26 ms·

A sleuth’s guide to the coming wave of corporate fraud

153 points by drooby 4y ago

metadat 4y ago
https://archive.today/uk2L8 https://archive.today/uk2L8
nostromo 4y ago
I hope I don’t regret saying this, but so far, this recession / slowdown has been very needed and will help the US economy grow in more sustainable ways going forward. And it’s happened without too much pain in the broader economy. We way overdid Covid stimulus, which helped inflate bubbles like you saw with crypto, pouring billions into the hands of criminal organizations like FTX. We had cheap money flowing for too long with near-zero interest rates, propping up many zombie enterprises that shouldn’t have been propped up to begin with. Salary growth is great, but we all have seen a proliferation of bullshit jobs with ridiculous salaries in the past two years. All of these trends have started to correct, and it’ll be better for the long term. I just hope nothing systemically important breaks before we’re through the worst of it.
- throwawaaarrgh 4y ago
  That kind of just sounds like regurgitated HN stories that sound plausible to a HN reader without evidence or a narrative (but I could be wrong)
- Retric 4y ago
  People blame stimulus spending, but the reduction in real economic output from COVID also has knock on effects. Expensive condos etc derive most of their value as a symptom of a much larger and extremely productive economic system which got disrupted. Suddenly people start reevaluating basic assumptions and markets adjust in ways more complex than a simple boom bust cycle.
  - moistly 4y ago
    I do not believe our economy’s output exceeds that of 2019, pre-Covid. We still have supply chain issues up the wazoo. We still have disease taking out employees en masse, and for weeks at a time. Potential customers are generally in worsening financial condition. I simply can not believe that conditions are such, that the stock market should have a higher valuation than it did in 2019.
    - Retric 4y ago
      A dollar today is worth ~15% less than a dollar from 2019 so a stock that’s nominally worth the same today would actually have taken a significant hit. Which really should be part of these comparisons.
      - bradleyjg 4y ago
        Which was at the tail end of an 11 year bull run.
      - animitronix 4y ago
        Yet the dollar is absolutely crushing other currencies. Funny how that works...
        rank0 4y ago
        The other currencies are weakening faster than the dollar. You care about what you can actually buy with a currency not just it’s exchange rate.
    - nradov 4y ago
      Which diseases?
    - kortilla 4y ago
      You forgot to adjust for inflation. Take the additional 10-15% haircut off of stock prices and we’re basically right at pre-COVID peaks in the general indexes.
- ericmcer 4y ago
  The economic fallout is correctible, but fixing the loss of faith in the foundation of our economy, that diligent work will be rewarded with comfort and stability, will be harder.
  - sammalloy 4y ago
    > The economic fallout is correctible, but fixing the loss of faith in the foundation of our economy, that diligent work will be rewarded with comfort and stability, will be harder. I think this is an archaic, pre-21st century mindset. Advanced, industrial, technological societies should be able to guarantee comfort and stability for all people regardless of work. In the modern world, we should work because we love or enjoy it, because we want to contribute to society, and because it brings meaning to our lives and the lives of other people. We should not work, on the other hand, to be "rewarded" in a zero-sum game competing with others, to the detriment of the rest of the planet. We really need to change the way we think about this. The most productive workers aren’t people working for a reward, they are those who love their work and are happy with the comfort and stability they already have. It’s 2022 going on 2023. The idea that we should work based on scarcity rather than abundance is completely out of date and no longer supported by the evidence. This is the kind of have and have not mindset that needs to disappear. Nobody should have to work to obtain comfort and stability.
    - lossolo 4y ago
      For this you first need robotic + AI revolution, without this it's impossible. You need to replace significant part of the workforce with robots. Every human needs different resources/products to live, these resources have complicated supply chains in which you have a lot of people that do not enjoy their work but needs resources to keep their family afloat, that's why this products are available on the market. How many ppl like doing working in coal mines? How many like working in factories for 12 hours doing the same thing over and over again? I think what you wrote is a goal for our society but we need minimum of many decades of technological advances to even start really thinking about implementing this. We are not there yet.
    - PixyMisa 4y ago
- dv_dt 4y ago
  I really don’t have any belief that the faults in our economy was due to easy money. Under scarce money or easy money the same class of decision makers are still making poor allocation choices. There are no fundamental changes associated with a recession that would correct that imho.
  - cavisne 4y ago
    The past few years have been great for scammers though https://www.justice.gov/opa/pr/us-attorney-announces-federal-charges-against-47-defendants-250-million-feeding-our-future https://www.justice.gov/opa/pr/us-attorney-announces-federal... There is surely some GDP gain from not ploughing 250m of taxpayers money into lambo's.
    - dv_dt 4y ago
      That’s not what economist means by easy money? That article is referring to a fault that is purely a function of legal and administrative regulation of programs. When economics refers to east money and recessions and interest rates it’s how easy it is for businesses to find investment and loans for expansion.
  - Silverback_VII 4y ago
    I'm not sure about that. I see the economy as a giant engine made out of the flesh of millions of humans. The guy pushing the accelerator or not must truly feel like God hearing the roaring of this giant flesh engine and affecting the fate of so many people.
- nimbius 4y ago
  "and will help the US economy grow in more sustainable ways going forward" how? capitalisms defining hallmark is a ten year cycle of boom/bust. the last solution in 2020 was a bailout and forgiveness for virtually all commercial covid debts. prior to that it was a massive bailout and payout checks to taxpayers along with a scorched earth foreclosure wave. at some point the argument comes across as an alcoholic that repeatedly crashes cars and promises to learn and grow from it. real wages are stagnant, homes are still unaffordable, rent is skyrocketing, healthcare now routinely sells insulin for $200 and everything from energy to food is still rising. ive a tough time believing corporate fraud is a silver lining.
