We are also talking about companies that are leveraged to the tits to juice their return on equity. What is glossed over in all of these discussions about bailouts is that the managers of these corporations respond directly to financial incentives, and the existence of a "lender of last resort" such as the Fed ensures that corporations will tend to leverage their balance sheets far beyond a level commensurate with the actual risk of the underlying business.

> We are talking about companies which have plenty of assets and strong businesses.

Except that those assets are owned with borrowed money. Someone has to eat the losses, and in an actual free market there are two options: the equity holders, or the bondholders. 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.

This. The moral hazard here is enormous. And why should the Fed serve the interests of equity owners over the national interest in a strong, reserve dollar?

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.

This is a misconception. Loss or profit only happens when you sell your assets. Until then it is just economic potential. The trend of not paying dividends is at fault here. When you do not care about dividends but perceived future growth to earn money there is an incentive to over-commit and increase risk above any reasonable level.

Adding to that, if someone's "investments" last just a few days or weeks. Then that person is not investing, that person is just speculating. And, speculators should not be shielded of market readjustments. If anything they should fully pay to use the market as a casino.

But, back to the point, your assessment do not contradicts that companies are excessively leveraged and are not ready to survive though times. As the parent comment says, there is an incentive to leverage as much as possible and let the tax payers pay for the meltdown.

"American Airlines spent $13 billion on share buybacks for 10 years through 2019". They should have used that money more wisely. Why should the taxpayers give money away or lent money at close to zero interest when the companies had the money and dedicated it to artificially increase share prices?

This is a meme phrase; losses absolutely do happen before you sell your assets. (If I bought Enron at $90 and never sold, I didn't lose any money, right?)

> "American Airlines spent $13 billion on share buybacks for 10 years through 2019". They should have used that money more wisely. Why should the taxpayers give money away

You have two misunderstandings here. The Fed is not bailing out American Airlines by giving money away. That has to go through Congress. (I have no claims about whether bailing out AA is a good decision or not). Bailouts also generally are not free giveaways; the government often takes equity stakes.

> or lent money at close to zero interest

The Fed is lending everyone money at 0% to avoid a recession. Regardless of whether AA previously bought back their stock, they could still borrow at 0%. The Fed is doing this because the alternative (letting everything crash) is much worse.

> when the companies had the money and dedicated it to artificially increase share prices?

Share buybacks do not "manipulate the market" (not your words, but common phrasing among anti-buyback advocates) and artificially increase share prices. They return capital to shareholders. The share price goes up because the stock now represents a better return on investment (when AA buys back stock, it no longer a bunch of market cap tied up in money uselessly sitting around in a money market account).

When times get tough, AA can sell equity for more money, which is a stock buyback but in reverse. That's what could happen here. This ebb and flow (raising capital by issuing shares when you need it, returning capital when you don't) is the whole point of equity markets.

See https://www.bloomberg.com/opinion/articles/2020-03-17/the-go... for a more comprehensive argument about why share buybacks for airlines are more rational than holding money for a rainy day.

so why are they not doing this, but instead asking for low interest loans? (https://finance.yahoo.com/news/airline-ceos-promise-to-elimi...)

The reason is that raising equity dilutes all current shareholders. It's a bigger "loss" to them than a termed interest loan which the tax payer gets minimal reward for taking on the risk.

I say, that any bailout loans _should_ come with an equity dilution component. Tax payers should get compensated, or this moral hazard will just continue into the future.

But like venture funding, dilution is fine as long as it means that the company survives or grows. I'd rather own 1% of a billion dollar company than 10% of a dead one.

> It's a bigger "loss" to them than a termed interest loan which the tax payer gets minimal reward for taking on the risk.

Yes, I agree, but my key point is that buybacks are a natural part of equity markets and are not done solely to "manipulate the market" as commonly claimed.

> I say, that any bailout loans _should_ come with an equity dilution component. Tax payers should get compensated, or this moral hazard will just continue into the future.

Agreed, any exceptional bailouts through the government should come with an equity stake. I'm fine with lending to airlines at normal corporate lending rates without needing any additional compensation, though.

the problem is that the current bond and credit markets have seized up because nobody wants to lend (at "normal" rates). If the gov't comes into the market and act as a perfect lender of last resort, then true price discovery don't happen, and you cannot really know what the "true" corporate lending rate would be. That's my take on why it doesn't work without an equity stake for the gov't to do the lending.

