7 ms·

AKA On behalf of our banking customers we're going to be advising that governments get ready to do another bailout.

std_throwaway 7y ago
It amazes me how long and how slowly the value of our money can be eroded without casing a hard crash. This has been going on for over 100 years in the US. Money used to pay things used to be gold, then fully gold backed, then partially gold backed, then no gold but security backed, then securities are diluted more and more. The next logical steps would be that the central banks buy up the bankrupt economy and introduce social credit as currency which is backed by surveillance.
- IAmEveryone 7y ago
  Your "next logical step" isn't logical in any sense of the word. You're just recounting a few steps of history (that actually went along with increased stability of the financial system) and then suddenly suggesting it's a preamble to some scenario that's currently en vogue among the paranoid. "backed by surveillance" simply does not mean anything. At least not in the sense of "backed by" as used in those other cases.
- glangdale 7y ago
  Right, because everything was so much better when you could, for no particularly good reason, relate money to a marginally useful-to-jewellers-and-dentists soft metal. I suppose I shouldn't expect economic literacy on Hacker News, but the twist on the standard goldbug narrative ("social credit backed by surveillance") is at least original, if nutty.
  - 5822130027 7y ago
    Gold's uselessness / rarity is what makes it perfect as money. The dollars you hold in your wallet are not even useful as toilet paper. Its sole use is to store value - just like gold. Gold standard created the first motor, railway, steamships. More importantly, wages kept up with productivity, in fact as soon as you decoupled gold from money, wages stagnated.
  - std_throwaway 7y ago
    I did not say that gold backed currency is better for everybody. I'm just amazed at the time span over which the dilution is happening. And I don't think that anybody can deny that our money is slowly losing its purchasing power.
    - fjp 7y ago
      it is slowly losing purchasing power. That's called inflation and nobody denies it or is surprised by it. In fact what people are generally surprised about is how little inflation is has occurred in the USA compared to how much money has been pumped into the system via QE.
    - glangdale 7y ago
      Mainstream economic opinion is not particularly concerned by the fact that our money is slowly losing its purchasing power. There's a general consensus that a small amount of inflation is useful, although the reasons are pretty cynical (i.e. wage flexibility -> "it's easier to give someone a 0% raise under conditions of 2% inflation than it is to give someone of -2% pay cut under conditions of 0% inflation"). You might make the argument that making it psychologically easier for employers to hand out small 'in-real-terms' pay cuts is wrong in itself, of course, but that's another discussion.
  - turk73 7y ago
    It's not nutty to point out that the dollar is presently only worth $.05 what it was in the year the Federal Reserve came into being.
- notfromhere 7y ago
  This makes way less sense than you think it does.
IAmEveryone 7y ago
That's a cynical, conspiratorial, and woefully uninformed take on this. On the most basic level, what you're suggesting doesn't make sense: "getting ready for a bailout" doesn't imply any real action any government would take. If anything, being warned about financial instability will lead to an increase in requirements for banks: capital requirements might increase, M&A might become harder, etc. But those are the sort of changes banks would tend to hate, because they necessarily reduce their opportunities to make money. So I believe you're reacting to seeing "McKinsey", and it triggers you into running your conspiracy-themed sentence-generation Markov chain. In the process, it reveals that "government" and "finance" figure large as sinister agents in your belief system.
- roenxi 7y ago
  The conversation around bank bailouts involves more money than the wealth of entire countries flowing through the financial system like a leviathan; so deep that we paddlers in the oceans of finance barely see the shadow. It is an excellent time to be cynical; and a great time to recognise that if anyone were ever to be tempted to conspiracy this is the sort of value that would tempt them. The woefully uninformed I'm not going to quibble on because agree with you on that point.
- anm89 7y ago
  I love this idea of words which have negative(or positive) connotations in someones belief systems triggering theme based sentence generation via markov chains. I feel like this is a bizarrely insightful take on how people actually think and respond to things.
omginternets 7y ago
>do another bailout. I know you're being tongue-in-cheek, but in theory, are governments even capable of doing another bailout? My understanding is that public debt in most Western countries (not sure about China/India) is through the roof. Other than printing money and risking a cataclysmic devaluation, what can be done?
- radiator 7y ago
  I hope it does not come as a surprise if I tell you that printing money has already been, since a long time and in great quantities, taking place. The cataclysmic devaluation part is the one they are working on postponing.
  - omginternets 7y ago
    Indeed it does not. I'm just not clear on how one postpones a cataclysmic devaluation.
  - QuesnayJr 7y ago
    We had a big increase in the money supply after the financial crisis, and yet inflation remains stubbornly low. At some point one needs to recognize that there is more in heaven and earth, Horatio, than dreamt of in your philosophy.
    - radiator 7y ago
      If you acknowledge that there was a big increase in money supply, then there is nothing more needed to conclude that there IS inflation. Whether acknowledged by official narratives or hidden, does not matter: it is still there and cannot remain hidden forever. But can you explain why practically all Central Banks are recently worried about high asset prices? Are high asset prices the sign of a stubbornly low inflation, in your opinion?
- mywittyname 7y ago
  > Other than printing money and risking a cataclysmic devaluation The US government would need to print an insane amount of money to have a tangible devaluation impact. Even more so when the money creation is intended to offset deflationary pressures due to a economic contraction. Considering the GDP of the US is ~$20 trillion, I bet we're probably talking about $2-4 trillion of printed money, in addition to deflation offsets, over the course of a year before the noticeable market inflation occurs. That would be like spending the entire annual budget of the US military five times over.
ismail 7y ago
I am going to agree with sentiments posted by others. This has nothing to do with bailouts. I have not read the report though having read the article one thing is clear all the solutions mentioned in the article are services provided by Mckinsey. So rather than being about a bailout it is positioning their services
SilasX 7y ago
Depending on how you regard the Federal Reserve, it's already happening. The Fed has been making massive loans to banks that are unable to get overnight loans from other banks based on their portfolios. [1] The amount and duration reporting has been. Originally it was $53 billion planned for a few weeks [2], and now it's over $128 billion [3], lasting into next year. [1] https://news.ycombinator.com/item?id=21004068 https://news.ycombinator.com/item?id=21004068 [2] https://www.reuters.com/article/us-usa-fed-repo/n-y-fed-awards-54-85-billion-in-overnight-repos-idUSKBN1WG3WM https://www.reuters.com/article/us-usa-fed-repo/n-y-fed-awar... [3] https://markets.businessinsider.com/news/stocks/fed-repo-injects-billions-into-market-first-time-in-decade-2019-9-1028534289 https://markets.businessinsider.com/news/stocks/fed-repo-inj...
- toast0 7y ago
  If nobody is willing/able to lend dollars overnight secured by borrowers' treasury notes as collateral, and the Fed steps in to lend, the problem is either there's not enough dollars around to lend or people don't trust the collateral. Since treasury notes are trading at normal interest rates in the overall market, it seems pretty clear it's a liquidity issue. The potential lenders in that market don't have enough dollars to lend (in part due to post-2008 regulations and post-2008 behavioral changes by those lenders). If it were easy to become a lender in the overnight market, you would see people swooping in to make nearly risk free loans for 8% (apr) overnight. The swooping would rather rapidly lower the interest rates back to near normal. The Fed has authority and ability to swoop in, and a desire to keep the interests low, so there you go.

