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Wall Street jumps (S&P up nearly 6%) at open after global bailout

13 points by jfi 16y ago

sown 16y ago
These enormous debt relief loans wouldn't feel so bad if they'd just stop doing it over and over again. When a plane crashes or any other engineered system fails, analysis is (supposed to be) carried out and we try to make it so that it doesn't happen again. When economies crash we loan them out and never really analyze or try to correct what made that crash happen, or at least that's the way it seems.
- borism 16y ago
  that's an imperfect analogy. No economy (besides Iceland and Latvia perhaps, and even they haven't defaulted yet) has crashed so far. All are having engine problems though. What those bailouts are doing is buying some time before the crash, so we can hopefully restart engines or glide to a safe landing. That's the phase we're in now. Unfortunately I'm not very optimistic that our flight crews can still manage to save us.
  - sown 16y ago
    OK, I see what you mean, but if what I understand is correct about the 2008 situation, we just narrowly avoided a crash and there's not enough real change to prevent it from happening again, at least here in the US.
  - varjag 16y ago
    Is there any indication that anyone's going to restart engines?
    - deleted 16y ago
      [deleted]
  - anamax 16y ago
    > What those bailouts are doing is buying some time before the crash, so we can hopefully restart engines or glide to a safe landing. That's the argument for doing the bailouts. The reality is probably that they're just delaying the inevitable and making it worse. And that trillion dollars is money that we won't have to help pick up the pieces. To put it another way, the bailouts are like giving an alcoholic another bottle of Jim Beam. Yes, it stops their jitters now, but they'll soon be even worse off than they are now.
    - borism 16y ago
      oh, that argument is getting soo tired... even though I agree with it on some level. you see, capitalism is based on confidence. lose confidence and you lose everything. buying time helps to restore confidence. does it make system more stable? no. but it helps to prolong system's life. it's like Ponzi scheme - we need to keep it running, because when it stops... or do you have a better idea?
      - anamax 16y ago
        > that argument is getting soo tired The relevant question is whether it is correct, not whether it is "tired". > buying time helps to restore confidence No, it doesn't. At best it delays the time when confidence is lost. In reality, it increases the cost of that loss of confidence. (And, it's not confidence, but this message is tedious enough.) > do you have a better idea? Yes - take the hit as soon as possible. It costs less then and you haven't spent much trying to avoid it. Win win.
- varjag 16y ago
  From now on and until it stops working, Western elites are going to toss billions of pretend-money at any major economic problem. At some point though it'll stop working. Perhaps it would be better for the West to live through market crash and sovereign defaults now, while it can afford it, than a decade later?
- tumult 16y ago
  I'm not convinced anyone actually understands the economy, so there might not be anything to analyze.
- deleted 16y ago
  [deleted]
- CWuestefeld 16y ago
  The worst part is the moral hazard. We're signaling that there's little reason to be responsible, because there's always a bailout to fall back on. We're thus increasing the need for such bailouts in the future.
brown9-2 16y ago
I wish that the media would break it's habit of assuming that an upwards movement in the stock market indices acts as anything like an effective judgement of a government program/policy. Wall Street wasn't able to accurately digest the seriousness of the housing bubble crash until it was too late, what's any different this time around?
- CWuestefeld 16y ago
  I think you misapprehend what the market tells us. People invest in the market in order make money: if they expect that there's a greater amount of money to be made they'll invest more; if the amount to be made is lower, they invest less. If people are trying to get into the market (i.e., they think more money is to be made), prices rise; if the opposite, prices go down. So the movement of the market doesn't tell us that anything is "good" or "bad", it can only tell us if investors believe that it will lead to an increase or decrease of investment income. In the case of the USA, it should be obvious that the government pumping billions of dollars into businesses (banks, GM, Chrysler, etc.) will lead to people invested in those business getting more income, so prices of those investments rises. That is despite the fact that this money is earned (after the final accounting) on the backs of taxpayers that aren't invested. Thus, the bailout is a transfer of wealth from the poor to the rich. That said, the markets are hugely chaotic. Anybody who thinks he can say that a market movement is due to one particular piece of news is talking out of his butt. The market is a huge, distributed computer. When it's reasonable to believe that a single piece of news is so significant that everything else is just noise, then maybe we can guess. But the normal day-to-day news reports that attribute gains and losses to specific news items are pipe dreams.
  - roc 16y ago
    > "it can only tell us if investors believe that it will lead to an increase or decrease of investment income." I think that's rather his point. It's well-understood here that movement in the market is but a tiny window into a huge range of financial bets. But the overwhelming majority of financial reporting perpetuates the myth that the window is providing a value judgment on the economic impact a particular action. E.g. We know an uptick following a bailout is as likely caused by a desire to cash in on a sucker's rally as by optimism about long-term value. But articles such as the above link persist in suggesting that the uptick means the bailout is good, or helpful, or assuages actual concerns.
RyanMcGreal 16y ago
Good old socialism-for-the-rich.
- anigbrowl 16y ago
  This money is not being given to private companies, it will be used to purchase government bonds and/or guarantee existing debts of individual European countries.
  - jbooth 16y ago
    Debts which are overwhelmingly held by the wealthy. I mean, I don't see better options in the short term, either. It'd just be nice if we heard a little less about how infallible the markets are and how things like regulations are just "destroying value for no good reason" next time the economy's doing well.
    - anigbrowl 16y ago
      Well, I don't hold those views, but think markets have some limitations and that regulation is an important task in any economy - in fact I've taken a good amount of flak on HN for my support of the current reform bill winding its way through Congress. I take issue with chracterizing it as a bank bailout when it isn't, just because of simple inaccuracy. Nor do I think you can just say all debt is held by the wealthy. Government bonds are often held by other governments, pension funds, mutuals on behalf of their citizens/members. It's not as simple as a bunch of MBAs and tycoons lighting their cigars with banknotes.
ct4ul4u 16y ago
The title is misleading. This isn't a global bailout. This is the European Union protecting its currency by stating that the Union will stand behind the sovereign debt of member countries. It has little to do with the rich and everything to do with preserving the EU.