It is not a meme, is how accounting works, is how governments tax. If you look at your own example, some people though that they had made a lot of profit with Enron, if they did not sold the shares then they only got losses.

Because the you only win or lose money when you sell your shares (not counting dividends if any).

UK law: "You’ll need to work out your gain to find out whether you need to pay Capital Gains Tax.

Your gain is usually the difference between what you paid for your shares and what you sold them for." - https://www.gov.uk/tax-sell-shares/work-out-your-gain

Until you sell there is NO gains as price varies in function of time. And it can go up or down.

The other claims are more complicated. It's difficult to discuss them if common accounting knowledge is not understood.

There is no one accounting standard that is the ultimate reality. Accounting is a means of representing reality for a particular purpose like any other model. And it can only change and attempt to improve with the understanding that an outside reality exists.

And "mark to market" is a thing that exists, and is sometimes required, anyway.

So I think you're completely wrong in a deep sense, but also in a shallow technical sense.

What is your definition of temporary? QE 1/2/3 were each supposed to be temporary. But each one was never enough, and fed smoothly into the next. Then they finally tried reducing their balance sheet and the repo market blew up. Then "Not QE" repo support was supposed to last two weeks. Then only a few months. Now "only" a year, and at a trillion dollars overnight and half that in 14 day operations. How certain are you that at year's end, overnight repo support will be less than $1T? On which track record of correct predictions from central bankers do you base this belief?

Since 2008, there's not a single Fed dot plot that has been even remotely accurate even six months out. SIX MONTHS. These people have absolutely zero credibility. They lied to you about the duration of QE 1/2/3, they lied to you about the duration of ZIRP, they lied to you about the direction and duration of rate hikes, they lied to you about repo market support amount and duration. During all this, they steadily changed their mandate from "price stability", to "some inflation", to "2% inflation", to "2% symmetric inflation", to "greater than 2% symmetric inflation".

But this time, with QE4, they're super cereal pinky swear scouts honor giving you every reason to believe that it's temporary.

Okay.

There are no actual free markets and there never have been; governments exist and always intervene in the market, and even if they didn't have something like the Fed executing monetary policy, there's typically the option of “past, present, or future taxpayers”; in the case of future taxpayers, often in part or in whole out of returns directly made from the gains from keeping the businesses afloat rather than letting them fail.

> And so the charade will continue.

What “charade”? It would only be a charade if the government pretended that monetary and fiscal policy wasn't part of the system of the economy, which it does not.

I know that's what the macroeconomics 101 textbook says, but is there any empirical evidence this actually drives higher inflation?

We've had historically low inflation for over a decade now[0], a decade during which the Fed has undertaken successive rounds of QE to the tune of $40-$85 billion per month.[1]

[0] https://www.usinflationcalculator.com/inflation/historical-i...

[1] https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1,_QE...

- Inflation gets 'exported' along with production to countries with lower manufacturing costs (because globalization). So no inflation but no working class either, resulting in income inequality - a problem of its own.

- Depending on jurisdiction, inflation should include or adjust the weight of house prices (Eurozone), education costs, medical costs. These are goods that cannot be outsourced, hence they reflect higher inflation.

- Shrinkflation - https://www.economicshelp.org/blog/24369/inflation/shrinkfla...

Driving inflation up from low is a nominal goal of QE but the magnitude varies.

Q: rather than going into debt, would it be possible for the government to just... suspend the activation of financial covenants generally for a while? Enact a law putting a temporary patch on how contract law works vis-a-vis financial instruments?

Something like... any covenant with triggers written after date X would now be required to be written to include additional language Y; and any covenant triggers written before date X would be implicitly interpreted as if they did contain language Y. Language Y specifies that the activation of the covenant is suspended when the government says a certain named financial-market state "Z" pertains; and, when state "Z" is declared as having ended, only then would the covenant be evaluated for activation, based on the present state of the debtor, rather than its state during the historical period during condition "Z". Effectively, the covenant wouldn't be able to "see into" whatever happened during "Z" to apply its triggering logic to it.

(I'm picturing here how you can, in an RDBMS, create constraints that don't validate until a transaction is complete, such that you can temporarily put a table into a constraint-violating state during the TX, and—as long as you fix things before the end of the TX—everything will be fine, and the trigger won't run.)

Changing the rules of massive bilateral agreements to benefit one party over another tends to blow confidence in the system. Investors would start trying to guess which asset class will next be amended, thereby triggering runs across the market. (We see this when governments start expropriation processes in previously-stable economies.)