It amazes me how long and how slowly the value of our money can be eroded without casing a hard crash. This has been going on for over 100 years in the US. Money used to pay things used to be gold, then fully gold backed, then partially gold backed, then no gold but security backed, then securities are diluted more and more. The next logical steps would be that the central banks buy up the bankrupt economy and introduce social credit as currency which is backed by surveillance.

IAmEveryone 7y ago
Your "next logical step" isn't logical in any sense of the word. You're just recounting a few steps of history (that actually went along with increased stability of the financial system) and then suddenly suggesting it's a preamble to some scenario that's currently en vogue among the paranoid. "backed by surveillance" simply does not mean anything. At least not in the sense of "backed by" as used in those other cases.
glangdale 7y ago
Right, because everything was so much better when you could, for no particularly good reason, relate money to a marginally useful-to-jewellers-and-dentists soft metal. I suppose I shouldn't expect economic literacy on Hacker News, but the twist on the standard goldbug narrative ("social credit backed by surveillance") is at least original, if nutty.
- 5822130027 7y ago
  Gold's uselessness / rarity is what makes it perfect as money. The dollars you hold in your wallet are not even useful as toilet paper. Its sole use is to store value - just like gold. Gold standard created the first motor, railway, steamships. More importantly, wages kept up with productivity, in fact as soon as you decoupled gold from money, wages stagnated.
- std_throwaway 7y ago
  I did not say that gold backed currency is better for everybody. I'm just amazed at the time span over which the dilution is happening. And I don't think that anybody can deny that our money is slowly losing its purchasing power.
  - fjp 7y ago
    it is slowly losing purchasing power. That's called inflation and nobody denies it or is surprised by it. In fact what people are generally surprised about is how little inflation is has occurred in the USA compared to how much money has been pumped into the system via QE.
  - glangdale 7y ago
    Mainstream economic opinion is not particularly concerned by the fact that our money is slowly losing its purchasing power. There's a general consensus that a small amount of inflation is useful, although the reasons are pretty cynical (i.e. wage flexibility -> "it's easier to give someone a 0% raise under conditions of 2% inflation than it is to give someone of -2% pay cut under conditions of 0% inflation"). You might make the argument that making it psychologically easier for employers to hand out small 'in-real-terms' pay cuts is wrong in itself, of course, but that's another discussion.
- turk73 7y ago
  It's not nutty to point out that the dollar is presently only worth $.05 what it was in the year the Federal Reserve came into being.
notfromhere 7y ago
This makes way less sense than you think it does.

