4 ms·

The same way if someone steals your car, you buy a new one and the economy as whole (GDP) is in profit. What bailout did (also via QE + ZIRP/NIRP) is prop-up p

The same way if someone steals your car, you buy a new one and the economy as whole (GDP) is in profit. What bailout did (also via QE + ZIRP/NIRP) is prop-up property & asset prices effectively legitimising the prior speculation. This prevented resetting of prices to the levels where people would start buying again for non speculative reasons. Effect is young generation sees houses at 10x earnings whereas the average is 3-3.5x. Boomers sit on tons of unearned house equity that is only there because land prices are inflating like crazy. For capitalism to work well there needs to be a mechanism for wealth destruction, at least for the "unrealised wealth".

pjc50 9y ago
> mechanism for wealth destruction Well, that's never going to be popular, to the extent that all lobbying is going to be diverted to making sure that it's not your wealth that gets destroyed. Have you seen how unpopular even tiny amounts of inflation are? Getting wealth redistribution would be a start.
- ric2b 9y ago
  inflation isn't wealth destruction, it's wealth redistribution from everyone into the financial industry.
andrewmutz 9y ago
He means that the government literally made a profit off of the bailout loans. One Source: https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...
ataturk 9y ago
That's some pretty faulty reasoning there. If an economy was better off because cars get stolen or property gets destroyed and must be replaced, then we should just all go around breaking everyone else's shit all the time and we would all be billionaires. But we know the real world doesn't work that way--if insurance pays for a new car, insurance rates rise for everyone and prices go up, which leads to fewer choices for those who have to buy and maintain insurance. Similarly, if someone came by and broke your windows every day, the glass guy would become rich, but you might not have any money for groceries after awhile and you certainly wouldn't have money for new renovations or other improvements to your property. You would just be treading water. I do think that Keynsianism requires a sink for all the durable goods that are produced, be it obsolescence or outright destruction (think war materials).

pjc50 9y ago

> mechanism for wealth destruction Well, that's never going to be popular, to the extent that all lobbying is going to be diverted to making sure that it's not your wealth that gets destroyed. Have you seen how unpopular even tiny amounts of inflation are? Getting wealth redistribution would be a start.

ric2b 9y ago
inflation isn't wealth destruction, it's wealth redistribution from everyone into the financial industry.

andrewmutz 9y ago

He means that the government literally made a profit off of the bailout loans. One Source: https://www.washingtonpost.com/business/economy/bailout-highly-profitable-for-taxpayers-when-you-look-at-the-right-numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html https://www.washingtonpost.com/business/economy/bailout-high...

ataturk 9y ago

That's some pretty faulty reasoning there. If an economy was better off because cars get stolen or property gets destroyed and must be replaced, then we should just all go around breaking everyone else's shit all the time and we would all be billionaires. But we know the real world doesn't work that way--if insurance pays for a new car, insurance rates rise for everyone and prices go up, which leads to fewer choices for those who have to buy and maintain insurance. Similarly, if someone came by and broke your windows every day, the glass guy would become rich, but you might not have any money for groceries after awhile and you certainly wouldn't have money for new renovations or other improvements to your property. You would just be treading water. I do think that Keynsianism requires a sink for all the durable goods that are produced, be it obsolescence or outright destruction (think war materials).