It also does nothing for e.g. a company with good receivables that can't make payroll or interest payments because its good commercial paper isn't being purchased. It's in a liquidity problem, not a solvency one. But if the liquidity problem persists, the firm will go insolvent.

I suspect "confidence" isn't an accurate word to describe the current aggregate sentiment of people towards the system.

> Investors would start trying to guess which asset class will next be amended, thereby triggering runs across the market. (We see this when governments start expropriation processes in previously-stable economies.)

We are already seeing this today. /r/WallStreetBets has plenty of content along these lines, and for good reason - that the government would be selectively bailing out corporations, once again, was fairly self-evident to anyone with half decent capabilities in logic and memory.

> It also does nothing for e.g. a company with good receivables that can't make payroll or interest payments because its good commercial paper isn't being purchased.

Fair enough, but lets not think in false dichotomies - there is in fact an extremely broad array of ways the fed could go about this. Unfortunately (and coincidentally), they seem to have once again miraculously chosen the way that benefits corporations at the expense of taxpayers.

Most people believe that we live in nations based on ~democracy, in both function and name. I for one would be very interested to know what the public's actual sentiments are on this matter, as opposed to what we are told are their sentiments (comically derived from a single vote, at one point in time). It's self-evidently silly behavior, and yet this seems to be the way the vast majority of people conceptualize the world.

That's...happening? It's the core of each of the stimulus bills.

The company bailouts are, theoretically, for otherwise-good businesses unusually impacted by the pandemic. Restaurants and airlines, for example. Of course, there is the winner-picking that happens when any government spends money.

Instead the Fed and US government have a much simpler and near instant tool: act as the lender of last resort.

A bonus feature of this implementation is it costs not much money. Big corporations have lots of assets and the government is sure to be re-paid.

Says who? The whole point of loans is that there is a possibility that they will not be repaid. Banks thinks it is risky to lend money at the current interest rates so American taxpayers instead have to shoulder the whole burden. The assets owned by corporations is mostly in the form of financial instruments whose value is currently plummeting. The US government is taking on huge risks.

If these loans weren't risky banks themselves would issue them. Since they aren't it stands to reason that they in fact are risky!

I don't see the parallel.

Covenants, ultimately, have to be enacted through the courts. (I mean, presuming debtors' legal departments get the message from the government that they don't have to worry about covenants during this period, whatever their creditors demand. The creditors would ultimately have to take them to court to attempt to get their covenants enforced.)

And, if the covenant enforcement hits the court system, then the government would already be "in place" to suspend traffic—it's "the wire" that court-system messages are flowing through!

(Or, really, it's more like a judge is a router and the legislature controls a WAF module in said router. The judge, as router for motions, is required to deny any motion the law-as-WAF declares as illegitimate.)

You and me and Fed.gov. It fucking sucks.

Does this increase risk? I would think so, but I think people should have an obligation to provide at least some evidence or logical reasoning as to why we must accept the particular flavor of corporate socialism we practice. If an idea is sound, it should be defensible.

Without the flow of money the funds/banks/institutions which own those bonds are in-turn going to default to their creditors.

Hence the internet analogy: you cannot just hack in a pause on your local machine. There is a world of complex interactions which would also need to be paused, so complex just figuring out who owes who would take years/decades.

If you take covenants out, contracts become inherently more negotiable. And that's important, because frequently creditors have less pressure on them to perform, in exactly the same circumstances that cause debtors to face more challenges; and so creditors often find that their best option, EBITDA-wise, is to eat the losses from the challenges that their debtors are facing, rather than destroying their debtors through liquidation in a way that gets them, in the end, less money.

You know how, right now, corporations are more willing to release previously-withheld "bad news", because they can blame their lack-of-performance on a suspension of work due to the virus? Those corporations are creditors, not just debtors (esp. in commercial paper); and the "slack" they earn like this, they can pass on to their debtors (e.g. other corporations)—but only if contracts work the "normal" way, that you see in small-scale non-covenanted contracts.

In such non-covenanted contracts, where when the regular contract isn't working out, frequently the best thing to do isn't to sue for breach, but rather to just sit down and renegotiate the contract. That's what's going on right now all over the place—contracts between e.g. landlords and renters, or between suppliers and retailers, are being renegotiated, just for this temporary period, to the benefit of both parties. (Another good example, more generally, is personal debt forgiveness: debtors are willing to accept a renegotiation of a loan to an individual, over the much-less-likely chance of ever claiming the full original loan amount.)

