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Blame "too big to fail" and negative interest rates. When big banks had problems, the solution was to make even bigger banks and giving them free money in orde

by pipio21 10y ago

Blame "too big to fail" and negative interest rates. When big banks had problems, the solution was to make even bigger banks and giving them free money in order to look good. They take savers money with negative interest rates and give it free to big banks and companies like Google, Microsoft or Deutsche Bank. Given that if you(as a person or small company) ask a bank for money you will have to pay 20% interest rates or so, this is a tremendous advantage for them. Big companies have free money because they can ask for a loan and give back later less that what they took after inflation!!! This means big companies could buy the competition instead of competing with them , like facebook with wassapp, with stock, being cheaper than having their overvalued stock go down with competition. It also means big companies could buy their own stock in the market and pump up their value, making the stock acquisition cheaper and increasing board bonus(from stock owners) look reasonable. Central banks and politicians are obliterating middle class and business owners. This is a terrible thing because History teach us this always happens before a (violent)revolution.

guelo 10y ago
This argument doesn't make any sense to me. Neither Google or Facebook or Apple have been using cheap loans to fuel growth. They have more cash flow from operations than they know what to do with, they don't need loans.
- greeneggs 10y ago
  They also can't borrow at negative real interest rates. Only some governments can. And you can't blame the governments for low interest rates. At least in the medium term, interest rates are mostly set by the market, supply and demand for loans. There's not a lot of demand.
  - GenWintergreen 10y ago
    Sure they can. AAPL issued bonds in 2015.
    - guelo 10y ago
      That's just part of their tax avoidance schemes. And they did not get negative rates on them.
    - greeneggs 10y ago
      I didn't say they can't issue bonds. I said they can't borrow at negative interest rates, or even negative real interest rates. Here's what they sold in February 2016, for example (annual inflation was 1.0%): - $500 million in 1.3% two-year notes issued at a spread of 60 basis points over similar-maturity Treasuries - $500 million in three-year FRNs (floating rate notes) issued at three-month LIBOR + 82 basis points - $1.0 billion in 1.3% three-year notes issued at a spread of 60 basis points over similar-maturity Treasuries - $500 million in five-year FRNs issued at three-month LIBOR + 113 basis points - $2.25 billion in 1.7% five-year notes issued at a spread of 80 basis points over similar-maturity Treasuries - $1.5 billion in 2.25% seven-year green notes issued at a spread of 105 basis points over similar-maturity Treasuries - $2.0 billion in 2.85% ten-year notes issued at a spread of 135 basis points over similar-maturity Treasuries - $1.25 billion in 3.25% 20-year bonds issued at a spread of 150 basis points over similar-maturity Treasuries - $2.5 billion in 4.5% 30-year bonds issued at a spread of 190 basis points over similar-maturity Treasuries http://marketrealist.com/2016/02/investment-grade-corporate-bond-issuance-gained-traction/ http://marketrealist.com/2016/02/investment-grade-corporate-...
dmix 10y ago
Capitalism without the corrective downward functions of capitalism creates scary unwieldy beasts. Moral hazards are very real yet the people who wished to avoid this in 2008-09 by letting them fail were called reckless (myself included) as austerity would have caused a ripple effect which hurts the incomes of regular people. But instead of giving temporary safety nets to protect those regular people - while weathering the storm of a recession and rebuilding the system into something better, an evolution of sorts - the US gov went head and gave safety nets to the big corps and maintained the status quo of the last generation. Which allowed the type of behaviour your talking about to flourish. Basically the government and financial power players kicked the can down the road for the next generation to experience the effects of competitionless financial exploitation. The priority was (and is) valuing the financial industries short-term health over the organic growth of business, the flow of capital to things that create jobs (aka small/medium businesses which employ 90% of people), and long term wealth generation. I personally don't find it surprisingly that it took 8 years for median incomes to rise again while the top tier upper class has been doing absolutely fine since the crash. This was by design of a liberal democratic administration. Yet regular people are in no better position to deal with the next recession (particularly economically and to a lesser extent socially as US health care is slightly better but still embarrassingly bad) and the same people who caused the last one have likely been given better jobs, raises, and positions of power from which to influence on the next political administration.

by pipio21 10y ago

guelo 10y ago

This argument doesn't make any sense to me. Neither Google or Facebook or Apple have been using cheap loans to fuel growth. They have more cash flow from operations than they know what to do with, they don't need loans.

greeneggs 10y ago
They also can't borrow at negative real interest rates. Only some governments can. And you can't blame the governments for low interest rates. At least in the medium term, interest rates are mostly set by the market, supply and demand for loans. There's not a lot of demand.
- GenWintergreen 10y ago
  Sure they can. AAPL issued bonds in 2015.
  - guelo 10y ago
    That's just part of their tax avoidance schemes. And they did not get negative rates on them.
  - greeneggs 10y ago
    I didn't say they can't issue bonds. I said they can't borrow at negative interest rates, or even negative real interest rates. Here's what they sold in February 2016, for example (annual inflation was 1.0%): - $500 million in 1.3% two-year notes issued at a spread of 60 basis points over similar-maturity Treasuries - $500 million in three-year FRNs (floating rate notes) issued at three-month LIBOR + 82 basis points - $1.0 billion in 1.3% three-year notes issued at a spread of 60 basis points over similar-maturity Treasuries - $500 million in five-year FRNs issued at three-month LIBOR + 113 basis points - $2.25 billion in 1.7% five-year notes issued at a spread of 80 basis points over similar-maturity Treasuries - $1.5 billion in 2.25% seven-year green notes issued at a spread of 105 basis points over similar-maturity Treasuries - $2.0 billion in 2.85% ten-year notes issued at a spread of 135 basis points over similar-maturity Treasuries - $1.25 billion in 3.25% 20-year bonds issued at a spread of 150 basis points over similar-maturity Treasuries - $2.5 billion in 4.5% 30-year bonds issued at a spread of 190 basis points over similar-maturity Treasuries http://marketrealist.com/2016/02/investment-grade-corporate-bond-issuance-gained-traction/ http://marketrealist.com/2016/02/investment-grade-corporate-...

dmix 10y ago

Capitalism without the corrective downward functions of capitalism creates scary unwieldy beasts. Moral hazards are very real yet the people who wished to avoid this in 2008-09 by letting them fail were called reckless (myself included) as austerity would have caused a ripple effect which hurts the incomes of regular people. But instead of giving temporary safety nets to protect those regular people - while weathering the storm of a recession and rebuilding the system into something better, an evolution of sorts - the US gov went head and gave safety nets to the big corps and maintained the status quo of the last generation. Which allowed the type of behaviour your talking about to flourish. Basically the government and financial power players kicked the can down the road for the next generation to experience the effects of competitionless financial exploitation. The priority was (and is) valuing the financial industries short-term health over the organic growth of business, the flow of capital to things that create jobs (aka small/medium businesses which employ 90% of people), and long term wealth generation. I personally don't find it surprisingly that it took 8 years for median incomes to rise again while the top tier upper class has been doing absolutely fine since the crash. This was by design of a liberal democratic administration. Yet regular people are in no better position to deal with the next recession (particularly economically and to a lesser extent socially as US health care is slightly better but still embarrassingly bad) and the same people who caused the last one have likely been given better jobs, raises, and positions of power from which to influence on the next political administration.