> How, exactly? What "long term decisions" would not have been worse off if the 2008 bailouts hadn't been made and a large chunk of Western retail banking had gone insolvent, tying up accounts until it could have been resolved? There is an important difference between "this business is no longer viable", and "this business is perfectly viable in the future but is experiencing a temporary shock which its cashflow and trade credit cannot cover".

I think that OP is referring to people who have decisions that would help them weather a bad storm such as 2008 or the pandemic. Let’s say I’m a small bank that is extra extra conservative with my balance sheet and only makes responsible loans, etc. In theory, 2008 or 2020 comes along and my business is hurt but I’m still fine because of my caution. And long term I am in a great position because my competitors are soon going out of business... except they aren’t because the government props them up.

This is essentially what’s happening to Warren Buffett right now who has a war chest is billions of dollars saved up during the good times that he’s ready to invest now. But it’s not as viable a strategy because the government props everyone up.

Yes, a lot of these are viable businesses in the long term if they can just be helped now. But if the government protects them on the downside many would argue that they should get more of a share of the upside as well.

> This is essentially what’s happening to Warren Buffett right now who has a war chest is billions of dollars saved up during the good times that he’s ready to invest now. But it’s not as viable a strategy because the government props everyone up.

In all fairness, Berkshire Hathaway stepped in to bailout Bank of America. It obviously paid out handsomely for Buffett and Co. long term, just find it interesting to use as an example.

>In all fairness, Berkshire Hathaway stepped in to bailout Bank of America. It obviously paid out handsomely for Buffett and Co. long term, just find it interesting to use as an example.

Private capital does not "bail out" companies. That's called an investment.

I agree, I mixed up BoA with Goldman.

Instead should have mentioned his investment in Goldman--not BoA--during the financial crisis, which he did counting on the bailout that was passed shortly after.

I don't believe it's too much of a leap to conclude that back in 2008 it was as close as possible to a joint effort between BRK/Goldman/the-financial-powers-that-be to minimize the total obligation GS would have to the Treasury from TARP funds.

Read somewhere the TARP investment was repaid 8 months later by GS with 23% interest, whereas they repurchased BRK's preferred stock for a 10% premium in 2011. BRK's warrant redemption in 2013 is another story, but easier for GS to account for long term.

> How, exactly?

[0] Uber, an 11 year old company, IPO-ed in 2019, losses were >1/3 of their $14 billion revenue that year.

There is a level of crazy afoot there. The shares being worth money to anyone is alarming, and indicative that something is very broken. Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from'

> Also remember that every "saving" is also a "debt" on the other side of somebody's ledger.

And if the money on the debt side isn't used prudently, both the debtor and saver end up with nothing at the end of a sad story. The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor. What the loan is used for in real terms (useful infrastructure, vanity projects, wasted, etc) matters.

I don't mind what the accounting identities do if I get a nice place to live, cheap electricity and lots of food. But the loans at the moment aren't going towards big construction in desirable areas, nuclear power plants and securing food supplies.

[0] https://en.wikipedia.org/wiki/Uber

> Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from'

Uber appear to have $7.6bn debt, reading off the balance sheet. Quite a lot for a company which shouldn't need much to cover operating cashflow.

But who are the investors? It's bloody Softbank again.

> The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor.

Softbank also managed to lose a lot of money on WeWork. Given that one of their main backers for this is the Saudi government and royal family, whose capacity to "live it up" is already pretty high, I'm going to make an alternative argument: the rise of global inequality and lack of wealth taxes means that the only way left to channel money back to the general public is through Potemkin investments.

> nuclear power plants

If we want to talk long-term prudence, something with a massive decommissioning liability that's uninsurable is probably not it.

And Softbank were willing to try this insane strategy because they know as well as everyone else that anything exposed to the stock market is being buoyed up by high debt levels. Uber IPO-ed. People are valuing it with a large positive value.

If you entertain the idea that a big bubble (3-5 years long) could ever happen, Uber being allowed to continue operations is an eyebrow raiser. There are risks that much of the effort that should be going in to securing a prosperous future is being misdirected.

> If we want to talk long-term prudence...

I would like, in my old age, to have twice as much electricity available as when I was young. I don't really care how. But it isn't going to happen because I wished hard. We need to invest in physical changes to the world that will make life better for people. Particularly in things that aren't oil.

Look at the amount of construction that is going on in China. That is what is physically possible. That sort of activity could be usefully replicated in the West.

> Look at the amount of construction that is going on in China. That is what is physically possible. That sort of activity could be usefully replicated in the West.

OK: how?

The private sector isn't going to be doing it because it's not profitable enough. The public sector won't do it because people complain about the public debt.

