4 ms·

You realize that the retail business can be quite difficult and that a monthlong shuttering can and will drive many into bankruptcy. Rent payments without incom

by charia 7y ago

You realize that the retail business can be quite difficult and that a monthlong shuttering can and will drive many into bankruptcy. Rent payments without income will put the nail in the coffin for many businesses. I do agree with your sentiment. Paying their workers who are probably struggling significantly at the moment would be ideal. I don't feel that landlords need the $'s as much as those workers.

christophilus 7y ago
You never know. I know some landlords for whom the rent is their primary retirement income.
XMPPwocky 7y ago
> a monthlong shuttering can and will drive many into bankruptcy. They should have saved up- a decent emergency fund is three+ months of expenses, or so I'm told. In a better world... Didn't save up? You lose your business. Either it goes under or you sell it at fire-sale prices to somebody who has the assets to keep it afloat until things stabilize (possibly the government). Your workers? Of course, the government will support them as individuals. And you, too! You won't be homeless or starving, even if your business fails completely. You just won't have your business anymore. "But what about startups or very small businesses who haven't had time to accumulate enough capital to survive this?" Then you do what you usually do to turn a rare risk into a predictable expense: buy insurance.
- digitaltrees 7y ago
  But everyone will end up poorer if we let mass bankruptcy to wash over the economy. Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. A little collective sacrifice and collaboration goes a long way when everyone is sinking together.
  - XMPPwocky 7y ago
    > Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. And the value of all that will help get them a higher price when they sell the company. Investors too scared to snap up these bargains? Cool- the government buys it and nationalizes it. A little collective sacrifice and collaboration goes a long way all the time- not just when you get run over by the steamroller you were picking up pennies in front of.
    - digitaltrees 7y ago
      In normal times we have the bankruptcy courts to facilitate an orderly wind down and prevent fire sales. Its called the automatic stay, it prevents creditors from taking any action against a company in the zone of insolvency to seize assets, restrict credit or in any way gain a first mover advantage. In a crisis of the current scale, the normal system can not handle the volume of bankruptcies. I would be ok with the government buying companies to preserve value but most American leaders are morally opposed to this type of intervention so it is basically impossible to do what you're suggesting.
- jrs95 7y ago
  You're right, the problem with American capitalism is that people with wealth don't have enough of an advantage in business /s
  - XMPPwocky 7y ago
    Sorry if I wasn't clear- would you mind explaining how you got that from what I said?
    - jrs95 7y ago
      "Didn't save up? You lose your business. Either it goes under or you sell it at fire-sale prices to somebody who has the assets to keep it afloat until things stabilize (possibly the government)." In this scenario a wealthy person who owns a business can simply keep their business afloat with their personal money, whereas someone with a more modest financial situation would go bankrupt and be forced to sell at pennies on the dollar to...someone who happens to be sitting on a pile of cash. That clearly leads to a consolidation of capital in the hands of the wealthiest people, which most people would consider to be a bad thing. Plus, more rural communities in general are a lot more dependent on middle class small business owners, many of whom are likely already struggling even before a crisis do to a stagnating local economy.
- anonsubmit2671 7y ago
  If we're talking SMBs: That's rarely possible in a small business, especially where costs are high and margins too thin. Business interruption insurance (with often mandatory flood insurance) is supposed to handle that, but it's an added cost and may have exclusions that make it pointless. For landlords, BII may or may not be worth it. EDIT: BII doesn't cover unlisted force majeure incidents, so most tenants and landlords are hooped. The only entity with enough money and power to make people whole is Congress. They can buy a few less F-35's and nukes, and help the people on the home front.
- imtringued 7y ago
