In contrast, in 2008, we realized things were being criminally propped-up and the economy crashed. Expectations were much higher compared to the actual performance of the economy.
The job of the Fed is to keep companies from going under due to this supply shock. If companies do go under, that means that there WILL be long-term problems with the economy because we're lowering LONG-RUN supply.
The whole point of the fed is to smooth short-run supply shocks so that long-run aggregate supply isn't affected.
This is a false narrative. If a company goes under, chances are the long-run supply will not be affected much, if at all.
When a company goes under, its assets are not burned, and its employees are not killed. If there is any long-term profit to be made, a wealthy investor will come in, buy up the assets at a low price, hire the employees who are now jobless, and pick up the torch where the previous ownership left off.
A government bailout only makes sense if you own a company being bailed out, and you want to stay rich. A government bailout is bad for every other American, because it introduces an incentive to making poor decisions and not planning for market downturns. We should not be rewarding bad corporate behavior with a bailout, we should be punishing it by letting the companies go under so fresh blood can have a try.
We shouldn't be living in a feudal society of fiefdoms that are propped up by the federal government. Let the market run its course.
But all this requires us to re-assemble these things into a new functioning company. A company isn't just a pile of people next to a pile of assets, it has internal and external relationships and processes and culture and on and on happening to make it do the stuff it needs to do. This all takes time and effort to create. To let it all burn down when we need it again in a few months is utterly pointless. What we want to do instead is freeze it for a little bit so we can thaw it out later.
Why should the gov't reward fiscal irresponsibility (stock buybacks) AND a terrible airline product (and thirdly, maintain airlines' negotiating power over employees), as opposed to a "new normal" which might include some fresh ideas?
Shouldn't the government, at the very least, wait a little while to see which companies or industries are actually close to failing, before committing $2+ trillion? American Airlines had 3.8 billion cash as of 12/31/19. Its total OpEx + Interest was about $8.2 billion in 2019. So it had nearly a half-year of expenses covered, before any cutbacks or preservation methods. I'm not an airline accountant, perhaps some obligatory expenses are hidden in COGS which increases their burn rate. But it would appear that AA could survive about 5 months even if it did nothing to reduce expenses -- if they cut back appropriately, perhaps they could extend that to a year. There's also equity and debt markets available if AA needs cash now.
I just don't see why the government felt it was necessary to immediately reassure companies they would be protected, or why, one month in, you are discussing "letting those businesses fail," as if it's a foregone conclusion. In fact, it seems highly likely they would survive intact. Poorer, but probably not bankrupt.
this is exactly how it should have been. If stock buybacks (or dividends, i don't think they are different) during good times, then equity raising during bad times is the counter balance.
No gov't bailout necessary. There will be a price that they can raise cash at. It's not gonna be nice for the current equity holders, but they knew what they bought when they buy equity.
And if the company fails, the gov't bailout should be for the unemployed in the form of social security and healthcare. Not for business continuity.
Yes, that is what happens in a capitalist society. If we are no longer a capitalist society, well... we should probably state that up front.
probably wouldn’t be much of a problem (letting the market run its course) if we had sufficient social safety nets in place for workers
but as we all probably know by now, the govt is mostly working for those with moneyed interests so, they get front and center
We do need creative destruction and to prevent moral hazards.
We also need to prevent mass unemployment and chaos. Nationalizing and re-privatizing can do this, but not as efficiently as just giving 0 interest loans to patch over a temporary “pause” in the flow of money.
Written by juniors, who doesn't really understand their codebase and writing ugly hacks all over the code? With code regularly failing at critical moments?
And you are suggesting to hire a bunch of new juniors who would finally fix this mess? I would rather fire half of the developers and hire new seniors instead who will refactor the codebase.
This makes the assumption that at least one of the following is true: 1. There are wealthy investors to fund the purchase 2. There are wealthy investors who realize there is a long term profit to be made 3. That wealthy investors care about long term profit
> A government bailout is bad for every other American, because it introduces an incentive to making poor decisions and not planning for market downturns.
There are events which no company can plan for, either because they are once in a several lifetime events or because they are so cataclysmic that they shake the foundations of a global economy.
all of those are true. Not just one.
> no company can plan for
and yet, in the filings for american arline, they have mentioned pandemics as one of the risks. No company wanted to plan for this, because they perceive the cost to not be commensurate with the reward - perhaps because they, after seeing 2008, know that the gov't bailout is a possibility, and that's cheaper for them than to save for a rainy day.