  - hedora 4y ago
    In the US, all of the problems you mentioned (or analogous issues) were solved during the New Deal era, which set the stage for relative economic stability post-WWII. Most of the laws / institutions from that time were eliminated in the last 3-4 decades. Anyway, the solutions are well understood. Any decent US history textbook contains them.
    - kortilla 4y ago
      This is naive. Post WWII was a boom because the US economy basically got to rebuild the world since all of the other industries in other countries were destroyed by war. There was zero global competition and massive demand. Unless you’re suggesting we replicate another world war to wipe out most of the competition, looking to some stupid domestic post war policies won’t do jack shit.
  - WalterBright 4y ago
    > a ten year cycle of boom/bust Free markets are a chaotic system, not a cyclical system. Every attempt at predicting markets based on cycles has failed.
- chinabot 4y ago
  These Bullshit jobs really need to be called out more, everyone in a company knows who they are and they just piss off the real workers who see themselves (rightly) as hard done by especially when they are in their management chain or paid substantially more. Every good HR departments and CEO should earn their money by culling these the moment they are recognized and sanctioning the Manager approving them.
- pjc50 4y ago
  Recession is, in and of itself, the opposite of growth. That's how it's defined. You can make an anti-growth argument, possibly on carbon emissions, but a recession cannot ever be good for growth.
  - MrLeap 4y ago
    If the economy is like a bacterial infection, and a recession is like an antibiotic. As long as you stop it before everyone is dead you'll be left an economy composed of only the most antibiotic resistant companies! I have no idea if that's good!
  - MisterMower 4y ago
    For short term growth, sure. But they’re absolutely necessary for sustainable long term growth. Sometimes new technology improves productivity in an industry, allowing the same amount of work to be done with less labor and resources. Sometimes consumer desires shift and industry has to adapt by reducing the size of their workforce or by cutting costs. Recessions are what you get when the economy reorganizes itself into stronger, more sustainable patterns of specialization and trade. Preventing that adjustment from occurring prevents future growth from happening.
    - deleted 4y ago
      [deleted]
- mschuster91 4y ago
  > We way overdid Covid stimulus, which helped inflate bubbles like you saw with crypto, pouring billions into the hands of criminal organizations like FTX. Crypto was already a problem way before covid came out of a bat cave - the problem is not the stimulus package, these saved a lot of lives, and they got to individual people, not corporations. The actual problem was the expansive monetary policy that virtually all major central banks followed since the 2008ff crisis - well over a decade of injecting absurd amounts of money is what caused the absolute bull run on real estate, stock markets, venture capital backed crap (remember Yo?) and, finally, once there was no other avenue for all that money left, into crypto.
  - lazide 4y ago
    Modern Monetary Theory yo!
- mancerayder 4y ago
  Yeah? Well, I don't know about the regret of it, I can say that not everyone's salary is growing in a way that matches their rent, medical, and general basic expenses. In fact, the national reports on rent growth and housing costs are devastating to the average person from a financial perspective. It is bad in every possible way, and with interest rates up, people without substantial cash can't even qualify to buy. In areas that haven't experienced the housing prices going down yet, there isn't any inventory. I don't think punishing FTX and zombie companies is a good trade-off for the overall effect on the standard of living of the average person. Wealthy and generally smart or connected people saw this coming in late 2021 when there started to be big dips in the market; no, not in the "a broken clock always strikes twice" sort of way, but in the "there's something fundamentally hosed here, let's cash out" sense. Wealth inequality can only get worse from here - it's mostly just separated in terms of who still rents versus who owns and collects rent.
  - lend000 4y ago
    This is incorrect -- wealth inequality only improves during recessions. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134
    - mancerayder 4y ago
      Careful. The graph you linked shows that inequality going up and beyond after each and every recessionary trough. And the %age owned by the 1 percent is higher in that recovery period, than it was before the drop began. Put in another way, that support the assertion that recessionary cycles make the inequality worse. You're just pointing to the acute phase of the recession, when the evidence is in the years immediately after. I think this can be explained because assets can be purchased more cheaply during these periods, leading to a greater share owned to be possible, and thus making the wealth slice of the pie by the 1% to be even more valued.
      - lend000 4y ago
        I think the problem is that every recession on that chart has been "bailed out" in some form by Fed monetary policy, mostly to the benefit of asset holders, and usually far too early or excessively. The increasing overall trend can be attributed to anti-progressive tax brackets (the wealthy pay 20% while the middle class pays 30-45%). But even in an increasing wealth inequality environment, a proper recession should at least decapitalize the stupid among the wealthy and benefit better capital allocators, which is beneficial. Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns.
- joshxyz 4y ago
  just made the gap between the poor and rich wider, good lord.
- bogota 4y ago
  Unless housing corrects none of this matters people are making more and just spending it on rent and other essentials. It’s crazy to me that the house i grew up in and my parents could afford with only my dad working as enlisted in the military now is 650k vs 140k 20 years ago. This rate of growth doesn’t seem sustainable.
  - hackerfromthefu 4y ago
    That house is not in the same context as 20 years ago. Constant growth provides more amenity for the house than previously, and higher competitive desireability. To get an equivalent house you need to go further out to a less developed area with less people competing for the house, and there you will find cheaper houses. I'm not saying it is sustainable or what the values should be etc, just that the past conditions != todays conditions despite it being the same latitude and longitude.
  - addaon 4y ago