With a covenant in place, though, one party has no incentive to sit down to renegotiate (and in fact, that's what they wanted to avoid by adding a covenant); and instead can just pressure the other party to do drastic things like liquidation in order to fulfill the secondary contract stipulations under the covenant-breaking clause.

Wouldn't it make sense to—temporarily!—take away the tool by which funds/banks/institutions force their debtors to liquidate, and instead force them to do the thing they'd have done if that tool wasn't there: to renegotiate performance expectations, to get what return they can get; and then, in turn, have those funds/banks/institutions renegotiate their performance expectations with their creditors?

That's completely unfair to one side of the transaction.

Here's an example:

Let's say that in 2010, I bought a million in bonds from various sources.

Let's say that in 2010, you sold me some bonds.

Let's say that your proposal goes through, and the government just declares that contracts will not be enforced.

That would completely punish ME at YOUR benefit.

See https://thehutchreport.com/your-bank-account-who-really-owns...

Or read https://www.amazon.com/Where-Does-Money-Come-Ryan-Collins/dp...

Highly recommended.

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.

Edit: ah yes shareholders lose money but that's the game. Retirement pensions? If you are not for socializing it then it's the game too.

Or is your proposal to default on all the debt for those industries and buy the companies in a firesale? Tourism would actually disappear in that scenario...

Not that we live in anything approaching a capitalist economy of course, but it would be funny if they were logically consistent for once.

That's what they're doing and what the article is about. [Edit: not buying the companies outright, but buying their debt]

The person I was responding to was proposing something else about clever entrepreneurs buying up all of these industries in bankruptcy, or something.

Boeing is an example of such a company.

That's actually called Socialism, when the government buys up companies and starts to own the means of production.

If the taxpayers are getting their wallet out, it should be to purchase something. So, they will be purchasing equity in the bankrupt company.

If Boeing doesn't like it, they can go pound sand, or maybe the executives could use the money (that formerly belonged to the shareholders) to purchase the shares themselves. Of course they don't want that, they want to have their cake and eat it too, again.

The parent here ^ seems to understand the nuance, that a lot of Fed decisions are for the CREDIT markets, not the stock markets.

I highly recommend reading the Greenspan or Bernanke biographies to hear what, and why, they use the levers that they do. There is simply too much nuance in financial markets and the Fed to play arm-chair politics about whether it is effective or not.

I just wrote a thread [0] responding to a joke going around about our first response to everything being to lower interest rates.

[0] https://mobile.twitter.com/elamje/status/1242129602040008704

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.

Which ones would you recommend? The autobiographies?

Do they? That's kind of a big assumption here. If the virus is going to have a major negative effect on their ability to deliver value, then that means they aren't (currently) sound businesses, and the market is correctly marking down their value.

There could definitely be fiscal -- and epidemiological! -- measures that can reverse this state. However, to buy up the bonds without those measures doesn't change the fundamental soundness of the business; it just loads up the Fed's balance sheet with garbage.

There is definitely an unsound premise here - the market hasn't marked down public companies as if they are generally unsound...yet. All the "crash" so far has done is take us back to the levels of 3-4 years ago.

Your point about buying bonds not changing "fundamental soundness" is like saying keeping someone from dying of an acute condition doesn't cure their illness. It still keeps them from dying right now! What is the advantage of causing a preventable catastrophe, just because everything eventually ends?

Yes, because maybe it hasn't accepted the gravity of what's going to happen to their ability to deliver value, or anticipates free money.

>Your point about buying bonds not changing "fundamental soundness" is like saying keeping someone from dying of an acute condition doesn't cure their illness. It still keeps them from dying right now! What is the advantage of causing a preventable catastrophe, just because everything eventually ends?

My point was that if they're not actually sound, then buying the bonds doesn't change that; it's just doing that weekend-at-bernie's thing. To the extent that the business can't deliver value, markets depend on such businesses shutting down, and subsidizing their bonds only delays.

Now, you'd be right that, if there's something fixable about them with collective action, then we should do that thing. But that would still obviate the need to subsidize their bonds, because it would revitalize market interest in them!

And from what I've read, this is how the great depression was created - people said "oh, the banks that are failing are weak, so they should fail".

I mean, if you want to debate this thing entirely in analogies.

But without debating which analogy is right, it does matter whether it's cancer or not. And if aggressive treatment of advanced cancer involves cutting out major organs and the patient will only survive a month longer at best, it makes more sense to assume it's not terminal cancer and act accordingly even if there's a chance.