AKA, moral hazard. It needs to stop.
if the other riskier airline didn't get a bailout, they would've bankrupted today.
So in good times, the riskier airline returns more money to shareholders. But those shareholders should know that it's taking a bigger risk.
And the difference isn't so much that an airline will be pushed out of the market by not returning 100% of the earnings to shareholders.
There is a lot more to play out. A lot of accounting irregularities will be coming to light, as seen with Luckin Coffee.
The government paying for Coronavirus also provides a financial incentive to not fuck it up so badly next time. We ignored the warning signs and decided to do nothing -- now it's costing us. Next time, we'll know that mismanaging the early days of a pandemic is going to cost trillions of dollars, so we'll probably do a better job. (Or rather, vote for people that will do a better job.)
(Here's how I think we should have handled the early days of Coronavirus. Ban travel and buy back the tickets/reservations for all travellers. People were still taking vacations even when Coronavirus was widespread. I'm guessing they did that because they sunk $2000 into non-refundable reservations, and didn't want to be the ones to subsidize the airlines. So they took their trip, got Coronavirus, infected 3 other people, and now tens of thousands of people are dead.)
It absolutely doesn't. Time and time again, corporations have proven their shareholders (management as well) will simply strip as much value as they can, and leave us (taxpayers via government, citizens with devalued currency via the Fed and their monetary policy) holding the bag with any losses or externalities to clean up.
For example, the Tax Reform Act was sold as incentivizing "jobs and investment"; all it incentivized was share buybacks [1]. Shareholders and management have proven themselves unworthy of trust, or more accurately, public and fiscal policy benefiting them that operates on the honor system. "Fool me once!"
[1] https://money.cnn.com/2018/07/10/investing/stock-buybacks-re...
So what? If I own a successful company, eventually I'm going to reach a point of diminishing returns. At that point, it no longer makes sense to reinvest my company's profits back into the same company. Eventually, I'm going to use that money to start a new business. Doing that will make more money and create more jobs than trying to scale my old company past the point of diminishing returns.
With a public corporation it's simply a case of management making that judgment on behalf of the collective shareholders.
How so?
The problem with that reasoning is that governments don't suffer the consequences of mismanagement the same way companies and private citizens do. Sure, the elected officials may end up voted out, but the same bureaucrats will still be running things, and the basic institutions and systems that led to the current response aren't likely to change.
Middle class Americans are expected to have enough cash reserves to survive 2-3 months in case of an emergency. Why is this expectation not in effect for an airline that makes vastly more profit per capita than the average household?
Airlines spent well over 96% of their free cash flow on stock buybacks, enriching their boards of directors, executives, and shareholders. Do you think it's fair that they can make those decisions and still be entitled to favourable loan agreements when their mismanagement comes back to bite them?
Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal?
Why does the government bailout not have the cash infusions come in the form of an equity buyout, thus bringing actual consequences to the mismanaged airlines and bringing a more stable guarantee of investment return to the taxpayers who have funded this bailout? Shouldn't having access to socialized coffers come with the caveat that your company must become, in part, socialized?
The system only works if companies feel the pain of their mismanagement. Any whisper of bailing out the airlines without considering the above is disgusting and un-American. You don't get to privatize profits and socialize losses. History has shown that companies do not learn lessons unless they are allowed to fail.
This is nuts. Not prepping for a pandemic that causes governments to eradicate your business model is not due to mismanagement.
All bailing out companies does in the long run is ensure they run things as close to the line of collapse as possible, because if there is any disruption, the government will bail them out.
It creates titanic systematic risk, and greatly rewards poorly managed companies vs well managed companies.
Any company weathering this storm well might as well have never bothered saving money and making long term wise decisions that may have limited short term upside, when you get a guaranteed bailout when things start going south when you have made decisions that lead to having no reserve capital (see American Airlines 12 billion dollar stock buyback, the airline industry wants a 50 billion dollar bailout, having spent 45b on stock buybacks in the last years, why would they save money when the government will swoop in and pay)
Don't think the individuals running these companies don't see the pattern here.
Its akin to betting red on a roulette wheel every time, and getting more free money when it comes out black instead.
No the best recourse when your business becomes illegal is to grant a large dividend to shareholders before your creditors liquidate the company. Preparing for your business to become illegal is a waste of money
If government action didn't kill demand, the ensuing death toll from letting the virus spread unchecked would eventually do it anyway.
