4 ms·

They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they p

They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.

downrightmike 4y ago
Yup, BlackRock specializes in closing failed banks. That's why the US gov't gave them all the bad banks from 2007 and also why they are a huge company. They'll only get larger at this point.
- arcticbull 4y ago
  Do you have a citation for this? My understanding is small community banks sold by the FDIC to larger banks or their depositors paid out directly. [0] Larger banks - WaMu for instance - were put under the purview of the Office of Thrift Supervision (OTS) and their customers assets and certain liabilities sold. In WaMu's case it was to JPMorgan. [1] [0] https://www.fdic.gov/consumers/banking/facts/payment.html https://www.fdic.gov/consumers/banking/facts/payment.html [1] https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision
  - downrightmike 4y ago
    https://thestrategystory.com/2020/09/18/blackrock-shadow-bank/ https://thestrategystory.com/2020/09/18/blackrock-shadow-ban...
luckylion 4y ago
Maybe you can explain it to me like I'm five. I've been occasionally watching the Turkish Lira this past year. The rates against the USD are still sinking. Against the EUR it's pretty stable. Yet allegedly they have something like 80-150% inflation in Turkey, while the EUR-zone has 10%. How does this work, why isn't the Lira becoming "worthless" with that amount of inflation?
- incrudible 4y ago
  One year ago, the Lira was worth twice as much in US dollars, which is in line with a 100% annual inflation rate.
- dragonwriter 4y ago
  Inflation in a particular country is about prices of consumer good innthqt country (usually measured in the official local currency.) Foreign exchange is about trading different currencies for each other. Because of shipping, transaction costs, import/export restrictions, and other deviations from the abstract ideal of a single frictionless global market, there is no necessary fixed relationship between consumer prices in Country X, the X:Y currency exchange rate, and consumer prices in Country Y.
- smegsicle 4y ago
  the expectation is that if people assume that kind of inflation will continue, they would convert their wealth to another currency/form of wealth, and vendors would also prefer these other currencies, which would drive the inflation even further, right? so i also wonder what they're doing to curb the spiral
  - miohtama 4y ago
    Here is a BBC article what has been done in the past to stop hyperinflation: https://www.bbc.com/news/business-45523636 https://www.bbc.com/news/business-45523636 The problem is that Erdogan is not doing any of this. His controversial politics are taking Turkey further down in the pit. Because Turkey’s political system is somehow broken, it is not clear if any election can replace Erdogan.
    - revolutukr 4y ago
- armchairhacker 4y ago
  ELI5 is that governments can produce money out of thin air (paper), but can’t produce resources. So when they produce more money, each “dollar” of their currency becomes worth less - inflation. When governments produce a lot of money, their dollar becomes substantially less. This causes them to need to produce even more money (because money which used to be enough is no longer), creating a cycle and a desperate attempt to produce something out of nothing, where eventually what used to cost one dollar literally costs trillions of dollars - hyperinflation. Banks manage a lot of money, so if they go bankrupt the government needs to bail them out by printing a lot of money, causing massive inflation. And if the government needs to pay off foreign creditors (they do), and tries to address the resulting poverty caused by the inflation, it leads to printing more money and hyperinflation. EDIT: Relating to the Turkish Lira and why that isn’t hyperinflating: I don’t know where exactly the line is where “high inflation” triggers the cycle and becomes hyperinflation. I suppose they still have resources, so their currency still has some worth. Just, either they don’t have as many resources as before, or the government is printing money which it spends on itself in order to drain money from the average person without explicit taxation.
unyttigfjelltol 4y ago
In the context of a past generation of government sponsored entities, the answer was 'yes', they could go bankrupt but the political branches will bail them out. The issue here is that the political branches are in the middle of being bailed out themselves by the central banks, and it's been going on for a decade or two, so conceptually there is a serious problem with politicians bailing the bailer. The fact that headlines like this are being written, regardless of the answer, should put everyone on alert for the possibility the can no longer can be kicked further down the road the way it has until now.
- Ma8ee 4y ago
  Which political branches are bailed out by the central banks, and how?
  - coryrc 4y ago
    The US Fed "owns" 8 and a half Trillion dollars of US debt, money that was spent by Congress (voters like that) without raising taxes (voters don't like that). (In addition to treasuries, the money is spent subsidizing home loan interest rates below market).
- miohtama 4y ago
  When the can meets the end of the road the ways out include - Hyperinflation - Great reset Likely effects may include - Revolution - War - Famine Here is a nice BBC article how hyperinflation has been solved in the past https://www.bbc.com/news/business-45523636 https://www.bbc.com/news/business-45523636 Usually there is a period, or permanent, “dollarisation” of the economy https://en.wikipedia.org/wiki/Hyperinflation#Aftermath https://en.wikipedia.org/wiki/Hyperinflation#Aftermath but not sure if this is an option for the something of the scale of the UK or the EU.
  - markdown 4y ago
    What's "great reset"? Is that economics jargon?
rr888 4y ago
There is literally one definition of bankrupt, and hyper inflation has nothing to do with it. Plus, in general hyper inflation means people in debt get relief, its the lenders who lose the purchasing power of the money they lent.
- dragonwriter 4y ago
  > There is literally one definition of bankrupt There are at least two, the legal definition of “under administration under bankruptcy laws“, and the less formal but still common “insolvent”. With a representational commodity currency (e.g., silver certificates) rather than fiat currency, insolvency (the inability of the issuer to redeem outstanding currency at face value) is at least reasonably connected to the risk of hyperinflation. OTOH, neither definition even applies to fiat currency issuers, who literally cannot be insolvent in their own currency, and usually aren’t subject to bankruptcy law.
  - thaumasiotes 4y ago
    > OTOH, neither definition even applies to fiat currency issuers, who literally cannot be insolvent in their own currency, and usually aren’t subject to bankruptcy law. They can find that they are unable to use their own currency to do anything. This is practically equivalent to being insolvent, even if you give it a different name.
arcticbull 4y ago
> When they go bankrupt economists like to use the term "Hyper Inflation". That's not what hyperinflation means. Hyperinflation is not the same thing as inflation, it's not just a monetary phenomenon. It happens when a population rejects a currency. It has historically always involved at least one of: losing a war, regime change or foreign-denominated debt - some kind of exogenous event. [1] Hyperinflation is the collapse of an economic system in which one of the symptoms is dramatic decrease in purchasing power. [1] https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/ https://www.pragcap.com/hyperinflation-its-more-than-just-a-...

