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>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 publi

>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.
- wcoenen 7y ago
  Things can happen very fast. The fed printed $128B in just two days to address the repo market crisis. 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... Granted, overnight loans are not permanent injections of money. But it serves as a reminder that there is no speed limit on the virtual printing press of the fed.
  - rightbyte 7y ago
    At some point the banking system will crash due to lost math precision I believe. The speed of porting everything to arbitrary precision programs limits inflation, unless the gov start cutting zeroes of the bills.
IAmEveryone 7y ago
The problem was never with banks failing, it was with some of them being "too big to fail". This news therefore doesn't mean attempts to prevent another 2008-like crisis have been unsuccessful. Also, let's the remember the last bailout was a somewhat underrated success: " TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6% and perhaps a loss when adjusted for inflation.". Apart from that, public debt is up considerably in the US (mostly due to tax cuts) but rather flat in the EU. Nothing would preclude another bailout of the same magnitude as the last one. But that's a somewhat silly question. Because if there's one thing we can be sure of, it's that the next crisis will be different than the last one. Italy going bankrupt is a far more imminent danger than private banks, and one that would be too big to contain, for example.
- howard941 7y ago
  From the bank shareholder's perspective the bailout was a stunning success. For the rest of us debtors, for those who greased the runways for the shareholders with their lost homes and lost savings that went to paying off debts in disinflationary dollars when stimulus and reasonable inflation would have made paying debts off easier, it remains an ongoing disaster.
  - IAmEveryone 7y ago
    No, the shareholders of rescued banks got wiped out.
  - ChrisLomont 7y ago
    >For the rest of us debtors...it remains an ongoing disaster Taxpayers didn't pay for bailouts. The Fed did. Taxpayers did make a profit form them, however, since the profits the Fed saw from the bailouts were, by law, handed over to Treasury (except for statutory operating expenses), offsetting taxes. >those who greased the runways for the shareholders with their lost homes Most of those those losing homes did so by taking loans they could not pay, and the ripples were felt by those not taking such loans, in their retirement funds. Those who left those funds alone recovered the value and then some after the recession. Those who did not, or could not, did lose value. But don't just blame bankers. Also blame borrowers defaulting.
hocuspocus 7y ago
Central banks printing money to acquire bad assets from collapsing commercial banks would not cause any inflation.
- treypitt 7y ago
  Some would argue it causes "inflation" in financial markets like the US equities market
- Spooky23 7y ago
  It’s blowing up the cost of many equities as borrowing has been so cheap for so long. I live in a boring small city with awful schools and mediocre economy. My house value went up in real dollars about 3x from 1999-2018z The apartment complex that I rented from in 1998 is about 2x more expensive in real terms since that time. The supply of capital is inflating real property values even without growth in demand. Given that most consumer product manufacturing has completed its move offshore, I’d expect increasing consumer prices as there isn’t much room left to shrink by lowering labor costs.
  - hocuspocus 7y ago
    You're describing the effects of QE (not in its original sense, but the way it has been implemented) and I couldn't agree more. But this is very different from a central bank taking over bad assets after a catastrophic collapse of the private banking sector.
QuesnayJr 7y ago
They are capable. Developed countries are still below the upper limit of what they could borrow. You can see this in the fact that long-term interest rates are so low. If people were running out of patience for government borrowing you would see long-run rates spiking. While debt levels are high, they are not unprecendented. US debt/GDP is 105%, which is far below Japan at 220%.

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.

wcoenen 7y ago
Things can happen very fast. The fed printed $128B in just two days to address the repo market crisis. 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... Granted, overnight loans are not permanent injections of money. But it serves as a reminder that there is no speed limit on the virtual printing press of the fed.
- rightbyte 7y ago
  At some point the banking system will crash due to lost math precision I believe. The speed of porting everything to arbitrary precision programs limits inflation, unless the gov start cutting zeroes of the bills.

IAmEveryone 7y ago

The problem was never with banks failing, it was with some of them being "too big to fail". This news therefore doesn't mean attempts to prevent another 2008-like crisis have been unsuccessful. Also, let's the remember the last bailout was a somewhat underrated success: " TARP recovered funds totalling $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6% and perhaps a loss when adjusted for inflation.". Apart from that, public debt is up considerably in the US (mostly due to tax cuts) but rather flat in the EU. Nothing would preclude another bailout of the same magnitude as the last one. But that's a somewhat silly question. Because if there's one thing we can be sure of, it's that the next crisis will be different than the last one. Italy going bankrupt is a far more imminent danger than private banks, and one that would be too big to contain, for example.

howard941 7y ago
From the bank shareholder's perspective the bailout was a stunning success. For the rest of us debtors, for those who greased the runways for the shareholders with their lost homes and lost savings that went to paying off debts in disinflationary dollars when stimulus and reasonable inflation would have made paying debts off easier, it remains an ongoing disaster.
- IAmEveryone 7y ago
  No, the shareholders of rescued banks got wiped out.
- ChrisLomont 7y ago
  >For the rest of us debtors...it remains an ongoing disaster Taxpayers didn't pay for bailouts. The Fed did. Taxpayers did make a profit form them, however, since the profits the Fed saw from the bailouts were, by law, handed over to Treasury (except for statutory operating expenses), offsetting taxes. >those who greased the runways for the shareholders with their lost homes Most of those those losing homes did so by taking loans they could not pay, and the ripples were felt by those not taking such loans, in their retirement funds. Those who left those funds alone recovered the value and then some after the recession. Those who did not, or could not, did lose value. But don't just blame bankers. Also blame borrowers defaulting.

hocuspocus 7y ago

Central banks printing money to acquire bad assets from collapsing commercial banks would not cause any inflation.

treypitt 7y ago
Some would argue it causes "inflation" in financial markets like the US equities market
Spooky23 7y ago
It’s blowing up the cost of many equities as borrowing has been so cheap for so long. I live in a boring small city with awful schools and mediocre economy. My house value went up in real dollars about 3x from 1999-2018z The apartment complex that I rented from in 1998 is about 2x more expensive in real terms since that time. The supply of capital is inflating real property values even without growth in demand. Given that most consumer product manufacturing has completed its move offshore, I’d expect increasing consumer prices as there isn’t much room left to shrink by lowering labor costs.
- hocuspocus 7y ago
  You're describing the effects of QE (not in its original sense, but the way it has been implemented) and I couldn't agree more. But this is very different from a central bank taking over bad assets after a catastrophic collapse of the private banking sector.

QuesnayJr 7y ago

They are capable. Developed countries are still below the upper limit of what they could borrow. You can see this in the fact that long-term interest rates are so low. If people were running out of patience for government borrowing you would see long-run rates spiking. While debt levels are high, they are not unprecendented. US debt/GDP is 105%, which is far below Japan at 220%.