., the price of a share of a company is (often much) more than the expected present value of all future cash flow for that share.

that there are no better alternative investments just strengthens the case that those p/e ratios are irrationally high for those assets, not that the strategy of investing in the best available alternative is irrational.

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

#97

Post by redis_mlc » Sun, Apr 12, 2020, 7:46 PM UTC

duxup wrote: post #75

option wrote: post #35

Earlier quoted context omitted.

yes, basic consumer goods didn’t see much inflation. But what about housing, education, even stuff like cars and travel. Of course, other factors are at play too, but abundant “cheap” money certainly increase prices of those

I wonder about cars. There are cheaper new cars...but people seem to choose cars with an ever inflating numbers of features.

It's American consumerism fueled by available credit.

What's really fascinating is that what you said applies to McMansions, and ... private aircraft too.

Cessna cancelled their basic $300,000 new 172 because people were only ordering the $400,000 glass panel model. The price is so high they took it off the website for the first time. (And older pilots were expecting it come in at $80,000. lol.)

Cubcrafters makes composite Cubs(!) that are priced starting in the $190,000 range for LSA and $317,000 for Part 23, and again, mainly sell the maxed out versions.

http://cubcrafters.com/compare

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

#98

Post by AnimalMuppet » Sun, Apr 12, 2020, 7:56 PM UTC

throwawayjava wrote: post #87

AnimalMuppet wrote: post #74

Earlier quoted context omitted.

I think the future is a series of online courses that have objective pass-fail, and somebody with recognized authority to issue degrees in X if you pass X's set of courses. And it's cheap - maybe $100 per class. And there's different classes competing to be in the set for X, and there's competing outfits with the authority to issue degrees.

Everything that you just listed is basically how our current system works. Accredited institutions can issue degrees if you pass their courses. There are various "grades" that bucket people, but as far as getting the degree goes, you just need to pass. Grading is at least ostensibly objective. Admissions to accredited institutions is selective, and colleges compete with one another for students. The only two differen…

OK, let me try again.

I'm the accrediting institution. For my degree in physics, you have to pass this online class on electrodynamics from MIT, because it's the best one there is. And you have to pass this other online class from Caltech on special relativity, because it's the best there is on that. And so on.

The "accrediting institution" doesn't need to own any of the course content. It can take the best of the online courses that are available. And the online stuff that's available tends to be the best of the available lecturers.

That's why it could be less expensive. You don't have to have classrooms. You don't have to pay the lecturers' salaries (though you do have to pay license fees on the video). You have to have a very small amount of administration, and you have to write and administer tests that show whether the student actually knows the material.

Western Governors University already runs on something like this model, except that I believe that they use their own content instead of the best available online content, and they only have a limited set of majors.

And, I didn't say "standardized tests". The tests would probably belong to the accrediting institution. But there need to be tests, so that they can tell that you actually learned something, instead of just sitting through the videos watching something else on your phone.

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

#99

Post by pepy » Sun, Apr 12, 2020, 8:00 PM UTC

jariel wrote: post #83

chrisco255 wrote: post #33

Earlier quoted context omitted.

QE never really worked, bailed out a bunch of corrupt and broken companies that should have gone bankrupt, and kicked the can down the road. They were supposed to unwind QE1 but they never did. And $4T in toxic QE1 assets sat on the Fed's balance sheet going into this mess. The Fed is propping up the bond market and toying with the idea of buying equities. We just had 17 million people file for unemployment in 3 week…

QE1 worked well and the banks are not corrupt. It's in the later years, while stocks and the economy were on a tear, that the Fed at. al. refused to raise interest rates ... this perpetuated the housing bubble among other things, which is the #1 source of inequality (hint, it's not between the billionaires and the rest of us, it's between the propertied and the unpropertied).

of course banks are not corrupt, Wells Fargo especially

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

#100

Post by treyfitty » Sun, Apr 12, 2020, 8:00 PM UTC

gerdesj wrote: post #57

HarryHirsch wrote: post #37

Earlier quoted context omitted.

Wimbledon took out a pandemic policy year after year. Turns out they were stupid to do so, they could have invested the insurance premium in the stock market and waited for their bailout.

Think in risk terms. When they were assessing the risk to their business posed by a pandemic then they could not foresee the govt response. An insurance policy is (almost) certain to pay out. Risk assessed and mitigated. "turns out" is not a method I use for business planning. I'm not sure what sort of bailout they would get either. My firm does not expect a loss of earnings style bailout. I would venture that they d…

Insurance is most certainly NOT certain to pay out. Case in point Star Cinema Grill; albeit this is an egregious case where the insurer is blatantly arguing and bluffing a lawsuit. Insurance will fight tooth and nail to not pay out.

https://www.insurancebusinessmag.com/us/news/hospitality/llo...