  I'm really, really confused when I read comments like yours. I mean, what problem are you trying to solve? What goal are you trying to accomplish? Why would you blame the businesses for a problem that the government caused? [0] Just think about it for a second. The real goal here isn't the eradication of businesses. The idea behind a quarantine is to prevent the spread of a disease. This involves reducing contact with other people and therefore as a side effect businesses that involve a lot of people being in contact have to shut down or at least make their employees work from home. So our goal is clear. We must defeat covid-19 and all sorts of other future diseases. Now, let us think about what prevents us from deploying an effective quarantine. First of all people need to meet their basic needs like food, drinks and shelter (without it quarantine is impossible). The way we structured our society is that everyone pays for what they need with money. That money is obtained through employment and it is used to make workers perform tasks that ensure we have food, drinks and shelter. For a successful quarantine we need to maintain a working economy before, during and after the quarantine. If we fail to do so then future quarantines may fail. If the economy and businesses collapse because of a disruptive quarantine then we might decide to never have quarantines again in the future. If the economy collapses because of a government intervention, such as a quarantine, then it only makes sense to use a government intervention to prevent the collapse of the economy. We could decide that it's the responsibility of each individual business to weather a government intervention and let them collapse but this would significantly decrease the popularity of quarantines and make them less effective because people will simply break the rules. Now that we have decided to intervene, what types of intervention are necessary to counteract the effect of quarantines? Well for starters the problem most businesses face is that they are fundamentally working but the quarantine is temporarily preventing them from functioning but they are almost guaranteed to make money in the near future. This can indeed be solved by having an emergency fund but it can also be solved by simply giving the businesses a loan. It is effectively the same principle. Businesses forgo profits to cover emergencies. Does this type of "bailout" create a moral hazard? Will businesses stop having emergency funds because they can get a 0% interest loan? Fortunately there is no moral hazard. If a business gets the loan it covers the missing 3 months but if it is unprofitable then it will collapse anyway. Any money that wasn't paid back is effectively an unorthodox form of unemployment benefits. Now lets imagine a different type of bailout. What if we simply let struggling companies let the government pay the wages of their employees? This could be abused by profitable companies that can keep their employees busy but somehow manage to trick the government to cover their expenses. What if we pause rent and mortgages? The banks end up holding the bag. They do have access to cheap loans but putting the banking system at risk will just encourage more bank focused protectionism/bailouts because the bank is now responsible for every collapsed business that didn't repay the loans. So let me summarize this. The effectiveness of quarantines depends on public acceptance and low disruption. Disruption can be prevented by providing just liquidity to businesses. Bad businesses use the money to pay their workers before they inevitably collapse after the quarantine. Good businesses will keep functioning after the quarantine and pay their loans back but they do not gain unfair benefits compared to companies that have emergency funds. [0] Yes, Covid-19 will kill a lot of people but it certainly will never kill the _entire_ economy like the every government on the planet is doing right now.
anonsubmit2671 7y ago
That's obvious. Corporations like Target and Walmart can weather the storm and shouldn't be gaming the situation for their advantage when they already receive enormous tax breaks, have lobbyists and corporate welfare, where mom&pop and regional chains may not be able to. Consider Louis Rossmann, who's now had to close up shop with $37500 in rent deferred, not including salaries. There are no emergency grants or no interest loans for small businesses, only "low" interest loans which don't help recoup losses. My mechanic, who has $16k in expenses per month, may have to default on his business, lay-off his brother-in-law, and find a salary job because his landlord is an ahole who will demand all of the back rent when the 90 days is up. Maybe business interruption/income insurance, which often requires buying flood insurance, is worth it if actually covers force majeure. Edit: It turns out the vast majority of BII policies do not cover pandemics, so almost all small businesses and landlords in the US are fucked. This will absolutely require federal bailout action or there will be revolution-level seething anger ready to explode. https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/from-business-interruption-coverage-to-force-majeure-clauses-covid-19-is-becoming-a-legal-land-mine-for-tenants-and-landlords-103526 https://www.bisnow.com/dallas-ft-worth/news/commercial-real-...