They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.

downrightmike 4y ago

Yup, BlackRock specializes in closing failed banks. That's why the US gov't gave them all the bad banks from 2007 and also why they are a huge company. They'll only get larger at this point.

arcticbull 4y ago
Do you have a citation for this? My understanding is small community banks sold by the FDIC to larger banks or their depositors paid out directly. [0] Larger banks - WaMu for instance - were put under the purview of the Office of Thrift Supervision (OTS) and their customers assets and certain liabilities sold. In WaMu's case it was to JPMorgan. [1] [0] https://www.fdic.gov/consumers/banking/facts/payment.html https://www.fdic.gov/consumers/banking/facts/payment.html [1] https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision https://en.wikipedia.org/wiki/Office_of_Thrift_Supervision
- downrightmike 4y ago
  https://thestrategystory.com/2020/09/18/blackrock-shadow-bank/ https://thestrategystory.com/2020/09/18/blackrock-shadow-ban...

luckylion 4y ago

Maybe you can explain it to me like I'm five. I've been occasionally watching the Turkish Lira this past year. The rates against the USD are still sinking. Against the EUR it's pretty stable. Yet allegedly they have something like 80-150% inflation in Turkey, while the EUR-zone has 10%. How does this work, why isn't the Lira becoming "worthless" with that amount of inflation?