    This is an 8% average (nominal) growth rate, and only about 5% over inflation. In the long run this isn't sustainable -- in the medium term we expect any exponential growth to plateau at a cubic, and in the long term quadratic, growth rate -- but while we're in what sure appears to be an exponential growth stage, that 8% number doesn't seem inherently unreasonable.
    - bogota 4y ago
      The 8% growth isn’t unreasonable but if we aren’t matching it over the long term with similar salary growth for a large portion of the population it becomes a problem. Since salary normally only grows at 2% for most people in another 10 years we are in a situation where almost no one can afford a house who isn’t getting help from their parents. The middle class has seemingly vanished and I don’t think that is good for society
      - conductr 4y ago
        My baseless feeling is that the middle class that is present is not keeping up with inflation right now. Even those that bought a house say 10 years ago and got decent 'value'. I think salary growth is happening at the bottom. That's where the labor shortage is huge. People just won't work for $12/hr in my area like they did in 2019. They'd want $18 now. And you have to pay if you own a business that employees this income bracket of employee's. And, they're not happy about pretty much anything. r/antiwork is a place you see a lot of this sentiment. People in the middle. They haven't quite received that 50% raise the so now they're effectively much closer to the bag boy at the grocery store purchasing power. Yes, it's pretty awful for society and just getting started. It is demotivating and my thought is it's probably a contributing factor to why productivity is down.
- mjevans 4y ago
  All except the stimulus (line 2). At least the to the general public kind; very agree with the (line 3) interest rate BS since 2008 that another comment mentioned. About the stimulus to the public; the policy should have been more nuanced and less about propping up failures. It should have been more solidly focused on humanitarian relief and incentivization of services that would be necessary during the pandemic (such as funding premiums, space, and PPE for critical jobs). The funded tests were a good step, but even better would have been blanket sending out a first test kit (of some size) free to every address registered to vote along with a letter that detailed the program and how to order more. The PPP program (relief for businesses, not directly workers), as an example, should have been in conjunction with already existing banks and credit unions (who already have due diligence systems) and about vastly reducing the interest and underwriting a small percentage of the overall firm's total loaned out value to some degree. Worker support should have been two prong, in the form of extended unemployment benefits during the pandemic and also the creation of new jobs fulfilling civic needs during the pandemic.
  - landemva 4y ago
    > The PPP program Rather than the forgiveable loan scheme, I would have implemented as a rebate to employer on say 5% of the payroll tax they remitted to the feds. That would precisely track actual payrolls without the application hurdles.
    - mjevans 4y ago
      Those would have to be tracked, and that also begs for kickbacks or outright hiring/retaining family/beneficiaries. There's probably a better design, but a think tank of experts given a week or two of time to explore them and bake them into a proper response would obviously be far more effective than back of the napkin replies by armchair observers on an Internet forum. Though the wisdom cherry picked from a crowd still seems to do better than government / congress; so maybe they need to be more humble and/or make an agency/think tank for problem solving that becomes legislation.
- 015a 4y ago
  Yeah; the two sectors to take the blunt of the damage to this point is Tech and Crypto, which were among the two most inflated asset classes. That's a pretty good place to start removing excess money from the system. Tech: QQQ is a pretty good index of tech stocks, which has dropped about 30% since 2022's high. Draw-downs from their 2022 peaks: AAPL: $513B. MSFT: $653B. AMZN: $711B. TSLA: $639B. GOOG: $663B. META: $598B. NVDA: $306B. The list goes on, and that doesn't even include the far higher investments lost in derivatives and indexes. Crypto: since the peak this year, we've seen a total draw-down of around $1.24T USD. For comparison: throughout 2020-2022, the M2 supply increased by around $6.3T. This peaked around Feb 2022.
- chiefalchemist 4y ago
  > All of these trends have started to correct, and it’ll be better for the long term. I just hope nothing systemically important breaks before we’re through the worst of it. Better for whom? That's the question. Maybe the imbalance in wealth distribution corrects, or maybe the wealth simply concentrates in still few hands. If I had the money, I'd bet on the latter.
- deleted 4y ago
  [deleted]
- frozenport 4y ago
  Lot of VC money was foreign sovereign wealth funds. Do you feel bad that Saudi Princes supported profligate brogramers via SoftBank?
- snapplebobapple 4y ago
  You missed the biggest effect specific to this community, which is that the raising rivals cost strategy of way overpaying for talent by the big guys seems to be abating. Programmers should expect serious headwinds in their compensation as that goes away as the big guys start valuing current profit over wrecking potential future competitors ability to compete by pricing them out of the programmer labor market. On the bright side, if you choose your startup wisely, this will mint a lot of wealthy programmers as the next big thing is developed and flourishes.
- xtiansimon 4y ago
  > “We way overdid Covid stimulus…” Not sure what you’re referring to specifically, but the PPP was a good program. Most of the money went directly to non-owners/workers. And the amount which owners did receive helped keep those businesses afloat, again benefiting employees with a place of work.
deleted 4y ago
[deleted]
ramesh31 4y ago
Interesting to see this play out in the crypto world in real time. CZ is coming across as the only legit player left in the space. And it seems hard to imagine he'd be putting a spotlight like this on himself if things weren't airtight over there. Looks like Binance will be the winner take all.
- buitreVirtual 4y ago
  I don't think he is chasing the spotlight more than necessary to promote his business. Besides, chasing the spotlight does not imply honesty. Just look at SBF.
- Animats 4y ago
  He doesn't even have a business address.
  - moralestapia 4y ago
    How does he operate though? Where does he send/receive fiat?
    - lazide 4y ago
      Normally, Tether. Another steaming stinking bucket of goo no one wants to look too hard at, for fear it will actually be shit instead of the maple syrup they keep being promised.
    - deleted 4y ago
      [deleted]
- skinnymuch 4y ago
  SBF was in the spotlight. Possibly more than any other crypto person. If applied to CZ, it means he is a fraud too. To think his stuff is airtight makes no sense when there isn’t transparency.