If someone appears to have a seizure and/or falls down and passes out, it could be a stroke, they could have cancer that's metastasized everywhere, but you don't make that assumption when there are many easily treatable possibilities.

https://docs.google.com/document/d/1YbtJGn7ida2IYNgwCFk3Sjhs...

We need a consistent approach across the board -- small businesses, individuals, etc. Pausing the economy makes much more sense than targeted bailouts to specific industries.

That's where the problem lies. Who is going to decide that? Traditionally we have debt markets for that.

Also, is it really accurate to call a company "clearly creditworthy" if a 2-3 month gap in cash flow results in bankruptcy? Surely the CFO can get down on his knees and find some spare change under the couch cushions to get through this.

Exactly. No one forced them to take on loans and then operate their balance sheets like they'd always be able to revolve bonds.

We are also talking about companies with specious "assets" and incredibly fragile businesses.

> Should we let clearly creditworthy companies go bankrupt because the credit markets are temporarily closed?

No, but they are not all creditworthy. Do you happen to know the ratio between the two? It seems to me that is a rather important data point that a logical person should be examining as part of their decision making process.

There two major assumptions there.

"Clearly creditworthy companies"

and

"Credit markets are temporarily closed"

The bonds are devalued. People are issuing credit to those who qualify. (I've secured two LOCs myself for both my business and personal needs.)

It's just that the bar is higher than normal. What is the function of a market if you don't allow it to clear?

These aren't sound businesses, because the current virus is going to screw them.

And if you think the market is correctly pricing the equity, you can't turn around and say it's mispricing the bonds so the Fed has to "correct it".

I mean, circular reasoning is one level of stupidity, but getting it going with a counterfactual is just enraging to me.

As corporate bonds get more risky banks are not allowed to hold as much of them. Triggering sales, which increases the risk, and thus triggers more sales.

Banks are fine, it is the corporations which need to re-issue bonds that are going to hit a wall.

"Need" to re-issue bonds? Did anyone force them to buy into a model that has a huge linchpin failure?

Edit: Why is this controversial? If people can't afford to make their mortgage payments, and political aid doesn't come through, many banks will definitely be in need of a bailout.

Then landlords can't pay their expenses, and will default on their own payments

This trickles up all the way to the banks and could result in their insolvency, which is what the Fed is (rightfully) trying to prevent

https://www.wsj.com/articles/ge-to-cut-aviation-workforce-as...

Debt is risky, period. Someone has to pay for that risk when bad things happen and the debt cannot be repaid. Also, people respond to incentives. When individuals and companies are allowed to keep all the profits from their risky activities, but are shielded in whole or in part from the losses, they will respond by taking on more risk than they would otherwise. It's called moral hazard.

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?

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 moral hazard you are deftly sidestepping is the fact that bonds/loans do not operate the same way for an individual with collateralized debt vs. a large corporation. And thus, a large corporation can - and does, occasionally - act in accordance with those incentives by assuming bailouts are coming after a black swan event.

Why, then, do corporations get to avoid their collateralized downfall?

it makes financial-risk/reward sense. But only because interest rates are at record lows, and there's evidence in the past that bailouts can happen for too-big-to-fail type companies. Essentially, these big employers can extort a country for a bailout, with the economy tanking as the weapon.

If they cannot rely on the interest being low, and if they cannot rely on a lender of last resort like the FEDs, i'm sure they will be more fiscally responsible.

Unfortunately, these risky behaviour these companies take are the result of years of poor monetary policy by the FEDs and lack of investment into increasing competition in all sectors of industry by the gov't.

> these bailouts are going to happen. No one who understands what is at stack would choose to "let the house fall".

Are the measures being taken now just adding another layer onto the "house of cards" as some people describe it?

Will these measures just make it all fall harder at some point in the future?

The Fed has an enormous amount of flexible firepower, it’s tough to sit back and not do everything you can to stop economic turmoil. They launched the most simulative economic policy of all time and stocks dropped today. If only there was action in other executive arms and congress.

Technically true, but I would argue misleading (note: not implying intent on your behalf).

"We are talking about companies which have plenty of assets and fragile, taxpayer supported businesses" contains kind of the opposite message of your statement, yet this statement is also technically true.

> Thus the FED is acting as a lender of last resort directly to major corporations. Without this last resort said corporations would need to either fire-sale off assets to pay the principle on these bonds or face a technical default.

