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But the government hasn't yet needed to bail out a VC, a Unicorn or a stockholder. Each may lose money, but that happens all the time. In the case of LTCM the
by georgeecollins 7y ago
But the government hasn't yet needed to bail out a VC, a Unicorn or a stockholder. Each may lose money, but that happens all the time.
In the case of LTCM the government needed to bail out LTCM positions. That is why it is different.
- roenxi 7y agoAlthough true, the money that the tech companies are burning through is probably related to the bail-out money that the trading firms are getting. The banks keep dealing with high levels of leverage. It keeps predictably blowing up in their faces. The government/Federal Reserve is responding by making it easier to borrow money and then VC/Unicorns etc borrow. The links aren't perfectly causal, but I bet that under normal conditions (if interest rates were allowed to rise into the 2-6% band in a sustained way and the government stopped handing out free money) then suddenly the unicorns would be subjected to market logic such as a need to make money to receive a high valuation.
- MR4D 7y agoThat’s incorrect. I quote, “ Technically, the Fed didn't bail out LTCM. It used no federal funds. It merely brokered a better deal than the one Buffett offered.” From https://www.thebalance.com/long-term-capital-crisis-3306240 https://www.thebalance.com/long-term-capital-crisis-3306240