  - bogomipz 4y ago
lifeisstillgood 4y ago
What if we paid auditors by the fraud discovered. That auditors finding fraud and other misdeeds get the highest seniority on any assets left. I mean, there has to be some answer to the problem of an auditor that says "I don't like the way you treat this income stream" and the CEO says "we will never work with you again and I will make sure everyone I golf with never will again."
- ipython 4y ago
  That’s kind of how the SEC handles whistleblower compensation. See https://www.sec.gov/news/press-release/2022-125 https://www.sec.gov/news/press-release/2022-125
- deleted 4y ago
  [deleted]
- joe_the_user 4y ago
  I get a bit suspicious when I hear a scheme that boils down "given a society rotten with marketization schemes enriching a corrupt few, we'll use one more layer of marketization to stop the problem, what could possibly go wrong?" And thinking in more detail, substantial problems seem evident: * You want auditors who check everyone, not just the most likely or most "profitable" targets. * If the activity of a regulator depends on the fraud level, you will have people slacking off in times of little fraud, which will then give rise to times of much fraud. * This would make regulation more adversarial - companies would have an incentive to withhold information from a regulator to the extent a regulator would have an incentive to "spin" things in a profitable direction for them. Despite a strong pro-business ideology prevailing in the US, US regulation is already often more adversarial than in Europe. A US regulator is more oriented to catching wrong doers than to guiding companies into behaving correctly. This is visibly failing in all sort of large and small ways. The proposal would make this worse.
  - boxed 4y ago
    > You want auditors who check everyone, not just the most likely or most "profitable" targets. Do you? Don't you in fact want the auditors to find the most fraud per hour worked? The problem the US has now is that for example IRS audits go after the poor because the rich have too annoying lawyers. This is the absolute worst.
datalopers 4y ago
I'm not sure if this is fraud, or simply how VCs operate, but we're going to see a massive collapse of SaaS startups and their customers in the near future. This is why: 1) Tech valuations over the past ~5 years were based entirely on annual revenue multiples. 25x was the norm, while 50-100x wasn't hard to find. 2) Let's say your VC firm owns 5% of CompanySaaS, which you paid $1M for, and the company is valued at 25x ARR ($800k * 25). 3) Now you invest $100k in CompanyWhatever. As their VC and valued advisor, convince them they should spend $100k/yr utilizing CompanySaaS's products. 4) CompanySaaS is now worth $900k * 25 (probably higher multiple since revenue is growing so fast), or $22.5M, and you just turned $100k into $125k. Rinse and repeat. It's a self-perpetuating bubble, and it's going to come crashing down hard. It's already happened but they've still got enough runway for another 6-24mos.
- lumost 4y ago
  I'd be curious how extensive this is. Presumably the entire ecosystem can't be running on VC... however I'm not sure how much of it is pure VC. Are SaaS firms on average going to see a 10% decline in revenues or a 70% decline? Or a 1% decline?
  - lazide 4y ago
    Definitely not all the revenue/ecosystem, but I'd be surprised if it wasn't at least 25%.
- hedora 4y ago
  This would only be a bubble / ponzi scheme if a significant fraction of B2B customers were currently backed by VC money. That isn't the case. Instead, these deals help bootstrap companies. Late phase investors insist on seeing per-customer revenue breakdowns specifically to avoid the issue you are describing. It is likely that startups that are becoming revenue-dependent in 2022-2023 are in trouble though.
  - lazide 4y ago
    A LOT of startup business comes from other businesses within the same VCs portfolio.
TacticalCoder 4y ago
Coming or actual. Chamath Palihapitiya just said that the current SBF/FTX/Alameda fiasco goes much further than just one man and FTX. He says that several SV firms and VCs have been working on several of the shitcoins in which SBF was a cofounder and pumped and dumped or which SBF just pumped and dumped (already before FTX even existed) without being involved in their creation. SBF had its hands into a lot of things, including Solana and Serum (SRM), which represented $2.2 bn in USD when FTX went down (but which since crashed by 75% or something). SBF owns 9% of RobinHood. I'm not saying it, Chamath Palihapitiya is. Here's a recent talk between him and Coinbase's CEO. Jump at 20 minutes when it starts on crypto: https://youtu.be/Id7cNqwqt1I https://youtu.be/Id7cNqwqt1I I do personally think Chamath Palihapitiya is right and we connect the dot with the article from TFA, this does indeed go much further than just SBF. Another one just for the gigs I recently read (facts needs to be checked): SBF's mom (lawyer and teacher at Stanford) ran a fundraising political campaign rooting for Biden. A few days after Biden announced he was running, SBF was apparently the biggest donor. Will they hand that money back to people who were scammed? Speaking of parents who raised ethical kids... Elizabeth Holmes, who defrauded investors, had as a parental example a father working at... Enron apparently. Just a coincidence of course. Daddy wasn't aware of anything. And he can be very proud of the way he raised his daughter. In french we say it's "un panier de crabes" (a pack of crabs). Thanks to these guys' examples I know how to not raise my kid.
- deleted 4y ago
  [deleted]
- theGnuMe 4y ago
  I mean... something about glass houses: https://www.institutionalinvestor.com/article/b1qf5t2ymwfcl5/Hindenburg-Research-Goes-After-Wall-Street-Celebrity-Promoter-Chamath-Palihapitiya https://www.institutionalinvestor.com/article/b1qf5t2ymwfcl5...
- boringg 4y ago
  Are you referring to Chamath the king of pump and dump SPACs? A bit rich to be using him as a source.
peterweyand 4y ago
I'm mostly concerned about government debt and bond yields. When governments start having a harder time bailing out the larger economy this can cause all sorts of problems, england atm is a prime example. If many governments start having this problem, FX contagion can start playing havoc with industry as no one knows who to export or import from or to.
hsuduebc2 4y ago
https://archive.ph/uk2L8 https://archive.ph/uk2L8
Ifkaluva 4y ago
I think it's remarkable that this article was published /before/ the FTX implosion.
chatterhead 4y ago
Just more scamming that will be overlooked cause the right people get paid. It's always that way. The economy must be separated from the government the same way religion was if we are to ever have true economic freedom and self-determination.
ur-whale 4y ago
https://archive.ph/uk2L8 https://archive.ph/uk2L8