"Travel is illegal" is only the proximate cause of the woes of the airline industry. The root cause is a lack of preparation.
2 million people dying in the United States isn't really that much. Given that COVID mostly affects people already more likely to die, the death toll had COVID gone unchecked would likely not be that much greater than the 2.8 million Americans that already die each year. Assuming a 30% overlap, we'd see deaths go from 2.8million to 4.2 million in one year, followed by herd immunity (according to the models). We'd then see subsequent years with a lower death rate (since there'd be fewer people with pre-existing conditions). It is unlikely that this would be as economically devastating as argued. It is incredibly unlikely it would have reduced air demand to the levels we're seeing now.
Air demand would still be around for flights to see family, etc. Most of it is gone due to government regulation. Necessary regulation for sure, but still regulation.
Because airlines don’t typically own those airplanes, they lease them from finance companies like GE Capital. Anything they do own is likely to be at/near EoL and generally worth $0 in a market where nobody can make any use of it.
Unless you’re suggesting that the Fed just take ownership of the aircraft and print money to make lease payments to GE Capital. I’m sure the Democrats in the House will jump right on that.
Ex-shareholders technically. Remember, stock buybacks only generate value when you exit the stock. Technically, if you've been holding, you're up shit creek.
>Why do we not let the airlines have an asset selloff of their "super expensive machines" in an attempt to bridge the coronavirus gap before giving them public funding? Could they not declare bankruptcy and restructure themselves to survive until shelter in place is over and business returns to normal?
Who the hell would buy them at this point? Wealth is so consolidated right now it'd be right back in the hands of the same people who were incentivizing the behavior in the first place.
The rest of your post is 100% spot on though in my estimation though.
Wtf does profit per capita than an average household even mean?
Also, profit is irrelevant if we’re talking about a super capital intensive business that can’t scale back its expenses when the revenue goes away (which is the case for all of these airlines leasing planes and paying employees).
Individuals and households have tremendously higher risk variability than companies, because most of the time there are only one or two major sources of income. When one or two of those incomes are interrupted it blows a giant hole in household cashflow.
A large company, however, is not dependent on individual relationships with sources of income. Each customer is a source of income, there are potentially millions of them. Losing 1 or 10 or even a thousand customers doesn't blow a giant hole in cashflow. There are correlations in those flows, but it's never 1.0.
Until now.
But let's assume we go ahead with the idea that every major company should hold 3 months of cash. For starters, that's 3 months of at least revenues, which is going to be one and sometimes two orders of magnitude larger than profits. Assuming that your profit is something like 10%, you're now holding something close to three years of profit on-hand, earning approximately bugger-all. Your shareholders will lynch you.
But suppose they don't lynch you. Is that the best use for your cash? Is it the use that genuinely reduces your overall risks? Almost certainly not. You could use that cash to pay for more R&D, more equipment, more and better-paid staff, improvement programs, to buy promising technologies, invest in other companies, pay down loans on larger, more modern and more-efficient factories ... the list goes on and on. By choosing to hold that cash against a catastrophic event, you greatly increase the much more mundane, but still fatal to the company, risk that you will be out-engineered, out-manfuactured, out-marketed, out-sold by competitors.
But suppose that everyone does it anyway. Now another COVID-19 style risk hits everyone simultaneously. What happens? The first thing that happens is that spending on anything that's not immediate ceases. So the money that we held back and didn't spend on investing in the future becomes joined by cancellation of all similar spending out of the rest of our income. So no net gain there.
The rest of the money gets spent on keeping the lights on. If there's a crisis big enough to halt the economy for 3 months, then it's not really going to halt the crisis for 3 months. It will be much longer than that. So everyone decides to hoard their cash and begins cutting everything, everywhere they can, to stretch it out. So the cash doesn't get spent over 3 months, it gets spent over 12 months.
But suppose everyone decides to spend at the 3-month rate anyhow. What happens next is that everyone's bank is suddenly facing a massive simultaneous drawdown in capital. They will almost immediately exceed their capital limits and now, they have to suspend lending. A whole bunch of otherwise companies get killed by the loss of credit liquidity.
But suppose we didn't put all of it in cash-at-bank? Well, we're still boned. If everyone begins to sell their bonds, shares, gold coins and stamp collections at once, prices crater. 3 months of reserves is now worth 2 weeks on the open market.