13 points by jfi 16y ago

sown 16y ago

These enormous debt relief loans wouldn't feel so bad if they'd just stop doing it over and over again. When a plane crashes or any other engineered system fails, analysis is (supposed to be) carried out and we try to make it so that it doesn't happen again. When economies crash we loan them out and never really analyze or try to correct what made that crash happen, or at least that's the way it seems.

borism 16y ago
that's an imperfect analogy. No economy (besides Iceland and Latvia perhaps, and even they haven't defaulted yet) has crashed so far. All are having engine problems though. What those bailouts are doing is buying some time before the crash, so we can hopefully restart engines or glide to a safe landing. That's the phase we're in now. Unfortunately I'm not very optimistic that our flight crews can still manage to save us.
- sown 16y ago
  OK, I see what you mean, but if what I understand is correct about the 2008 situation, we just narrowly avoided a crash and there's not enough real change to prevent it from happening again, at least here in the US.
- varjag 16y ago
  Is there any indication that anyone's going to restart engines?
  - deleted 16y ago
    [deleted]
- anamax 16y ago
  > What those bailouts are doing is buying some time before the crash, so we can hopefully restart engines or glide to a safe landing. That's the argument for doing the bailouts. The reality is probably that they're just delaying the inevitable and making it worse. And that trillion dollars is money that we won't have to help pick up the pieces. To put it another way, the bailouts are like giving an alcoholic another bottle of Jim Beam. Yes, it stops their jitters now, but they'll soon be even worse off than they are now.
  - borism 16y ago
    oh, that argument is getting soo tired... even though I agree with it on some level. you see, capitalism is based on confidence. lose confidence and you lose everything. buying time helps to restore confidence. does it make system more stable? no. but it helps to prolong system's life. it's like Ponzi scheme - we need to keep it running, because when it stops... or do you have a better idea?
    - anamax 16y ago
      > that argument is getting soo tired The relevant question is whether it is correct, not whether it is "tired". > buying time helps to restore confidence No, it doesn't. At best it delays the time when confidence is lost. In reality, it increases the cost of that loss of confidence. (And, it's not confidence, but this message is tedious enough.) > do you have a better idea? Yes - take the hit as soon as possible. It costs less then and you haven't spent much trying to avoid it. Win win.
varjag 16y ago
From now on and until it stops working, Western elites are going to toss billions of pretend-money at any major economic problem. At some point though it'll stop working. Perhaps it would be better for the West to live through market crash and sovereign defaults now, while it can afford it, than a decade later?
tumult 16y ago
I'm not convinced anyone actually understands the economy, so there might not be anything to analyze.
deleted 16y ago
[deleted]
CWuestefeld 16y ago
The worst part is the moral hazard. We're signaling that there's little reason to be responsible, because there's always a bailout to fall back on. We're thus increasing the need for such bailouts in the future.