153 points by drooby 4y ago

https://archive.today/uk2L8 https://archive.today/uk2L8

I hope I don’t regret saying this, but so far, this recession / slowdown has been very needed and will help the US economy grow in more sustainable ways going forward. And it’s happened without too much pain in the broader economy. We way overdid Covid stimulus, which helped inflate bubbles like you saw with crypto, pouring billions into the hands of criminal organizations like FTX. We had cheap money flowing for too long with near-zero interest rates, propping up many zombie enterprises that shouldn’t have been propped up to begin with. Salary growth is great, but we all have seen a proliferation of bullshit jobs with ridiculous salaries in the past two years. All of these trends have started to correct, and it’ll be better for the long term. I just hope nothing systemically important breaks before we’re through the worst of it.

throwawaaarrgh 4y ago
That kind of just sounds like regurgitated HN stories that sound plausible to a HN reader without evidence or a narrative (but I could be wrong)
Retric 4y ago
People blame stimulus spending, but the reduction in real economic output from COVID also has knock on effects. Expensive condos etc derive most of their value as a symptom of a much larger and extremely productive economic system which got disrupted. Suddenly people start reevaluating basic assumptions and markets adjust in ways more complex than a simple boom bust cycle.
- moistly 4y ago
  I do not believe our economy’s output exceeds that of 2019, pre-Covid. We still have supply chain issues up the wazoo. We still have disease taking out employees en masse, and for weeks at a time. Potential customers are generally in worsening financial condition. I simply can not believe that conditions are such, that the stock market should have a higher valuation than it did in 2019.
  - Retric 4y ago
    A dollar today is worth ~15% less than a dollar from 2019 so a stock that’s nominally worth the same today would actually have taken a significant hit. Which really should be part of these comparisons.
    - bradleyjg 4y ago
      Which was at the tail end of an 11 year bull run.
    - animitronix 4y ago
      Yet the dollar is absolutely crushing other currencies. Funny how that works...
      - rank0 4y ago
        The other currencies are weakening faster than the dollar. You care about what you can actually buy with a currency not just it’s exchange rate.
  - nradov 4y ago
    Which diseases?
  - kortilla 4y ago
    You forgot to adjust for inflation. Take the additional 10-15% haircut off of stock prices and we’re basically right at pre-COVID peaks in the general indexes.
ericmcer 4y ago
The economic fallout is correctible, but fixing the loss of faith in the foundation of our economy, that diligent work will be rewarded with comfort and stability, will be harder.
- sammalloy 4y ago
  > The economic fallout is correctible, but fixing the loss of faith in the foundation of our economy, that diligent work will be rewarded with comfort and stability, will be harder. I think this is an archaic, pre-21st century mindset. Advanced, industrial, technological societies should be able to guarantee comfort and stability for all people regardless of work. In the modern world, we should work because we love or enjoy it, because we want to contribute to society, and because it brings meaning to our lives and the lives of other people. We should not work, on the other hand, to be "rewarded" in a zero-sum game competing with others, to the detriment of the rest of the planet. We really need to change the way we think about this. The most productive workers aren’t people working for a reward, they are those who love their work and are happy with the comfort and stability they already have. It’s 2022 going on 2023. The idea that we should work based on scarcity rather than abundance is completely out of date and no longer supported by the evidence. This is the kind of have and have not mindset that needs to disappear. Nobody should have to work to obtain comfort and stability.
  - lossolo 4y ago
    For this you first need robotic + AI revolution, without this it's impossible. You need to replace significant part of the workforce with robots. Every human needs different resources/products to live, these resources have complicated supply chains in which you have a lot of people that do not enjoy their work but needs resources to keep their family afloat, that's why this products are available on the market. How many ppl like doing working in coal mines? How many like working in factories for 12 hours doing the same thing over and over again? I think what you wrote is a goal for our society but we need minimum of many decades of technological advances to even start really thinking about implementing this. We are not there yet.
  - PixyMisa 4y ago
dv_dt 4y ago
I really don’t have any belief that the faults in our economy was due to easy money. Under scarce money or easy money the same class of decision makers are still making poor allocation choices. There are no fundamental changes associated with a recession that would correct that imho.
- cavisne 4y ago
  The past few years have been great for scammers though https://www.justice.gov/opa/pr/us-attorney-announces-federal-charges-against-47-defendants-250-million-feeding-our-future https://www.justice.gov/opa/pr/us-attorney-announces-federal... There is surely some GDP gain from not ploughing 250m of taxpayers money into lambo's.
  - dv_dt 4y ago
    That’s not what economist means by easy money? That article is referring to a fault that is purely a function of legal and administrative regulation of programs. When economics refers to east money and recessions and interest rates it’s how easy it is for businesses to find investment and loans for expansion.
- Silverback_VII 4y ago
  I'm not sure about that. I see the economy as a giant engine made out of the flesh of millions of humans. The guy pushing the accelerator or not must truly feel like God hearing the roaring of this giant flesh engine and affecting the fate of so many people.
nimbius 4y ago
"and will help the US economy grow in more sustainable ways going forward" how? capitalisms defining hallmark is a ten year cycle of boom/bust. the last solution in 2020 was a bailout and forgiveness for virtually all commercial covid debts. prior to that it was a massive bailout and payout checks to taxpayers along with a scorched earth foreclosure wave. at some point the argument comes across as an alcoholic that repeatedly crashes cars and promises to learn and grow from it. real wages are stagnant, homes are still unaffordable, rent is skyrocketing, healthcare now routinely sells insulin for $200 and everything from energy to food is still rising. ive a tough time believing corporate fraud is a silver lining.