You've probably guessed that the only way out of this is to pool risks. Normally insurers do this, but insurers know that they cannot withstand correlated risks like pandemics, so they simply don't insure them (with rare and very expensive exceptions).
What we're seeing now is that fiscal and monetary policy is being used as "insurer of last resort". It's never been done on this scale before. It might never again.
All of which is to say that there's a lot to criticise about modern finance and managerial economics, but the idea that it's identical to household finances is very misleading.
The issue here is not really about the actual economic impact of the virus. No amount of money printing or loan issuance can recover the real economic output that has been lost. There is real destruction of capital and wealth because humans and their toys require continuous consumption to maintain homeostasis but production has fallen off a cliff.
What makes everything so insanely complicated is that the real economy is intimately tied up in a financial economy that compounds the distress. Missing debt payments has massive repercussions for both individuals and companies which can far exceed the value of the missed payment. We have built a legal and financial framework around our economy (under the banner of "risk management") that binds us to mutual destruction when things go badly. This is why the popping of the mortgage bubble in 2008 nearly annihilated the global banking system rather than just bankrupting a bunch of risky mortgage underwriters and maybe taking down a bank or two.
Our solution appears to be just making sure no one misses a payment by handing out cash like Santa Claus on a bender. I guess it does the job, but the level of moral hazard this invites is troubling (to put it lightly).
Why would they need to hold 3 months of revenue? Why not 3 months of operating expenses and suspend capex?
> more R&D, more equipment, more and better-paid staff, improvement programs, to buy promising technologies, invest in other companies, pay down loans on larger, more modern and more-efficient factories ... the list goes on and on
Does that list include stock buybacks?
The omission is deliberate.
When money is being returned to shareholders I greatly prefer dividends. It puts pressure on management to manage for sustainable long-term cashflow and removes the temptation to pump up the stock for a quick personal profit. Unfortunately the tax treatment in the US is very unfavourable. By contrast, Australia gives franking credits for dividends and more companies there pay shareholders with dividends instead.
Didn't the airline industry spend something like $45b on buybacks? And are now looking for $50b in a bailout?
That seems like mismanagement to me.
For how long? It's anyone's guess how long the pandemic will last. If we're lucky, there could be a vaccine ready in 18 months, but maybe we won't be so lucky.
And how much money should the airlines be given, as opposed to, say giving money to people who can't afford to pay their rent or feed themselves or their families?
I’m only half joking.
Do you operate an airline? Do you have some crystal ball that reveals the true economic costs of capitalizing and operating an airline?
Capitalism is premised on the notion that the aggregation of economic decisions made by individuals, with full freedom of choice, leads to the most productive and equitable allocation of capital for the economy as a whole. It's also premised on "skin in the game"--those who risk their capital in a venture both reap the rewards and bear the risk of losing that capital if things go poorly.
Here's the bottom line: no matter which way you slice it, capital is being destroyed when airlines can't operate for six months. Who should pay for that? If your answer is anyone other than the investors who put their capital at risk in financing the airline, then we have stepped outside of capitalism already and we might as well just nationalize the airlines to accomplish whatever your goal is.
GM was not allowed to fail and then the government took ownership of the company. That's not all what happened:
On July 10, 2009, following Chapter 11 reorganization after an initial filing on June 8 2009,[25][26] the original General Motors sold assets and some subsidiaries to an entirely new company including the trademark General Motors. Liabilities were left with the original GM freeing the companies of many liabilites resulting in a new GM.
GM emerged from government backed Chapter 11 reorganization after an initial filing on June 8, 2009.[25][26] Through the Troubled Asset Relief Program the US Treasury invested $49.5 billion in General Motors and recovered $39 billion when it sold its shares on December 9, 2013 resulting in a loss of $10.3 billion. The Treasury invested an additional $17.2 billion into GM's former financing company, GMAC (now Ally). The shares in Ally were sold on December 18, 2014 for $19.6 billion netting $2.4 billion.[27][28] A study by the Center for Automotive Research found that the GM bailout saved 1.2 million jobs and preserved $34.9 billion in tax revenue.[29]
Also in 2009 General Motors of Canada Limited was not part of theGeneral Motors Chapter 11 Bankruptcy, the company shed several brands, closing Saturn, Pontiac, and Hummer, while selling Saab Automobile to Dutch automaker Spyker, and emerged from a government-backed Chapter 11 reorganization. In 2010, the reorganized GM made an initial public offering that was one of the world's top five largest IPOs to date, and returned to profitability later that year.[19][30][31]
The government did the same thing its doing now. Investing in companies on a short term basis to prop them up and allow them to continue to operate. Once the economy is stabilized, it will cash out its investment(s) like it did with GM.