> The public sector won't do it because people complain about the public debt.

This isn't true, though. The US consistently elects republican administrations that jack up deficits to cover tax cuts for billionaires and nobody bats an eye. The military can blow 700bn a year with barely a peep of outrage. And unlike with infrastructure investment that money is effectively a 700bn jobs program for 3 million people that produce nothing of value.

Complaining about debt is usually a cover for bigotry. People don't want social equity or fairness because leveling the playing field is deconstructing hierarchies people were born into and base their personality on. Its why attacking institutional racism in the police is taken as an attack on the culture, personhood, and lifestyles of cops and white suburbia.

> That produce nothing of value. What an amazingly naive point of view.

> Complaining about debt is usually a cover for bigotry. People don't want social equity or fairness because leveling the playing field... This could be a paragraph out of the millenial reactionaries handbook..not only are the concepts of social equity and fairness highly subjective and controversial but debasing majority cultural bias to construct a level playing field is so historically unsuccessful as to make it a philosophical curiosity (aside from with a singularly unsuccessful foray into the real world which ended in despotism and pogroms for all).

>> The persistent bailouts are making losers of people who make good long term decisions

> How, exactly?

Keeping interest rates very low is hurting people who are saving money. Not just in banks also via pension funds[-], retirement schemese, life insurance.

It pushes savers into taking risky bets with real estates or stocks or even direct consumption (spending money instead of saving them is very risky bet on the future of events).

[-] The pensions will be low because 1) compound interest on riskless part of one's pension assets is low 2) Other assets that one will be purchasing with retirement money will be grossly inflated with cheap money chasing yields, via consumption etc.

You forgot inflationary pressure from all the "free" money. That is what really upset me the most about the 2008/etc situation. I was looking to buy a house, and you would have never known there was a housing crisis where I lived (Austin).

The banks were more than willing to sit on assets than actually sell foreclosed properties at market values. So while the housing prices went down slightly, your talking maybe a 10% after a decade of 10% a year increases. The "dip" didn't even last 2 years.

I myself made an offer on a forclosed/vacant house, and the bank counter offered above the listing price.

I had friends who tried to buy already forclosed houses and literally sat around for a year+ waiting for the banks to accept their offers. Eventually like me, actually buying other properties.

I did mention pushing savers into real estate and other assets. Lots of people are flipping houses simply because thay cannot get decent returns on bank savings anymore.

Same goes for professional money managers of all kinds who simply cannot provide decent returns to their customers by buying bonds like old school. So they are forced to chase yields in other risky assets.

Also with bank savings everyone has an equal chance. With risky assets - richer people are priviledged with better access to higher returns (via better access to information, scale of investment, credit etc.). So disparities grow.

Why are people entitled to a positive return on capital, a particular form of unearned income?

People are entitled to allocate their savings as they choose. It naturally gravitates to positive returns.

Its not some much they are entitled to it, but rather that if they don't get positive return on capital, it loses value because of inflation.

Edit: spelling

You know, the GGP is complaining about high government debt levels; you are complaining about low interest levels. That's not coherent.

I do agree that something is broken, but "debt is too high and interest is too low" is a bad problem statement.

How is that not coherent?

Low interest rates is how governments can keep the pretense that they are not printing money out of thin air and they "service" their debt and that they will repay it at some point in the future.

It' not coherent because both printing money and borrowing cause the interest rate to increase. Low interest rates is a reaction from the market to the conditions the government puts on the table, not something that the government sets at will to push an agenda.

You must have not been paying attention to financial news over last decade.

> When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, the price of borrowed funds – the federal funds rate – falls.

https://en.wikipedia.org/wiki/Federal_funds_rate#Explanation...

Yes. "When everything else remains constant" here means people choosing to take that extra money and immediately lending it to the government. It's not the government that makes this choice.

There's a difference between the world as we know it cannot exist without banks as we know them,and banks cannot exist without the people who led us into this mess.

There must be strict liability against those whose bad decisions lead to incalculable suffering for countless people. Hard stop.

We can debate the specific consequences (banned from positions of authority, fines, debt, prison, etc). But we must not allow those with demonstrable bad decision making abilities to continue to play roulette with the lives of others. Likewise, good decisions cannot be allowed to justify or excuse bad ones.

> Don’t offer a specific return but benefit society and the planet as a whole

Isn’t that antithetical to evidence based policy making? How can we verify a project is successful without a desired outcome to look for?

Reduced CO2 emissions? Reduced dependence on finite fossil fuel supplies? Cheaper energy in the long term once these systems are scaled up, and an end to energy price shocks caused by fossil fuel supply?

Aren’t those specific returns?