brown9-2 16y ago

I wish that the media would break it's habit of assuming that an upwards movement in the stock market indices acts as anything like an effective judgement of a government program/policy. Wall Street wasn't able to accurately digest the seriousness of the housing bubble crash until it was too late, what's any different this time around?

CWuestefeld 16y ago
I think you misapprehend what the market tells us. People invest in the market in order make money: if they expect that there's a greater amount of money to be made they'll invest more; if the amount to be made is lower, they invest less. If people are trying to get into the market (i.e., they think more money is to be made), prices rise; if the opposite, prices go down. So the movement of the market doesn't tell us that anything is "good" or "bad", it can only tell us if investors believe that it will lead to an increase or decrease of investment income. In the case of the USA, it should be obvious that the government pumping billions of dollars into businesses (banks, GM, Chrysler, etc.) will lead to people invested in those business getting more income, so prices of those investments rises. That is despite the fact that this money is earned (after the final accounting) on the backs of taxpayers that aren't invested. Thus, the bailout is a transfer of wealth from the poor to the rich. That said, the markets are hugely chaotic. Anybody who thinks he can say that a market movement is due to one particular piece of news is talking out of his butt. The market is a huge, distributed computer. When it's reasonable to believe that a single piece of news is so significant that everything else is just noise, then maybe we can guess. But the normal day-to-day news reports that attribute gains and losses to specific news items are pipe dreams.
- roc 16y ago
  > "it can only tell us if investors believe that it will lead to an increase or decrease of investment income." I think that's rather his point. It's well-understood here that movement in the market is but a tiny window into a huge range of financial bets. But the overwhelming majority of financial reporting perpetuates the myth that the window is providing a value judgment on the economic impact a particular action. E.g. We know an uptick following a bailout is as likely caused by a desire to cash in on a sucker's rally as by optimism about long-term value. But articles such as the above link persist in suggesting that the uptick means the bailout is good, or helpful, or assuages actual concerns.

RyanMcGreal 16y ago

Good old socialism-for-the-rich.

anigbrowl 16y ago
This money is not being given to private companies, it will be used to purchase government bonds and/or guarantee existing debts of individual European countries.
- jbooth 16y ago
  Debts which are overwhelmingly held by the wealthy. I mean, I don't see better options in the short term, either. It'd just be nice if we heard a little less about how infallible the markets are and how things like regulations are just "destroying value for no good reason" next time the economy's doing well.
  - anigbrowl 16y ago
    Well, I don't hold those views, but think markets have some limitations and that regulation is an important task in any economy - in fact I've taken a good amount of flak on HN for my support of the current reform bill winding its way through Congress. I take issue with chracterizing it as a bank bailout when it isn't, just because of simple inaccuracy. Nor do I think you can just say all debt is held by the wealthy. Government bonds are often held by other governments, pension funds, mutuals on behalf of their citizens/members. It's not as simple as a bunch of MBAs and tycoons lighting their cigars with banknotes.

ct4ul4u 16y ago

The title is misleading. This isn't a global bailout. This is the European Union protecting its currency by stating that the Union will stand behind the sovereign debt of member countries. It has little to do with the rich and everything to do with preserving the EU.