- hedora 4y ago
  In the US, all of the problems you mentioned (or analogous issues) were solved during the New Deal era, which set the stage for relative economic stability post-WWII. Most of the laws / institutions from that time were eliminated in the last 3-4 decades. Anyway, the solutions are well understood. Any decent US history textbook contains them.
  - kortilla 4y ago
    This is naive. Post WWII was a boom because the US economy basically got to rebuild the world since all of the other industries in other countries were destroyed by war. There was zero global competition and massive demand. Unless you’re suggesting we replicate another world war to wipe out most of the competition, looking to some stupid domestic post war policies won’t do jack shit.
- WalterBright 4y ago
  > a ten year cycle of boom/bust Free markets are a chaotic system, not a cyclical system. Every attempt at predicting markets based on cycles has failed.
chinabot 4y ago
These Bullshit jobs really need to be called out more, everyone in a company knows who they are and they just piss off the real workers who see themselves (rightly) as hard done by especially when they are in their management chain or paid substantially more. Every good HR departments and CEO should earn their money by culling these the moment they are recognized and sanctioning the Manager approving them.
pjc50 4y ago
Recession is, in and of itself, the opposite of growth. That's how it's defined. You can make an anti-growth argument, possibly on carbon emissions, but a recession cannot ever be good for growth.
- MrLeap 4y ago
  If the economy is like a bacterial infection, and a recession is like an antibiotic. As long as you stop it before everyone is dead you'll be left an economy composed of only the most antibiotic resistant companies! I have no idea if that's good!
- MisterMower 4y ago
  For short term growth, sure. But they’re absolutely necessary for sustainable long term growth. Sometimes new technology improves productivity in an industry, allowing the same amount of work to be done with less labor and resources. Sometimes consumer desires shift and industry has to adapt by reducing the size of their workforce or by cutting costs. Recessions are what you get when the economy reorganizes itself into stronger, more sustainable patterns of specialization and trade. Preventing that adjustment from occurring prevents future growth from happening.
  - deleted 4y ago
    [deleted]
mschuster91 4y ago
> We way overdid Covid stimulus, which helped inflate bubbles like you saw with crypto, pouring billions into the hands of criminal organizations like FTX. Crypto was already a problem way before covid came out of a bat cave - the problem is not the stimulus package, these saved a lot of lives, and they got to individual people, not corporations. The actual problem was the expansive monetary policy that virtually all major central banks followed since the 2008ff crisis - well over a decade of injecting absurd amounts of money is what caused the absolute bull run on real estate, stock markets, venture capital backed crap (remember Yo?) and, finally, once there was no other avenue for all that money left, into crypto.
- lazide 4y ago
  Modern Monetary Theory yo!
mancerayder 4y ago
Yeah? Well, I don't know about the regret of it, I can say that not everyone's salary is growing in a way that matches their rent, medical, and general basic expenses. In fact, the national reports on rent growth and housing costs are devastating to the average person from a financial perspective. It is bad in every possible way, and with interest rates up, people without substantial cash can't even qualify to buy. In areas that haven't experienced the housing prices going down yet, there isn't any inventory. I don't think punishing FTX and zombie companies is a good trade-off for the overall effect on the standard of living of the average person. Wealthy and generally smart or connected people saw this coming in late 2021 when there started to be big dips in the market; no, not in the "a broken clock always strikes twice" sort of way, but in the "there's something fundamentally hosed here, let's cash out" sense. Wealth inequality can only get worse from here - it's mostly just separated in terms of who still rents versus who owns and collects rent.
- lend000 4y ago
  This is incorrect -- wealth inequality only improves during recessions. [0] https://fred.stlouisfed.org/series/WFRBST01134 https://fred.stlouisfed.org/series/WFRBST01134
  - mancerayder 4y ago
    Careful. The graph you linked shows that inequality going up and beyond after each and every recessionary trough. And the %age owned by the 1 percent is higher in that recovery period, than it was before the drop began. Put in another way, that support the assertion that recessionary cycles make the inequality worse. You're just pointing to the acute phase of the recession, when the evidence is in the years immediately after. I think this can be explained because assets can be purchased more cheaply during these periods, leading to a greater share owned to be possible, and thus making the wealth slice of the pie by the 1% to be even more valued.
    - lend000 4y ago
      I think the problem is that every recession on that chart has been "bailed out" in some form by Fed monetary policy, mostly to the benefit of asset holders, and usually far too early or excessively. The increasing overall trend can be attributed to anti-progressive tax brackets (the wealthy pay 20% while the middle class pays 30-45%). But even in an increasing wealth inequality environment, a proper recession should at least decapitalize the stupid among the wealthy and benefit better capital allocators, which is beneficial. Better to have productive Elon Musks getting rich in the aftermath of economic turmoil than SBF's and Adam Neumanns.
joshxyz 4y ago
just made the gap between the poor and rich wider, good lord.
bogota 4y ago
Unless housing corrects none of this matters people are making more and just spending it on rent and other essentials. It’s crazy to me that the house i grew up in and my parents could afford with only my dad working as enlisted in the military now is 650k vs 140k 20 years ago. This rate of growth doesn’t seem sustainable.
