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The banks already broke free of the government. Facebook just wants to get in on that action. What other business gets to make money out of nothing through fr

The banks already broke free of the government. Facebook just wants to get in on that action. What other business gets to make money out of nothing through fractional reserve banking and gets trillion dollar bailouts at taxpayer expense when it regularly overextends itself with all that newly created money?

jameskilton 7y ago
Lets make sure we're talking facts. The US Government made a profit off of the 2008 bailout[1]. I'm not an economist so I can't say much about the program but I'm lead to believe that had we not bailed out many banks the cost to tax payers would have been much, much higher. [1] https://www.washingtonpost.com/business/economy/tarp-moves-into-the-black-as-some-loans-are-repaid/2011/03/30/AFDrEc6B_story.html https://www.washingtonpost.com/business/economy/tarp-moves-i...
- lawn 7y ago
  Yes, their gamble of buying extremely risky assets paid off. Similar to how you can "bet all on red" and manage to win. But that doesn't make it a good long-term plan. The incentives for banks are still unchanged: "heads I win, tails I get bailed-out". And of course even if they run the economy into the ground they still get their bonuses.
  - QuesnayJr 7y ago
    It worked out because the assets became risky from panic. The government is a large enough entity to stop the panic, and thus remove that risk.
    - lawn 7y ago
      The assets were always risky, way before the panic set in. I recommend the books After the Music Stopped or The Big Short for background on the crisis. (Also the movie The Big Short is excellent).
      - QuesnayJr 7y ago
        If the government's strategy was so risky, then why did it make money? The government wasn't gambling that there wouldn't be a crisis -- they intervened right in the middle of the crisis. (I should have said became riskier, though. Of course the assets had some risk.)
- narrator 7y ago
  They made money because the FED started buying the types of securities that they owned with electronically printed money. If this was China the whole thing wouldn't have even happened. The government would have just printed the money, recapitalized the banks and sold off their debts at a discount and punished (severely) anybody who violated banking regulation. The whole fiction that the government has to lend money into existence from the FED and the FED can buy assets off banks from money created out of nothing is this complicated convoluted game is intended to make it hard to figure out what's going on and to make it look like actual productive economic activity is occurring here.
elliekelly 7y ago
Can you elaborate? How is it the banks are “free of the government” and Facebook is somehow beholden to the regulators? My experience leads me to the exact opposite conclusion. I don’t think Zuck is losing any sleep at night worrying about the FTC and the pennies they might decide to fine FB.
QuesnayJr 7y ago
Banks aren't magic. If Facebook wanted to, they could start a bank. Anybody can start a bank. There are regulatory costs, but any business of reasonable size could comply with those costs. And banks "make money out of nothing" because bank deposits substitute for hard currency. If a cryptocurrency became standard, then someone could create an institution that accepted cryptocurrency deposits, and it would function exactly like a bank.

jameskilton 7y ago

Lets make sure we're talking facts. The US Government made a profit off of the 2008 bailout[1]. I'm not an economist so I can't say much about the program but I'm lead to believe that had we not bailed out many banks the cost to tax payers would have been much, much higher. [1] https://www.washingtonpost.com/business/economy/tarp-moves-into-the-black-as-some-loans-are-repaid/2011/03/30/AFDrEc6B_story.html https://www.washingtonpost.com/business/economy/tarp-moves-i...

lawn 7y ago
Yes, their gamble of buying extremely risky assets paid off. Similar to how you can "bet all on red" and manage to win. But that doesn't make it a good long-term plan. The incentives for banks are still unchanged: "heads I win, tails I get bailed-out". And of course even if they run the economy into the ground they still get their bonuses.
- QuesnayJr 7y ago
  It worked out because the assets became risky from panic. The government is a large enough entity to stop the panic, and thus remove that risk.
  - lawn 7y ago
    The assets were always risky, way before the panic set in. I recommend the books After the Music Stopped or The Big Short for background on the crisis. (Also the movie The Big Short is excellent).
    - QuesnayJr 7y ago
      If the government's strategy was so risky, then why did it make money? The government wasn't gambling that there wouldn't be a crisis -- they intervened right in the middle of the crisis. (I should have said became riskier, though. Of course the assets had some risk.)
narrator 7y ago
They made money because the FED started buying the types of securities that they owned with electronically printed money. If this was China the whole thing wouldn't have even happened. The government would have just printed the money, recapitalized the banks and sold off their debts at a discount and punished (severely) anybody who violated banking regulation. The whole fiction that the government has to lend money into existence from the FED and the FED can buy assets off banks from money created out of nothing is this complicated convoluted game is intended to make it hard to figure out what's going on and to make it look like actual productive economic activity is occurring here.

elliekelly 7y ago

Can you elaborate? How is it the banks are “free of the government” and Facebook is somehow beholden to the regulators? My experience leads me to the exact opposite conclusion. I don’t think Zuck is losing any sleep at night worrying about the FTC and the pennies they might decide to fine FB.

QuesnayJr 7y ago

Banks aren't magic. If Facebook wanted to, they could start a bank. Anybody can start a bank. There are regulatory costs, but any business of reasonable size could comply with those costs. And banks "make money out of nothing" because bank deposits substitute for hard currency. If a cryptocurrency became standard, then someone could create an institution that accepted cryptocurrency deposits, and it would function exactly like a bank.