What you are advocating for is not at all what occurred with GM.
“Otherwise” is a word with meaning, and, contrary to your claim, that's exactly what “otherwise” means.
Now, the underlying premise for that “otherwise strong” being a meaningful category (that firms in that position are well positioned for a post-COVID rebound if they are prevented from a catastrophic collapse due to COVID) may be subject to legitimate debate, but that's another question.
That's ridiculous nothing structural has changed about the economy. When the doors fly open people will be back to work and life will resume as normal, as it always has.
So what happens when, in order to cover expenses while you're quarantined for a few months, you've sold your fishing boat, fishing poles, life vests, etc.? Your fishing boat might have been turned into scrap metal by the time you can resume working, and you've already spent all the money in the interim (you sold it for cheap because at the time everyone else was selling their fishing boats for the same reason). That's why life won't necessarily return to normal when this is over.
A fishing boat is likely owned by a small business welcome to take out a (potentially forgivable) loan from the SBA to tide them over. Scheduled maintenance can be either deferred or completed by folks wearing masks -- I'd wager boat maintenance people wear masks anyways. Not to mention, is there any evidence people aren't eating fish anymore, and boats aren't out on the water -- well isolated from the rest of society? Isn't being out on the water about as socially isolated as you can possibly get?
Beyond that, China was out of commission for 76 days. How long are you expecting this to go in the US beyond 76 days, and why?
If the coronavirus continues to be a major threat for the next year or two, which is well within the realm of possibility, we don’t know what society or the economy will look like after.
Worse, we don’t know that there is an after. It’s possible there is no effective and safe vaccine, and that social distancing becomes a permanent feature of life.
Ok, deep breaths. We know that the disease triggers antibody response, we know basically nobody has become re-infected. That means herd immunity is very much in the cards -- and that vaccination is in the cards. So, there is an end-point, when some 70% of the population has it or has been vaccinated.
Next, week now that something like 0.5-9% of people who go to the hospital with severe symptoms of COVID then die (depending heavily, heavily on their age [4]), which means, 99.5%-91% of people with severe symptoms don't die. Now, there's a massive pile of people who show no symptoms at all, and another massive pile of people who show mild flu-like symptoms. This could represent 86% of all cases based on an earlier study [3]. The morality rate is much much lower than the numbers we're seeing because of adverse selection bias. If you only sample the people walking into hospital because they're sick, of course, they're much more likely to die than people who didn't go to the hospital.
This disease is worse than the flu, but not massively worse than the flu especially when you consider the flu kills 646,000 people each and every year worldwide (in spite of vaccinations being broadly available) [2] and this pandemic just crossed 95K -- and somehow we manage not to shut down the world because of the flu.
What that means is that we should respond about the same way we do to COVID as we do to the flu in steady-state conditions. There's no world in which social distancing, either via disease elimination, via vaccination program or via herd immunity, remains a part of our lives forever as a result of COVID.
> We don’t know when the doors will open. It’s reasonably certain they won’t “fly” open.
That was not the case in China where much of the economy is recovering judging from NO2 emissions from satellite imagery.
It's also not the case in Sweden where they aren't shutting down the economy for COVID. "Although herd immunity is not the official strategy, some officials maintain that there is no other conceivable way to stop the epidemic, praising the original British strategy that the United Kingdom later backed away from." [1]
[1] https://www.washingtonpost.com/opinions/2020/04/08/is-sweden...
[2] https://www.cdc.gov/media/releases/2017/p1213-flu-death-esti...
[3] https://science.sciencemag.org/content/early/2020/03/24/scie...
Also China today is nothing like China pre-covid. Mandatory mask wearing everywhere, temperature checks every few blocks, in every shop, mobile codes to scan certifying your virus free status before being allowed to buy anything. They're not exactly planning their next Disneyland trips over there.
Your comments about China are more hyperbole. What I've found most interesting during this entire event is how many people desperately want to convince themselves and others that we're facing certain doom. It's really quite bizarre.
"We're bad at accurately assessing risk; we tend to exaggerate spectacular, strange, and rare events, and downplay ordinary, familiar, and common ones. This leads us to believe that violence against police, school shootings, and terrorist attacks are more common and more deadly than they actually are—and that the costs, dangers, and risks of a militarized police, a school system without flexibility, and a surveillance state without privacy are less than they really are."
