8 ms·

It seems people don't realize how much $6T is and the effects of that kind of money being injected into the economy. Consider the 2008 housing bubble and finan

• _curious_ 7y ago
  Having lived through, intimately observed, and now in reflecting on the 2008 situation - Id's say your assessment is fair. That same effect/outcome multiplied this time around, seems to be inline. While the recovery may miraculously end up more evenly distributed (with Sanders out I don't see enough pressure/leverage) under current administration and potentially four more years, nothing is off limits and this one may in fact become much more concentrated than 2008.
  • trhway 7y ago
    we're about to witness another, and probably the greatest to date, round of wealth redistribution. There is going to be a lot of distressed assets at the bottom while the well connected top will have unlimited (my mind needs some time to make distinction between unlimited and $6T :) access to money. From the heights of the Pareto of 5-10 years down the road the today's Pareto will look indistinguishable from a uniform distribution.
  • malandrew 7y ago
    I would wager that most if not all downturns lead to greater concentration of wealth, since they invariably favor those that cover their risks with tail hedges and maintain a cash reserve for these market events. People who do this are far less common than those that don't and ownership will inevitably flow most dramatically to those that are prepared in a downtown. The converse, where everyone is prepared, at best would lead to maintaining the status quo, since everyone is ready and willing to pick up the few assets that are forced into a firesale if any.
• alexilliamson 7y ago
  It's amazing how the unemployment rate gets treated as gospel in the media. I never see the actual jobless rate reported anywhere. Why is that? The incentive for politicians to prop themselves up with the unemployment rate is clear. But why does the media never push back? Does "jobless" data - that is ACTUAL unemployment- not exist?
  • mperham 7y ago
    There are actually six different "unemployment" metrics, each with different criteria about who counts. https://www.bls.gov/lau/stalt.htm https://www.bls.gov/lau/stalt.htm
  • xyzzyz 7y ago
    Of course the data exists. See eg. https://fred.stlouisfed.org/series/LREM25TTUSM156S https://fred.stlouisfed.org/series/LREM25TTUSM156S The issue people are talking about unemployment rate and not the joblessness rate is that people care about ability to get a job if you want one. The joblessness rate includes people who are looking for job but can’t get any, but also people who are supported by their spouses, retirees, and people living on government benefits who are not looking for job, because they are disabled, too busy with childcare, or care for other people needing it, or ultimately too lazy and having too little self-respect to stop living on charity of others. This wide aggregation makes it very difficult to understand what actually causes changes in it: are more people jobless because of expansion of disability benefits? Or maybe there was a surge of people retiring early? You need to look at other indicators to understand it. For example, good amount of growth of employment rate in recent years is a result of many people, who previously drew disability benefits to compensate them for their inability to work, actually going to work, once the work became better option than government check. For this reason, unemployment rate is a better metric to look at, because it tells you something more useful and has better signal to noise ratio.
    • ska 7y ago
      > "For example, good amount of growth of employment rate in recent years is a result of many people, who previously drew disability benefits to compensate them for their inability to work, actually going to work, once the work became better option than government check." I've heard this before but have not seen good data on it, do you have cites?
• TrainedMonkey 7y ago
  I've been bombarded by a popular "stimulus for the rich" from everywhere. Please describe what would happen if stimulus did not pass and there was no assistance from the government.
  • downerending 7y ago
    As analogy, drain all of the oil from your car's engine. Start it, put it in neutral, and floor the accelerator until morale improves.
    • deleted 7y ago
      [deleted]
• nostromo 7y ago
  $6T has been created, but an unknown $X trillion has also been destroyed by a sharp and sudden decrease in economic activity, including a contraction of credit. So... who knows. Maybe it's enough, maybe it's too much, or maybe it's too little -- it's too early to say.
  • IAmEveryone 7y ago
    What’s been destroyed is not some amount of $, but of productivity as measured in $.
  • ttul 7y ago
    Thank you for pointing this out. Secondly, just what the hell is the central bank supposed to do? Had they not intervened hard in debt markets, we would have seen bank runs and mass chaos in financial markets, making things we take for granted (such as paying for stuff at the grocery store) totally fail over night. I am wayyyy less worried about the magnitude of the Fed’s intervention than I am about what might have happened otherwise.
    • malandrew 7y ago
      Lately, I've been amazed at the number of people that have been arguing in favor of allowing "otherwise" to happen.
      • WanderPanda 7y ago
        Everyone is afraid of „otherwise“ without anyone having witnessed it before. My guess is, we are trading short / mid-term stability for decreased long-term efficiency / productivity
        • wait_a_minute 7y ago
          Which in my opinion is acceptable, because it's the short-term chaos that is the most likely to bubble out of control and turn into a long-term chaos. Imagine the chaos that would besiege the world if there was a risk of bank runs and people not even being able to pay for food anymore. We're only three to six missed meals away from absolute anarchy and violence in the streets.