incrudible 4y ago
One year ago, the Lira was worth twice as much in US dollars, which is in line with a 100% annual inflation rate.
dragonwriter 4y ago
Inflation in a particular country is about prices of consumer good innthqt country (usually measured in the official local currency.) Foreign exchange is about trading different currencies for each other. Because of shipping, transaction costs, import/export restrictions, and other deviations from the abstract ideal of a single frictionless global market, there is no necessary fixed relationship between consumer prices in Country X, the X:Y currency exchange rate, and consumer prices in Country Y.
smegsicle 4y ago
the expectation is that if people assume that kind of inflation will continue, they would convert their wealth to another currency/form of wealth, and vendors would also prefer these other currencies, which would drive the inflation even further, right? so i also wonder what they're doing to curb the spiral
- miohtama 4y ago
  Here is a BBC article what has been done in the past to stop hyperinflation: https://www.bbc.com/news/business-45523636 https://www.bbc.com/news/business-45523636 The problem is that Erdogan is not doing any of this. His controversial politics are taking Turkey further down in the pit. Because Turkey’s political system is somehow broken, it is not clear if any election can replace Erdogan.
  - revolutukr 4y ago
armchairhacker 4y ago
ELI5 is that governments can produce money out of thin air (paper), but can’t produce resources. So when they produce more money, each “dollar” of their currency becomes worth less - inflation. When governments produce a lot of money, their dollar becomes substantially less. This causes them to need to produce even more money (because money which used to be enough is no longer), creating a cycle and a desperate attempt to produce something out of nothing, where eventually what used to cost one dollar literally costs trillions of dollars - hyperinflation. Banks manage a lot of money, so if they go bankrupt the government needs to bail them out by printing a lot of money, causing massive inflation. And if the government needs to pay off foreign creditors (they do), and tries to address the resulting poverty caused by the inflation, it leads to printing more money and hyperinflation. EDIT: Relating to the Turkish Lira and why that isn’t hyperinflating: I don’t know where exactly the line is where “high inflation” triggers the cycle and becomes hyperinflation. I suppose they still have resources, so their currency still has some worth. Just, either they don’t have as many resources as before, or the government is printing money which it spends on itself in order to drain money from the average person without explicit taxation.

unyttigfjelltol 4y ago

In the context of a past generation of government sponsored entities, the answer was 'yes', they could go bankrupt but the political branches will bail them out. The issue here is that the political branches are in the middle of being bailed out themselves by the central banks, and it's been going on for a decade or two, so conceptually there is a serious problem with politicians bailing the bailer. The fact that headlines like this are being written, regardless of the answer, should put everyone on alert for the possibility the can no longer can be kicked further down the road the way it has until now.

Ma8ee 4y ago
Which political branches are bailed out by the central banks, and how?
- coryrc 4y ago
  The US Fed "owns" 8 and a half Trillion dollars of US debt, money that was spent by Congress (voters like that) without raising taxes (voters don't like that). (In addition to treasuries, the money is spent subsidizing home loan interest rates below market).
miohtama 4y ago
When the can meets the end of the road the ways out include - Hyperinflation - Great reset Likely effects may include - Revolution - War - Famine Here is a nice BBC article how hyperinflation has been solved in the past https://www.bbc.com/news/business-45523636 https://www.bbc.com/news/business-45523636 Usually there is a period, or permanent, “dollarisation” of the economy https://en.wikipedia.org/wiki/Hyperinflation#Aftermath https://en.wikipedia.org/wiki/Hyperinflation#Aftermath but not sure if this is an option for the something of the scale of the UK or the EU.
- markdown 4y ago
  What's "great reset"? Is that economics jargon?

rr888 4y ago

There is literally one definition of bankrupt, and hyper inflation has nothing to do with it. Plus, in general hyper inflation means people in debt get relief, its the lenders who lose the purchasing power of the money they lent.

dragonwriter 4y ago
> There is literally one definition of bankrupt There are at least two, the legal definition of “under administration under bankruptcy laws“, and the less formal but still common “insolvent”. With a representational commodity currency (e.g., silver certificates) rather than fiat currency, insolvency (the inability of the issuer to redeem outstanding currency at face value) is at least reasonably connected to the risk of hyperinflation. OTOH, neither definition even applies to fiat currency issuers, who literally cannot be insolvent in their own currency, and usually aren’t subject to bankruptcy law.
- thaumasiotes 4y ago
  > OTOH, neither definition even applies to fiat currency issuers, who literally cannot be insolvent in their own currency, and usually aren’t subject to bankruptcy law. They can find that they are unable to use their own currency to do anything. This is practically equivalent to being insolvent, even if you give it a different name.

arcticbull 4y ago

> When they go bankrupt economists like to use the term "Hyper Inflation". That's not what hyperinflation means. Hyperinflation is not the same thing as inflation, it's not just a monetary phenomenon. It happens when a population rejects a currency. It has historically always involved at least one of: losing a war, regime change or foreign-denominated debt - some kind of exogenous event. [1] Hyperinflation is the collapse of an economic system in which one of the symptoms is dramatic decrease in purchasing power. [1] https://www.pragcap.com/hyperinflation-its-more-than-just-a-monetary-phenomenon/ https://www.pragcap.com/hyperinflation-its-more-than-just-a-...