Or in this case, that COVID is much more fatal, devastating and terrifying than it really is, while the flu is much more tame and approachable -- and that we should spare literally no expense in the world to prevent it. Even though of course the flu kills 650,000 people each and every year, year after year. We're just used to it so we pay it no mind.
What we're seeing is less a pandemic (although of course it is one) and more a bug in human psychology on a massive never-before-seen scale.
[1] https://www.schneier.com/essays/archives/2013/08/our_decreas...
What's going on now, in the moment, seems to be something different. I keep hearing people taking minor news stories and blowing them up into apocalyptic scenarios like they WANT them to be true. As an example, there was a story a few days ago about how some tigers at the Bronx Zoo were infected. The next day, I overheard some people talking about how Covid19 is now infecting pets and there are animals spreading it in the streets of NY. Nearly every day I'm hearing things like this. Go look at the trending movies on Netflix - every one of them has to do with pandemics or the world ending. People want to fantasize about these realities. Why is that? It has to be some kind of coping mechanism. Is this an expression of society's deep discontent with the way things are and a desire to see it all come down? Whatever it is, for some reason, imagining the worst case scenario decreases pain/increases pleasure for a lot of people. It's fascinating.
Here's a great article on the subject: https://blogs.scientificamerican.com/observations/psychology...
That's debatable. Great Britain and Netherlands in the beginning wanted to simply let it go and use a "herd immunity" strategy, but changed track quickly after seeing how ICUs were overloaded in Italy and Spain. I've never heard ICUs being overloaded and medical resources being stretched to their limits during the flu season... Could you explain why? Isn't a great difference that we have flu vaccines but no known cure for COVID-19 yet?
Are you sure it wasn't public push-back?
> I've never heard ICUs being overloaded and medical resources being stretched to their limits during the flu season... Could you explain why?
There's never a whole lot of excess medical capacity since medical capacity is, you know, expensive. The disease burden of the flu is high. The US alone sees 45,000,000 flu infections each year. Having two diseases with the burden of the flu is double high, but it's not a reason to stop the world.
> Isn't a great difference that we have flu vaccines but no known cure for COVID-19 yet?
Yep, sure is. That said, COVID has shown so far to exhibit very little mutation. Globally the delta between viruses is about 15 base pairs. This means a single vaccine (or single infection leading to immunity) may be all we need. [1] The flu mutates regularly and different strains make it out each season which is why the flu vaccine needs to be given each year and why it's different each year. Flu vaccines are much less effective (19-60% [2]) for those reasons than, for instance, an MMR vaccine.
[1] https://nymag.com/intelligencer/2020/03/low-coronavirus-muta...
[2] https://www.cdc.gov/flu/vaccines-work/effectiveness-studies....
Think about it: if you allow it to spread, then yes, you will see people die. The same is true of the flu, which has so far killed more people in the same period of time than COVID has according to the CDC -- in every age category [5].
I bet flu deaths are plummeting in Finland, too. I bet you anything that Sweden has 20X the death rate from the flu as compared to Finland and Denmark. Because nothing spreads when you're locked in. But it would be absurd to lock everyone inside because of the flu right? It's a question of risk management not risk elimination. [1]
And they're quite right, that they will be safe from a second wave as no other country will.
So, to answer you question, it's working out well.
> Also China today is nothing like China pre-covid. Mandatory mask wearing everywhere, temperature checks every few blocks, in every shop, mobile codes to scan certifying your virus free status before being allowed to buy anything. They're not exactly planning their next Disneyland trips over there.
1. They wore masks anyways due to the pollution ([2] this photo is from 2013 not 2020).
2. They had police/army stops anyways due to the PRC government being totalitarian. [3]
3. They have actually re-opened Shanghai Disneyland, as of March 9th. [4]
Sounds pretty similar to me.
[1] https://www.schneier.com/essays/archives/2013/08/our_decreas...
[2] https://www.chinadaily.com.cn/photo/2013-01/25/content_16174...
[3] https://www.wsj.com/articles/twelve-days-in-xinjiang-how-chi...
[4] https://www.usatoday.com/story/travel/destinations/2020/03/0...
1. This is untrue. Masks were worn intermittently only on "bad pollution" days in cities like Beijing and Shanghai. Inland cities like Chengdu there is not widespread mask usage.
