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That is impossible. No business can see a 50% drop in revenue over an extended period of time and survive. That is, unless we assume that the price setting func
by digitaltrees 7y ago
That is impossible. No business can see a 50% drop in revenue over an extended period of time and survive. That is, unless we assume that the price setting function of markets is suspended. Supply and demand will result in razor thin margins unless we get rid of competition and allow monopolies.
- throwaway2048 7y agoIs 6 weeks really an "extended period of time" ?, we are barely a few weeks into a global crisis and already companies are collapsing, that's an indicator of just how insanely fragile things are.
- NikolaeVarius 7y ago6 weeks is a damn eternity. Modern supply chains are stupid highly optimized.
- throwaway2048 7y agohighly optimized means insanely fragile in terms of disruption.
- digitaltrees 7y agoIf there was absolute certainty that the disruption would only be 6 weeks then a business could take the hit and recover over time; this may be a longer term drop in demand such that they have to make drastic cuts immediately.
- tonyedgecombe 7y agoBritish Airways is calling on the government to not bail out it's competitors. They are sitting on $9Bn in cash.
- digitaltrees 7y agoMany countries have companies that are strategic assets that will be protected in crisis, auto manufacturers, farming, airlines, banks etc. This means that they are some times shielded from the full force of market competition. I would be curious about British Airways posture.
- true_religion 7y agoPresumably since Brexit is happening, their word only carries weight in the UK, and they are the strategic asset there. They probably are hoping totally private competitors like Ryanair are gone, so they can buy their planes and fly their routes.
- tonyedgecombe 7y agoBritish Airways is totally private, the state unloaded it a long time ago. My understanding is Ryanair have a reasonable cash position. Virgin have the begging bowl out at the moment though.
- driverdan 7y agoGood. Let fiscally irresponsible companies fold. There should never be government bailouts for anyone.
- mlthoughts2018 7y agoI’m with you on this, but then it should be executives and shareholders required to fully support unemployment for the workers affected by the company failing due to financial mismanagement. Instead we see executives get out with huge severance or even just accumulated wealth, and stick taxpayers with unemployment bills.
- digitaltrees 7y agoIn a financial crisis every company is at risk, without support, you get a fire sale, and the cascading effect takes down more than just the irresponsible companies. The time to regulate irresponsible action is before the crisis not during the crisis. We learned that in the 1929 Great Depression. There is a lot of research to that effect. We saw that in the recovery from 2008 which used the lessons learned about 1929 to adopt different responses that the 'liquidationists' recommended (google that term and you will see your exact argument used and followed by the government in 1929 and the devastating effect it had on the economy).