IAmEveryone 7y ago

That's a cynical, conspiratorial, and woefully uninformed take on this. On the most basic level, what you're suggesting doesn't make sense: "getting ready for a bailout" doesn't imply any real action any government would take. If anything, being warned about financial instability will lead to an increase in requirements for banks: capital requirements might increase, M&A might become harder, etc. But those are the sort of changes banks would tend to hate, because they necessarily reduce their opportunities to make money. So I believe you're reacting to seeing "McKinsey", and it triggers you into running your conspiracy-themed sentence-generation Markov chain. In the process, it reveals that "government" and "finance" figure large as sinister agents in your belief system.

roenxi 7y ago
The conversation around bank bailouts involves more money than the wealth of entire countries flowing through the financial system like a leviathan; so deep that we paddlers in the oceans of finance barely see the shadow. It is an excellent time to be cynical; and a great time to recognise that if anyone were ever to be tempted to conspiracy this is the sort of value that would tempt them. The woefully uninformed I'm not going to quibble on because agree with you on that point.
anm89 7y ago
I love this idea of words which have negative(or positive) connotations in someones belief systems triggering theme based sentence generation via markov chains. I feel like this is a bizarrely insightful take on how people actually think and respond to things.

omginternets 7y ago

>do another bailout. I know you're being tongue-in-cheek, but in theory, are governments even capable of doing another bailout? My understanding is that public debt in most Western countries (not sure about China/India) is through the roof. Other than printing money and risking a cataclysmic devaluation, what can be done?

radiator 7y ago
I hope it does not come as a surprise if I tell you that printing money has already been, since a long time and in great quantities, taking place. The cataclysmic devaluation part is the one they are working on postponing.
- omginternets 7y ago
  Indeed it does not. I'm just not clear on how one postpones a cataclysmic devaluation.
- QuesnayJr 7y ago
  We had a big increase in the money supply after the financial crisis, and yet inflation remains stubbornly low. At some point one needs to recognize that there is more in heaven and earth, Horatio, than dreamt of in your philosophy.
  - radiator 7y ago
    If you acknowledge that there was a big increase in money supply, then there is nothing more needed to conclude that there IS inflation. Whether acknowledged by official narratives or hidden, does not matter: it is still there and cannot remain hidden forever. But can you explain why practically all Central Banks are recently worried about high asset prices? Are high asset prices the sign of a stubbornly low inflation, in your opinion?
mywittyname 7y ago
> Other than printing money and risking a cataclysmic devaluation The US government would need to print an insane amount of money to have a tangible devaluation impact. Even more so when the money creation is intended to offset deflationary pressures due to a economic contraction. Considering the GDP of the US is ~$20 trillion, I bet we're probably talking about $2-4 trillion of printed money, in addition to deflation offsets, over the course of a year before the noticeable market inflation occurs. That would be like spending the entire annual budget of the US military five times over.

ismail 7y ago

I am going to agree with sentiments posted by others. This has nothing to do with bailouts. I have not read the report though having read the article one thing is clear all the solutions mentioned in the article are services provided by Mckinsey. So rather than being about a bailout it is positioning their services

SilasX 7y ago

Depending on how you regard the Federal Reserve, it's already happening. The Fed has been making massive loans to banks that are unable to get overnight loans from other banks based on their portfolios. [1] The amount and duration reporting has been. Originally it was $53 billion planned for a few weeks [2], and now it's over $128 billion [3], lasting into next year. [1] https://news.ycombinator.com/item?id=21004068 https://news.ycombinator.com/item?id=21004068 [2] https://www.reuters.com/article/us-usa-fed-repo/n-y-fed-awards-54-85-billion-in-overnight-repos-idUSKBN1WG3WM https://www.reuters.com/article/us-usa-fed-repo/n-y-fed-awar... [3] https://markets.businessinsider.com/news/stocks/fed-repo-injects-billions-into-market-first-time-in-decade-2019-9-1028534289 https://markets.businessinsider.com/news/stocks/fed-repo-inj...

toast0 7y ago
If nobody is willing/able to lend dollars overnight secured by borrowers' treasury notes as collateral, and the Fed steps in to lend, the problem is either there's not enough dollars around to lend or people don't trust the collateral. Since treasury notes are trading at normal interest rates in the overall market, it seems pretty clear it's a liquidity issue. The potential lenders in that market don't have enough dollars to lend (in part due to post-2008 regulations and post-2008 behavioral changes by those lenders). If it were easy to become a lender in the overnight market, you would see people swooping in to make nearly risk free loans for 8% (apr) overnight. The swooping would rather rapidly lower the interest rates back to near normal. The Fed has authority and ability to swoop in, and a desire to keep the interests low, so there you go.