- hackerfromthefu 4y ago
  That house is not in the same context as 20 years ago. Constant growth provides more amenity for the house than previously, and higher competitive desireability. To get an equivalent house you need to go further out to a less developed area with less people competing for the house, and there you will find cheaper houses. I'm not saying it is sustainable or what the values should be etc, just that the past conditions != todays conditions despite it being the same latitude and longitude.
- addaon 4y ago
  This is an 8% average (nominal) growth rate, and only about 5% over inflation. In the long run this isn't sustainable -- in the medium term we expect any exponential growth to plateau at a cubic, and in the long term quadratic, growth rate -- but while we're in what sure appears to be an exponential growth stage, that 8% number doesn't seem inherently unreasonable.
  - bogota 4y ago
    The 8% growth isn’t unreasonable but if we aren’t matching it over the long term with similar salary growth for a large portion of the population it becomes a problem. Since salary normally only grows at 2% for most people in another 10 years we are in a situation where almost no one can afford a house who isn’t getting help from their parents. The middle class has seemingly vanished and I don’t think that is good for society
    - conductr 4y ago
      My baseless feeling is that the middle class that is present is not keeping up with inflation right now. Even those that bought a house say 10 years ago and got decent 'value'. I think salary growth is happening at the bottom. That's where the labor shortage is huge. People just won't work for $12/hr in my area like they did in 2019. They'd want $18 now. And you have to pay if you own a business that employees this income bracket of employee's. And, they're not happy about pretty much anything. r/antiwork is a place you see a lot of this sentiment. People in the middle. They haven't quite received that 50% raise the so now they're effectively much closer to the bag boy at the grocery store purchasing power. Yes, it's pretty awful for society and just getting started. It is demotivating and my thought is it's probably a contributing factor to why productivity is down.
mjevans 4y ago
All except the stimulus (line 2). At least the to the general public kind; very agree with the (line 3) interest rate BS since 2008 that another comment mentioned. About the stimulus to the public; the policy should have been more nuanced and less about propping up failures. It should have been more solidly focused on humanitarian relief and incentivization of services that would be necessary during the pandemic (such as funding premiums, space, and PPE for critical jobs). The funded tests were a good step, but even better would have been blanket sending out a first test kit (of some size) free to every address registered to vote along with a letter that detailed the program and how to order more. The PPP program (relief for businesses, not directly workers), as an example, should have been in conjunction with already existing banks and credit unions (who already have due diligence systems) and about vastly reducing the interest and underwriting a small percentage of the overall firm's total loaned out value to some degree. Worker support should have been two prong, in the form of extended unemployment benefits during the pandemic and also the creation of new jobs fulfilling civic needs during the pandemic.
- landemva 4y ago
  > The PPP program Rather than the forgiveable loan scheme, I would have implemented as a rebate to employer on say 5% of the payroll tax they remitted to the feds. That would precisely track actual payrolls without the application hurdles.
  - mjevans 4y ago
    Those would have to be tracked, and that also begs for kickbacks or outright hiring/retaining family/beneficiaries. There's probably a better design, but a think tank of experts given a week or two of time to explore them and bake them into a proper response would obviously be far more effective than back of the napkin replies by armchair observers on an Internet forum. Though the wisdom cherry picked from a crowd still seems to do better than government / congress; so maybe they need to be more humble and/or make an agency/think tank for problem solving that becomes legislation.
015a 4y ago
Yeah; the two sectors to take the blunt of the damage to this point is Tech and Crypto, which were among the two most inflated asset classes. That's a pretty good place to start removing excess money from the system. Tech: QQQ is a pretty good index of tech stocks, which has dropped about 30% since 2022's high. Draw-downs from their 2022 peaks: AAPL: $513B. MSFT: $653B. AMZN: $711B. TSLA: $639B. GOOG: $663B. META: $598B. NVDA: $306B. The list goes on, and that doesn't even include the far higher investments lost in derivatives and indexes. Crypto: since the peak this year, we've seen a total draw-down of around $1.24T USD. For comparison: throughout 2020-2022, the M2 supply increased by around $6.3T. This peaked around Feb 2022.
chiefalchemist 4y ago
> All of these trends have started to correct, and it’ll be better for the long term. I just hope nothing systemically important breaks before we’re through the worst of it. Better for whom? That's the question. Maybe the imbalance in wealth distribution corrects, or maybe the wealth simply concentrates in still few hands. If I had the money, I'd bet on the latter.
deleted 4y ago
[deleted]
frozenport 4y ago
Lot of VC money was foreign sovereign wealth funds. Do you feel bad that Saudi Princes supported profligate brogramers via SoftBank?
snapplebobapple 4y ago
You missed the biggest effect specific to this community, which is that the raising rivals cost strategy of way overpaying for talent by the big guys seems to be abating. Programmers should expect serious headwinds in their compensation as that goes away as the big guys start valuing current profit over wrecking potential future competitors ability to compete by pricing them out of the programmer labor market. On the bright side, if you choose your startup wisely, this will mint a lot of wealthy programmers as the next big thing is developed and flourishes.
xtiansimon 4y ago
> “We way overdid Covid stimulus…” Not sure what you’re referring to specifically, but the PPP was a good program. Most of the money went directly to non-owners/workers. And the amount which owners did receive helped keep those businesses afloat, again benefiting employees with a place of work.

