4 ms·

What makes this worse is that it isn't even necessary. Allowing companies (even ones that are large and considered important like airlines) to "fail" just mean

What makes this worse is that it isn't even necessary. Allowing companies (even ones that are large and considered important like airlines) to "fail" just means that they'd have to go through bankruptcy proceedings and that the owners would lose some money - it doesn't mean that their operations will shutter, or that the planes will suddenly disappear, or that everyone in those companies will suddenly be out of work. There are many examples of how this works - a recent one being PG&E in California, who filed for bankruptcy last year. Our electricity is still running and the linemen are still working.

naveen99 7y ago
It might overwhelm the legal system. Then people will propose flattening the curve on bankrupcies. Maybe it’ll encourage the legal system to go all online. Somehow I doubt the courts will be powered by DocuSign faster than corona kills off the unadapted. Also, beneficiaries of bankruptcies are the same billionaires and hedge funds being bailed out now. Distressed private equity funds will be salivating over all the fire sales.
- Red_Leaves_Flyy 7y ago
  Part of the reason why private equity loves bankruptcy is because they're so successful at divesting all the risk and costs of acquiring toxic assets. Change these dynamics by making the employees whole first.
deleted 7y ago
[deleted]
j-walker 7y ago
Isn't the counter-point to this the stock price of PG&E? Look at its performance over the last 5 years, it's down to ~$11 from ~$50. If the the whole market looked like this in the next year, people's 401k accounts would probably be demolished.
- Guest42 7y ago
  Investing is inherently risky and prices ought to reflect a companies viability and performance. 401ks give a variety of options to reduce risk including money markets, bonds, and stocks in different sectors with diversification options
- paulhodge 7y ago
  Just optimizing for 401ks is going about it wrong. $500b from the stimulus went to corporations, which indirectly boosts stock prices, which indirectly boosts 401ks. (unless the market still crashes). It's essentially trickle-down economics. If we wanted to improve individual's retirement savings then it would more effective to just divert more of that $500b to social security.
  - bitcoinbutter 7y ago
    The stimulus packages seem more focused on ensuring that asset prices remain inflated. The idea that the average person will see any major impact from the S&P500 dropping to 2000 points is laughable. How many people do you know that truly had their lives ruined by the 2008 crash? Allowing the markets to find a bottom and recover creates opportunities for social mobility. The people who don't want asset prices to drop are rich people. They are the ones who own the assets.
- mandelbrotwurst 7y ago
  It isn't going to be every company. It's better in the long run for the health of the market if companies' financial success correlates with their asset prices - it isn't good for investor confidence to add in an X factor of whether companies are going to have the political capital needed to get bailed out.
- ericd 7y ago
  There's a reason 100% allocation to equities is generally not recommended for retirement accounts...
downerending 7y ago
Not sure that's realistic. When companies go bankrupt, things don't just skip merrily along as if nothing is happening. Business partners start getting a lot more worried about getting paid, employees start thinking the same and moving on if they can, etc. It's like stepping in molasses--everything gets slower. Perhaps they should just be allowed to fail, but it's far from risk-free, especially when we're diving into a deep Depression the likes of which none of us have ever seen.
- mandelbrotwurst 7y ago
  I agree with you (to an extent) and was admittedly glossing over the costs - I'm just not convinced that market manipulation is going to be an effective way to prevent depressions. I'm not even convinced that anyone pulling these strings doesn't know this. Some of the costs that you describe, like folks being less willing to invest in and work on things that have proven themselves to be unprofitable, may actually be benefits.
boublepop 7y ago
It might be good for the overall market in the long term. But it’s not good for the stock investments of the politicians making the decisions.

naveen99 7y ago

It might overwhelm the legal system. Then people will propose flattening the curve on bankrupcies. Maybe it’ll encourage the legal system to go all online. Somehow I doubt the courts will be powered by DocuSign faster than corona kills off the unadapted. Also, beneficiaries of bankruptcies are the same billionaires and hedge funds being bailed out now. Distressed private equity funds will be salivating over all the fire sales.

Red_Leaves_Flyy 7y ago
Part of the reason why private equity loves bankruptcy is because they're so successful at divesting all the risk and costs of acquiring toxic assets. Change these dynamics by making the employees whole first.

deleted 7y ago

[deleted]

j-walker 7y ago

Isn't the counter-point to this the stock price of PG&E? Look at its performance over the last 5 years, it's down to ~$11 from ~$50. If the the whole market looked like this in the next year, people's 401k accounts would probably be demolished.

Guest42 7y ago
Investing is inherently risky and prices ought to reflect a companies viability and performance. 401ks give a variety of options to reduce risk including money markets, bonds, and stocks in different sectors with diversification options
paulhodge 7y ago
Just optimizing for 401ks is going about it wrong. $500b from the stimulus went to corporations, which indirectly boosts stock prices, which indirectly boosts 401ks. (unless the market still crashes). It's essentially trickle-down economics. If we wanted to improve individual's retirement savings then it would more effective to just divert more of that $500b to social security.
- bitcoinbutter 7y ago
  The stimulus packages seem more focused on ensuring that asset prices remain inflated. The idea that the average person will see any major impact from the S&P500 dropping to 2000 points is laughable. How many people do you know that truly had their lives ruined by the 2008 crash? Allowing the markets to find a bottom and recover creates opportunities for social mobility. The people who don't want asset prices to drop are rich people. They are the ones who own the assets.
mandelbrotwurst 7y ago
It isn't going to be every company. It's better in the long run for the health of the market if companies' financial success correlates with their asset prices - it isn't good for investor confidence to add in an X factor of whether companies are going to have the political capital needed to get bailed out.
ericd 7y ago
There's a reason 100% allocation to equities is generally not recommended for retirement accounts...

downerending 7y ago

Not sure that's realistic. When companies go bankrupt, things don't just skip merrily along as if nothing is happening. Business partners start getting a lot more worried about getting paid, employees start thinking the same and moving on if they can, etc. It's like stepping in molasses--everything gets slower. Perhaps they should just be allowed to fail, but it's far from risk-free, especially when we're diving into a deep Depression the likes of which none of us have ever seen.

mandelbrotwurst 7y ago
I agree with you (to an extent) and was admittedly glossing over the costs - I'm just not convinced that market manipulation is going to be an effective way to prevent depressions. I'm not even convinced that anyone pulling these strings doesn't know this. Some of the costs that you describe, like folks being less willing to invest in and work on things that have proven themselves to be unprofitable, may actually be benefits.

boublepop 7y ago

It might be good for the overall market in the long term. But it’s not good for the stock investments of the politicians making the decisions.