• alistairSH 7y ago
  This was done through cooking the unemployment books ... That's patently false. BLS reports 6 different "unemployment rates" (1). The media has historically reported U-3. You can argue that U-6 is more meaningful in light of recent economic trends. But, no books have been cooked. 1 - https://www.bls.gov/news.release/empsit.t15.htm https://www.bls.gov/news.release/empsit.t15.htm
  • harimau777 7y ago
    For sake of argument: If U-3 is the one that everyone pays attention to does it really matter that much if the others exist?
    • vkou 7y ago
      To respond to your argument - it may not matter that the others exist, but allegations that the books have been cooked are unfounded. The books are there, plain as day, and there are no shenanigans with them.
      • adamsea 7y ago
        There's lies, damned lies, and statistics. Presenting merely data or information is insufficient. The responsibility is to present useful, contextualized information to the public - knowledge.
        • vkou 7y ago
          I'd like my government census/statistics agencies to present the raw data, instead of editorializing it. There's plenty of pundits and elected officials who are quite happy to provide the latter service.
          • lotsofpulp 7y ago
            This is may be the first time I’ve seen downvotes for a proponent of transparency in government. Government provides a nice website (BLS) with explanations and empowers its citizens to analyze it, and the government is still doing something wrong.
• BubRoss 7y ago
  6 trillion USD is about $30,000 per US tax payer. People should think about where that is going as they get their $1000 checks in the mail.
  • deleted 7y ago
    [deleted]
  • malandrew 7y ago
    The majority of that $30,000 is loans that will have to be paid back. Comparing their $1200 checks with no strings attached to other money in the stimulus being lent is apples and oranges.
    • BubRoss 7y ago
      To who and at what interest rate?
      • Jommi 7y ago
        You can Google this stuff man. It's quite complicated.
        • BubRoss 7y ago
          The point is that interest rate matters. Anything below what you can get from low risk investments is essentially free money.
          • Jommi 7y ago
            Well that's not exactly how it works. Do you want to discuss this more in depth?
• PKop 7y ago
  >don't realize how much $6T is This would be more relevant is we tallied how much actual credit "money" is getting into the hands of average people. Divide 6 trillion per every person and if that was the extent of the calculation and legislation, we'd be better off. But it's not, the same financial beneficiaries in good times are the ones getting the bailout money in bad times. >being injected into the economy Except the crux of the problem is this money, arguably, doesn't "get into the economy", certainly not in any uniform sense. Big chunks go to bail out large corporate stockholders, bonds, financial assets. Some are funneled through the banks via loans that are hard to come by for some. What is sorta kinda direct payments to people amount to 1 time events, and too small at that. And given no commerce & fixed obligations for many small businesses, what good does debt & "loans" do for them? The biggest lie in all of this is that the money is actually getting to people that need it. It's not, yet.. and calling it helicopter money doesn't change the fact that many aren't anywhere near the helicopters to get it.
  • snovv_crash 7y ago
    Of course, if it was actually distributed to people who needed it to spend, it would cause massive inflation. This way most of the money never gets spent, and demand never goes up. Not that it's a good thing, just saying.
    • lkrubner 7y ago
      it would cause massive inflation You seem to be saying that excess money would lead to demand-driven inflation. That is clearly impossible at a time when 16 million people lost their jobs in 3 weeks, and the downturn is global, so there is no growth area, somewhere else in the world, to use up resources. One could make an argument that the withdrawal of labor from the market (last month, this month, and for several months) is a supply-side shock (slightly similar to the OPEC oil crisis in 1973) and therefore can generate some inflation via the supply-side losses. But that kind of supply-side shock is likely to be highly transient, considering how much labor is eager to get back to work, as soon as they are allowed to do so.
    • TheOtherHobbes 7y ago
• dcolkitt 7y ago
  I'd caution away from comparing the current recession to 2008. There the problem was truly unsustainable economic activity in the runup expansionary phase. Consumer spending was powered by sub-prime mortgages that let people use hyperbolic housing prices as an ATM. Investment was juiced by an unsustainable expansion in residential construction. The financial markets created a flood of illusory wealth based off credit models that were never tested in production. Even after the initial financial crisis subsided, there was no way to turn the clock back to 2007. You couldn't just go back to AAA-rated CDOs built on NINJA loans to let people speculate on McMansions. This crisis is very different. Quarantine may last a long time, but eventually it will be over. There's no ostensible reason we can't go back to status quo ante bellum. There was nothing grossly unsustainable about the way the economy was operating in 2019. And once the virus threat is gone, we can just go back to the same economic patterns we were engaged in before the crisis.
  • icedchai 7y ago
    Even after quarantine is over, it will be a slow ramp for many sectors. Small (hopefully very small) outbreaks will continue to occur, so people will be afraid. Restaurants will be less than a third full. Nobody will want to go to the movies. Crowds will be avoided.
    • dcolkitt 7y ago
      I doubt people alter their behavior for long. Certainly not more than 6 months after the crest is over. The 1957 flu pandemic killed 100,000 Americans, which adjusted for population is where current models estimate Covid will land. And it had virtually zero lasting impact on culture of behavior.