Again, technically true, under the circumstances we find ourselves in. But might the existence of the Fed, and its past policy responses to such events, have possibly creates an environment of moral hazard whereby events like this are practically guaranteed?

> Which is to say: these bailouts are going to happen. No one who understands what is at stack would choose to "let the house fall".

This seems like a bit of a false dichotomy to me, as if letting the house fail or bailing them out (once again) in this fashion are our only two options.

In a true capitalist system, the US government would receive equity in all the companies they bail out.

At some point I think it would be a good idea for us to admit to ourselves what kind of economic system we really have in the West, and try to determine if it is up to the task of competing with China and their economic system, which to my eye is clearly superior (based in part on observable relative performance in the last 20 years).

Pitchforks, torches, and nooses if necessary.

Also, it's not great to use a politically provocative username. That ends up having a politically provocative effect on every thread the account posts to. If you want to stick around and use HN as intended, we can rename the account for you if you email [email protected].

> Thousands of top traders and bankers on Wall Street were awarded huge bonuses and pay packages last year, even as their employers were battered by the financial crisis.

> Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008, according to a report released Thursday by Andrew M. Cuomo, the New York attorney general.

> At Goldman Sachs, for example, bonuses of more than $1 million went to 953 traders and bankers, and Morgan Stanley awarded seven-figure bonuses to 428 employees. Even at weaker banks like Citigroup and Bank of America, million-dollar awards were distributed to hundreds of workers.

The amount of economic waste involved in people having silly arguments over their perceptions of reality would likely be a horrifying large number if one was to see it.

The US today is more communist than China. The US tends to make fun of China's government for still calling themselves 'communists', but now the tables have turned and I wouldn't be surprised if China starts to make fun of the US for calling themselves 'capitalists'.

I agree that more needs to be done directly for folks who have already lost their jobs or will soon, but that type of stimulus would require an act of Congress, who apparently can't get their collective heads out of their own asses at the moment.

Yes that is the problem. I believe that the Fed's powers should be expanded to allow giving that money directly to the people, instead of only to banks and financial markets.

If we really cared about minimizing unemployment beyond simply paying lip service to it, we'd institute a job guarantee.

I appreciate (and indeed once shared) the knee-jerk libertarianism of the people saying "let them fail", but this view does not fully appreciate the consequences of allowing a violent deleveraging such as we're experiencing now to continue indefinitely.

FFS, these "strong businesses" are so extremely fragile that they are liable to go bankrupt because they can't roll over some of their debt. And now the Fed just wants to let them roll it over again consequence free.

A libertarian purist would say that money creation shouldn't be government controlled; but given that it is they should at least do a good job of it.

None of those things are real except as emotional gates on social agency so the privileged under the law can get first dibs.

Remember Thiel & Trump, probably the rest, really believe romantic notions like tough guys must rule as “that’s the way society has to be because that’s how it has always been”.

Trump literally said it the other day and Thiels ramble was posted here recently.

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.

If their businesses were so strong, they shouldn't have taken a loan that would jeopardize them so easily. The Fed should let them default and take all their cronies down with them. Give the system a good clean by wiping out the parasites.

A lot of these so-called 'strong' companies had been using debt as a way to evade taxes... And now that their highly unethical schemes are about to crumble, we bail them out?

The Fed are aggravating the 'too-big-to-fail' problem. They're turning every corporation into 'too-big-to-fail'. If we continue down this path, we'll end up with communism. It will be the worst, most perverse form of communism ever invented.

1. Lots of businesses would fail, and we would experience another great depression. 2. You don't like populism now? The risks of outright fascism (beyond what you could say we already are experiencing) would go up exponentially.

The main problem with the Ron Paul acolytes is they think that society wouldn't have a massive breakdown in the face of an extremely deep depression - it would just be "the smart entrepreneurs would buy up the assets and build something better!" - but they never talk about how they would deal with the breakdown in democracy and basic government systems that would be a likely result.

We need a great depression. Every depression brings new opportunities.

Have you considered the other side of the story? There are many people who have been locked out of opportunities (especially millennial) and who have been struggling to start or grow their own businesses for a whole decade because they could not compete against corporate monopolies. The failure of these corporations would be a huge opportunity for them.

>> 2. You don't like populism now? The risks of outright fascism (beyond what you could say we already are experiencing) would go up exponentially.

It's better to have fascism officially if that means everyone will be subject to the same rules and same level of hardship.