2. There is a difference between Xinjiang and the rest of China. You definitively do not see this type of security checkpoints in "regular" pre-covid China.
China is not back to "normal", there is fits and starts in the restarts to life, and there is also a psychological drag on consumer demand even though some shopping is reopened.
2. Sure, it varies.
I didn't mean to imply it was back to 100%, just that it was pointed in the right direction again.
Citation needed for this. The 1920s would seem to differ.
Also, it turns out that fighting a world war is a good economic stimulus. I believe the first American recession after the Great Depression was a very brief post-war recession caused by scaling down war production. IOW, war production was such a large chunk of the economy that simply doing less of it because we won was enough to cause a measurable GDP dip.
The new deal was a failure and caused long lasting damage to the USA.
The works of the roots of the vines, of the trees, must be destroyed to keep up the price, and this is the saddest, bitterest thing of all. Carloads of oranges dumped on the ground. The people came for miles to take the fruit, but this could not be. How would they buy oranges at twenty cents a dozen if they could drive out and pick them up? And men with hoses squirt kerosene on the oranges, and they are angry at the crime, angry at the people who have come to take the fruit. A million people hungry, needing the fruit—and kerosene sprayed over the golden mountains.
And the smell of rot fills the country.
Burn coffee for fuel in the ships. Burn corn to keep warm, it makes a hot fire. Dump potatoes in the rivers and place guards along the banks to keep the hungry people from fishing them out. Slaughter the pigs and bury them, and let the putrescence drip down into the earth.
There is a crime here that goes beyond denunciation. There is a sorrow here that weeping cannot symbolize. There is a failure here that topples all our success. The fertile earth, the straight tree rows, the sturdy trunks, and the ripe fruit. And children dying of pellagra must die because a profit cannot be taken from an orange. And coroners must fill in the certificate—died of malnutrition—because the food must rot, must be forced to rot.
The people come with nets to fish for potatoes in the river, and the guards hold them back; they come in rattling cars to get the dumped oranges, but the kerosene is sprayed. And they stand still and watch the potatoes float by, listen to the screaming pigs being killed in a ditch and covered with quick-lime, watch the mountains of oranges slop down to a putrefying ooze; and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.
The Grapes of Wrath, John Steinbeck
https://en.wikipedia.org/wiki/Judicial_Procedures_Reform_Bil...
Bankruptcy requires a functioning, liquid market to operate. Complete collapse of demand on a scale never before seen isn’t that.
More crucially, the virus is affecting the real economy, and people's lives. Fixes for the financial economy that don't address that directly are band-aids to make balance sheets look good.
Just because the pandemic itself was predicted doesn’t mean much when the global fall out is totally novel and unpredictable.
Maybe you have noticed something. The rich managers don't really a give a damn about the lock down. They have a huge amount of money and mostly diversified their net worth away from their own business. $5 million after a 50% stock market crash is still $2.5 million.
That might sound like a huge loss but only when you forget to consider that there also exist people that aren't managers and they are in the majority. If you lose your job that is pretty much a 100% reduction in income. If you lose your job you can't just kick out the rest of your family to reduce costs. For every manager that is seeing his portfolio dip there are probably a dozen more non-managers having a worse time.
The bank bailouts weren't actually about bailing out banks. The taxpayers were bailing their own money out. Dead banks mean your money is gone. It's like video game servers shutting down. Your stuff is just gone. The managers at the bank probably couldn't care less about their customers losing all their funds.
Your argument holds little water when you wave away the ratings of "random rating agencies". Their ratings are what drives investment decisioning by the largest funds in the world.
[1] https://www.cnn.com/2019/09/10/business/ford-downgrade-junk/...
I'm not waving away rating agencies. I'm saying that General Motors has less liquidity than Ford. In your "no bailouts" world, Ford would be in better shape than General Motors. General Motors is investment grade, does that magically make them better than Ford even though cash on hand says different?
Ratings really mean nothing right now as far as the health of a company goes and ratings agencies have specifically mentioned that they are backlogged with assessing all consequences of what's going on right now. Ratings have and are always backwards looking data. How the "largest funds" in the world invest is completely irrelevant for this.
The Fed buying junk bonds is "extend and pretend". If you want to save the jobs, allow overextended firms to fail, and then bail them out with the government taking ownership (while removing management). We did this with GM in 2008: we saved the jobs, we removed management, and we wiped out existing equity owners.