Which people? Which loans? Please please be specific.
> These loans aren't available to ordinary people or businesses because the terms would obviously put any individual far too far ahead
Again, which loans? What are the collateralization rules for them? What are the interest rates? Do you think an individual and a bank have the same credit score?
You cannot expect to be taken seriously if you just allege "crime" without specifics.
> There isn't any reason to believe the loans are being paid back
Please distinguish between "default" and "rollover". There is nothing wrong with rollover unless the risk has changed?
> Every time it looks like debts might get called in on aggregate
This can't really happen in a world of pension funds, because that's what the other side of the balance sheet is: the increasing number and amount of money owed to future pensioners. That's why the US "social security balance sheet" (which is accounted separately for some reason specific to the US) keeps increasing.
> coordinated giving of massive funds
lending?
> wasting the resources they are entrusted with
Example of "wasting"?
> Prices could be a random walk around an average, for example.
That's "inflation targeting at 0%"; it's both politically and practically achievable, but you do have to convince people that the locally-deflationary effects aren't a problem. And you can't avoid external shocks: if you embargo Russian gas, prices are going to go up, and that's inflation regardless of money supply issues.
> the UK pension funds were getting margin called on their safe assets
Yes - UK govenment bonds (gilts), which suddenly look a lot more risky in the presence of stupid policy decisions. Quite hard to find a safer asset, though.
So when you think a random walk around 0, you think of an ever-increasing positive trend? Because that isn't what a random walk looks like.
> And you can't avoid external shocks: if you embargo Russian gas, prices are going to go up, and that's inflation regardless of money supply issues.
Later on it would go down. It is a commodity market, and trade will normalise.
> Quite hard to find a safer asset, though.
I mean, maybe I've badly misunderstood what a "margin call" means, but my feeling on this one is it suggests margin is involved. It is not a conservative financial decision if they involve buying safe assets for someone's retirement on margin, because they aren't safe assets any more.
Bond prices go down and I'm at no risk whatsoever of being sent bankrupt by that, because I'm not stupid enough to start using debt in my retirement savings. To claim they're buying "safe assets" while simultaneously they are in need of assistance due to playing around in the gilt market derivatives is an impressive take.
> Which people? Which loans? Please please be specific.
When someone (A) lends money to another person (B), that person becomes a counterparty. So if B goes bankrupt, A loses money. If B is about to go bankrupt, gets big loans from a central bank then pays back A, A has effectively gotten a handout. What should happen is A loses money for taking on a risky gamble.
> Again, which loans? What are the collateralization rules for them? What are the interest rates? Do you think an individual and a bank have the same credit score?
Yeah, good point, that part doesn't actually make any sense. I was thinking about QE1 when I wrote that, but the issue there wasn't really any deals getting done as much as the general money printing.
> Please distinguish between "default" and "rollover". There is nothing wrong with rollover unless the risk has changed?
There absolutely is something wrong with rollover. If entities can perpetually roll over their debt, and the entity issuing the debt is a government entity or bankrolled by a government entity - ie, risk insensitive and unable to go bankrupt because of policy - then all the usual economic controls to make sure the money is well spent are removed.
> Example of "wasting"?
If a banking entity goes bankrupt due to enormous losses it has effectively wasted all the money it was given. Which is fine, happens from time to time, but the people responsible shouldn't get a chance to try again because the regulators like them.
> ...if you just allege "crime"...
Sorry, I missed a step here. What crime are you talking about? I don't think anything criminal is happening.
QE4 was the better part of a trillion dollars. That much money moves through a system that is too complex and jargon filled for the layman to understand, and you want them to believe that there is nothing to see here?
1. The people on the other side of the bad loan, who aren't expected to pay back the money, are making bank by taking on silly levels of risk and then benefiting from the bailouts.
2. These loans aren't available to ordinary people or businesses because the terms would obviously put any individual far too far ahead. We can tell they are unfair just from that.
3. There isn't any reason to believe the loans are being paid back. Every time it looks like debts might get called in on aggregate, people claim financial crisis and there is another big round of lending.
> The problem with allowing banks to hard-fail is that imposes real, huge costs on customers even if the deposits are 100% covered
Yeah. People can't funnel their savings to incompetents and expect a good outcome. They should be very picky and reserved in deciding who to trust with their money, and there should not be coordinated giving of massive funds to a small pool of institutions who are regularly discovered to be wasting the resources they are entrusted with. This is one of the reasons we put up with the economy, it is supposed to keep power away from those sort of fools.
They need to be sent broke when they screw up badly. And people shouldn't be punished for saying "they're all untrustworthy, so I'm keeping money under my mattress".
> And prices going down exponentially is bad for investment, and precisely keeping prices the same forever is impossible
You've missed a bunch of options here though, namely the infinite number of functions that aren't exponential. Prices could be a random walk around an average, for example.
> Pension funds are more or less obliged to buy the safest assets they can?
I'm not following the story too closely, but the word I heard was the UK pension funds were getting margin called on their safe assets.