by charia 7y ago

christophilus 7y ago

You never know. I know some landlords for whom the rent is their primary retirement income.

XMPPwocky 7y ago

> a monthlong shuttering can and will drive many into bankruptcy. They should have saved up- a decent emergency fund is three+ months of expenses, or so I'm told. In a better world... Didn't save up? You lose your business. Either it goes under or you sell it at fire-sale prices to somebody who has the assets to keep it afloat until things stabilize (possibly the government). Your workers? Of course, the government will support them as individuals. And you, too! You won't be homeless or starving, even if your business fails completely. You just won't have your business anymore. "But what about startups or very small businesses who haven't had time to accumulate enough capital to survive this?" Then you do what you usually do to turn a rare risk into a predictable expense: buy insurance.

digitaltrees 7y ago
But everyone will end up poorer if we let mass bankruptcy to wash over the economy. Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. A little collective sacrifice and collaboration goes a long way when everyone is sinking together.
- XMPPwocky 7y ago
  > Many of these SMBs and large corps took years to establish and have domain knowledge, trained work forces, supply chains that can’t just spin up easily. And the value of all that will help get them a higher price when they sell the company. Investors too scared to snap up these bargains? Cool- the government buys it and nationalizes it. A little collective sacrifice and collaboration goes a long way all the time- not just when you get run over by the steamroller you were picking up pennies in front of.
  - digitaltrees 7y ago
    In normal times we have the bankruptcy courts to facilitate an orderly wind down and prevent fire sales. Its called the automatic stay, it prevents creditors from taking any action against a company in the zone of insolvency to seize assets, restrict credit or in any way gain a first mover advantage. In a crisis of the current scale, the normal system can not handle the volume of bankruptcies. I would be ok with the government buying companies to preserve value but most American leaders are morally opposed to this type of intervention so it is basically impossible to do what you're suggesting.
jrs95 7y ago
You're right, the problem with American capitalism is that people with wealth don't have enough of an advantage in business /s
- XMPPwocky 7y ago
  Sorry if I wasn't clear- would you mind explaining how you got that from what I said?
  - jrs95 7y ago
    "Didn't save up? You lose your business. Either it goes under or you sell it at fire-sale prices to somebody who has the assets to keep it afloat until things stabilize (possibly the government)." In this scenario a wealthy person who owns a business can simply keep their business afloat with their personal money, whereas someone with a more modest financial situation would go bankrupt and be forced to sell at pennies on the dollar to...someone who happens to be sitting on a pile of cash. That clearly leads to a consolidation of capital in the hands of the wealthiest people, which most people would consider to be a bad thing. Plus, more rural communities in general are a lot more dependent on middle class small business owners, many of whom are likely already struggling even before a crisis do to a stagnating local economy.
anonsubmit2671 7y ago
If we're talking SMBs: That's rarely possible in a small business, especially where costs are high and margins too thin. Business interruption insurance (with often mandatory flood insurance) is supposed to handle that, but it's an added cost and may have exclusions that make it pointless. For landlords, BII may or may not be worth it. EDIT: BII doesn't cover unlisted force majeure incidents, so most tenants and landlords are hooped. The only entity with enough money and power to make people whole is Congress. They can buy a few less F-35's and nukes, and help the people on the home front.
imtringued 7y ago
I'm really, really confused when I read comments like yours. I mean, what problem are you trying to solve? What goal are you trying to accomplish? Why would you blame the businesses for a problem that the government caused? [0] Just think about it for a second. The real goal here isn't the eradication of businesses. The idea behind a quarantine is to prevent the spread of a disease. This involves reducing contact with other people and therefore as a side effect businesses that involve a lot of people being in contact have to shut down or at least make their employees work from home. So our goal is clear. We must defeat covid-19 and all sorts of other future diseases. Now, let us think about what prevents us from deploying an effective quarantine. First of all people need to meet their basic needs like food, drinks and shelter (without it quarantine is impossible). The way we structured our society is that everyone pays for what they need with money. That money is obtained through employment and it is used to make workers perform tasks that ensure we have food, drinks and shelter. For a successful quarantine we need to maintain a working economy before, during and after the quarantine. If we fail to do so then future quarantines may fail. If the economy and businesses collapse because of a disruptive quarantine then we might decide to never have quarantines again in the future. If the economy collapses because of a government intervention, such as a quarantine, then it only makes sense to use a government intervention to prevent the collapse of the economy. We could decide that it's the responsibility of each individual business to weather a government intervention and let them collapse but this would significantly decrease the popularity of quarantines and make them less effective because people will simply break the rules. Now that we have decided to intervene, what types of intervention are necessary to counteract the effect of quarantines? Well for starters the problem most businesses face is that they are fundamentally working but the quarantine is temporarily preventing them from functioning but they are almost guaranteed to make money in the near future. This can indeed be solved by having an emergency fund but it can also be solved by simply giving the businesses a loan. It is effectively the same principle. Businesses forgo profits to cover emergencies. Does this type of "bailout" create a moral hazard? Will businesses stop having emergency funds because they can get a 0% interest loan? Fortunately there is no moral hazard. If a business gets the loan it covers the missing 3 months but if it is unprofitable then it will collapse anyway. Any money that wasn't paid back is effectively an unorthodox form of unemployment benefits. Now lets imagine a different type of bailout. What if we simply let struggling companies let the government pay the wages of their employees? This could be abused by profitable companies that can keep their employees busy but somehow manage to trick the government to cover their expenses. What if we pause rent and mortgages? The banks end up holding the bag. They do have access to cheap loans but putting the banking system at risk will just encourage more bank focused protectionism/bailouts because the bank is now responsible for every collapsed business that didn't repay the loans. So let me summarize this. The effectiveness of quarantines depends on public acceptance and low disruption. Disruption can be prevented by providing just liquidity to businesses. Bad businesses use the money to pay their workers before they inevitably collapse after the quarantine. Good businesses will keep functioning after the quarantine and pay their loans back but they do not gain unfair benefits compared to companies that have emergency funds. [0] Yes, Covid-19 will kill a lot of people but it certainly will never kill the _entire_ economy like the every government on the planet is doing right now.

anonsubmit2671 7y ago

That's obvious. Corporations like Target and Walmart can weather the storm and shouldn't be gaming the situation for their advantage when they already receive enormous tax breaks, have lobbyists and corporate welfare, where mom&pop and regional chains may not be able to. Consider Louis Rossmann, who's now had to close up shop with $37500 in rent deferred, not including salaries. There are no emergency grants or no interest loans for small businesses, only "low" interest loans which don't help recoup losses. My mechanic, who has $16k in expenses per month, may have to default on his business, lay-off his brother-in-law, and find a salary job because his landlord is an ahole who will demand all of the back rent when the 90 days is up. Maybe business interruption/income insurance, which often requires buying flood insurance, is worth it if actually covers force majeure. Edit: It turns out the vast majority of BII policies do not cover pandemics, so almost all small businesses and landlords in the US are fucked. This will absolutely require federal bailout action or there will be revolution-level seething anger ready to explode. https://www.bisnow.com/dallas-ft-worth/news/commercial-real-estate/from-business-interruption-coverage-to-force-majeure-clauses-covid-19-is-becoming-a-legal-land-mine-for-tenants-and-landlords-103526 https://www.bisnow.com/dallas-ft-worth/news/commercial-real-...