      • elliekelly 7y ago
        Were people in 1957 forced to alter their behavior so significantly? I’ve been spending $5+/day at starbucks every single day for the last 15 years. I’d often go morning and afternoon. Lately I’ve had to make my coffee at home. The first week or so sucked. The baristas did a much better job. But I had to make it work so I’d tweak things here and there until I got it right. Now I can pretty much make the same drink I was buying. It’s much faster and much cheaper. I don’t see myself going back to starbucks nearly as frequently as I used to when this is over.
• metacritic12 7y ago
  > ... it will be spread to an even smaller group of people... Last time, the package was given to mostly big banks and GM. This time most qualified Americans are getting a check and small businesses are getting sizable support as well. In what way is the base of support smaller than in 2008?
• 3xblah 7y ago
  Whatever the truth may be it is certainly interesting how 20 million people can lose their jobs simply as a result of their employer reducing or stopping its operations for a few weeks. Regardless of the previous unemployement figures it raises the question of how secure were these "jobs". Is job security worth measuring.
  • gniv 7y ago
    For certain jobs it's better to fire the workers so they can get unemployment benefits, rather than keep them without pay.
    • cjamesd 7y ago
      Fascinating. Do you suppose there are businesses that actually could keep their employees but are just throwing in the towel because their human capital will be easy to obtain after people can go back to work?
      • Jommi 7y ago
        Oh definitely, and especially now with the unemployment benefits cap being nearly 4kUSD/month the decision is even easier.
  • refurb 7y ago
    Why is it surprising? The government literally said “stop what you’re doing” to 80% of the businesses out there. I’m honestly surprised it’s only 20M people unemployed.
  • EpicEng 7y ago
    It's "surprising" that people lose jobs when businesses stop functioning? I can't think of any interpretation of that sentence which makes any sense at all.
• Aeolun 7y ago
  Roughly ~20,000 per US citizen. It’s almost their yearly income for some.
• lkrubner 7y ago
  "it will be spread to an even smaller group of people" I'll point out, the Democrats are fighting hard to ensure that the rescue money is spread to a very broad section of the public. With enough public pressure, Congress can be pushed to ensure that there is more rescue money made available, and also that the money should be distributed to the broadest possible spectrum of the public. We can look at the mistakes made during 2008 and promise ourselves that this time we will get things right. We all have the moral responsibility to fight and ensure that our government helps everyone through this crisis. Meanwhile, the Fed has an obligation to make sure that there is no absolute breakdown of the credit markets. The Fed felt it necessary to inject some money into specific markets to ensure they continue to function (the repo market, in particular). But to whatever extent that money might help a narrow section of society, Congress can offset any unfair benefits granted to participants in those markets, by ensuring that money is also given to other sections of society.
  • thoughtstheseus 7y ago
    The fed has stepped into the repo market, commercial paper, money market, primary corporate bond, secondary corporate bond, consumer ABS, they're backing payroll lending through banks, direct lending to sub 10,000 employee companies through banks, municipal debt, treasury market, MBS market, expanded swap lines and foreign bank repos to provide dollars internationally all to ensure financial markets function. They're busy.
• sytelus 7y ago
  World GDP is $80T. An important fact: USD is world reserve currency. So no, I don't think that injecting, $6T is going to be super big deal. Just like in 2008, this additional money gets dispersed in to world economy or in other words the burden of US action gets transferred to other countries. This is precisely the reason why $2T injection has almost no effect on inflation within US but if any other country had dared to inject same proportion, it would have faced about 10% inflation making most of the imports pretty expensive for them.
  • fg6hr 7y ago
    This is the good old trick often done by startups: founders & investors create and generously give themselves a lot of shares, diluting the share of rank-and-file employees to zero. Here's some deep analysis from a armchair economist. $6T goes to the US "board members": their share of the company (I mean, the planet's resources) grows, but the share of rank-and-file American employees (I mean citizens), probably shrinks. My guess: $5T will be hoarded by the US elites, $1T will trickle down to citizens, the world's GDP will shrink from $80T to $50T and the US's GDP will shrink from $20T to $15T. If these hand wavy assumptions are correct, the US citizens' share will grow by 5%, from 20/80=25% to 15/50=30%, while the elites will get an extra 5/50=10% share of everything. Everybody outside the 12 mile zone around the US land is going to lose.
• guscost 7y ago
  $6 Trillion is about $20,000 per person.
  • fg6hr 7y ago
    With skillful division and distribution techniques, it's only $5,000 per person.
• empath75 7y ago
  I don’t understand the theory for why injecting money into the economy is supposed to work. They’ve forcibly shut it down. The point of injecting money is to stimulate the production of goods and services. If you can’t make goods and services all it’s going to do is generate a lot of inflation.
  • fg6hr 7y ago
    Here's another observation from an armchair economist. Money flow upwards by forces of debt and contracts. If we short circuit the very top with the very bottom, money will start flowing inside this loop. If we don't form this loop, the powerful vacuum cleaner at the top will break this mechanism. In other words, the amount of money in the system doesn't matter much. What matters is that money form a steady flow pattern.
    • bo1024 7y ago
      This sounds reasonable. Right now people need money mostly for rent and mortgages. So the solution is to pay people money so they can afford rent, I.e. loop money right back up to the banks and capital holders.