deleted 4y ago

[deleted]

ramesh31 4y ago

Interesting to see this play out in the crypto world in real time. CZ is coming across as the only legit player left in the space. And it seems hard to imagine he'd be putting a spotlight like this on himself if things weren't airtight over there. Looks like Binance will be the winner take all.

buitreVirtual 4y ago
I don't think he is chasing the spotlight more than necessary to promote his business. Besides, chasing the spotlight does not imply honesty. Just look at SBF.
Animats 4y ago
He doesn't even have a business address.
- moralestapia 4y ago
  How does he operate though? Where does he send/receive fiat?
  - lazide 4y ago
    Normally, Tether. Another steaming stinking bucket of goo no one wants to look too hard at, for fear it will actually be shit instead of the maple syrup they keep being promised.
  - deleted 4y ago
    [deleted]
skinnymuch 4y ago
SBF was in the spotlight. Possibly more than any other crypto person. If applied to CZ, it means he is a fraud too. To think his stuff is airtight makes no sense when there isn’t transparency.
- bogomipz 4y ago

lifeisstillgood 4y ago

What if we paid auditors by the fraud discovered. That auditors finding fraud and other misdeeds get the highest seniority on any assets left. I mean, there has to be some answer to the problem of an auditor that says "I don't like the way you treat this income stream" and the CEO says "we will never work with you again and I will make sure everyone I golf with never will again."

ipython 4y ago
That’s kind of how the SEC handles whistleblower compensation. See https://www.sec.gov/news/press-release/2022-125 https://www.sec.gov/news/press-release/2022-125
deleted 4y ago
[deleted]
joe_the_user 4y ago
I get a bit suspicious when I hear a scheme that boils down "given a society rotten with marketization schemes enriching a corrupt few, we'll use one more layer of marketization to stop the problem, what could possibly go wrong?" And thinking in more detail, substantial problems seem evident: * You want auditors who check everyone, not just the most likely or most "profitable" targets. * If the activity of a regulator depends on the fraud level, you will have people slacking off in times of little fraud, which will then give rise to times of much fraud. * This would make regulation more adversarial - companies would have an incentive to withhold information from a regulator to the extent a regulator would have an incentive to "spin" things in a profitable direction for them. Despite a strong pro-business ideology prevailing in the US, US regulation is already often more adversarial than in Europe. A US regulator is more oriented to catching wrong doers than to guiding companies into behaving correctly. This is visibly failing in all sort of large and small ways. The proposal would make this worse.
- boxed 4y ago
  > You want auditors who check everyone, not just the most likely or most "profitable" targets. Do you? Don't you in fact want the auditors to find the most fraud per hour worked? The problem the US has now is that for example IRS audits go after the poor because the rich have too annoying lawyers. This is the absolute worst.

datalopers 4y ago

I'm not sure if this is fraud, or simply how VCs operate, but we're going to see a massive collapse of SaaS startups and their customers in the near future. This is why: 1) Tech valuations over the past ~5 years were based entirely on annual revenue multiples. 25x was the norm, while 50-100x wasn't hard to find. 2) Let's say your VC firm owns 5% of CompanySaaS, which you paid $1M for, and the company is valued at 25x ARR ($800k * 25). 3) Now you invest $100k in CompanyWhatever. As their VC and valued advisor, convince them they should spend $100k/yr utilizing CompanySaaS's products. 4) CompanySaaS is now worth $900k * 25 (probably higher multiple since revenue is growing so fast), or $22.5M, and you just turned $100k into $125k. Rinse and repeat. It's a self-perpetuating bubble, and it's going to come crashing down hard. It's already happened but they've still got enough runway for another 6-24mos.

lumost 4y ago
I'd be curious how extensive this is. Presumably the entire ecosystem can't be running on VC... however I'm not sure how much of it is pure VC. Are SaaS firms on average going to see a 10% decline in revenues or a 70% decline? Or a 1% decline?
- lazide 4y ago
  Definitely not all the revenue/ecosystem, but I'd be surprised if it wasn't at least 25%.
hedora 4y ago
This would only be a bubble / ponzi scheme if a significant fraction of B2B customers were currently backed by VC money. That isn't the case. Instead, these deals help bootstrap companies. Late phase investors insist on seeing per-customer revenue breakdowns specifically to avoid the issue you are describing. It is likely that startups that are becoming revenue-dependent in 2022-2023 are in trouble though.
- lazide 4y ago
  A LOT of startup business comes from other businesses within the same VCs portfolio.

TacticalCoder 4y ago

Coming or actual. Chamath Palihapitiya just said that the current SBF/FTX/Alameda fiasco goes much further than just one man and FTX. He says that several SV firms and VCs have been working on several of the shitcoins in which SBF was a cofounder and pumped and dumped or which SBF just pumped and dumped (already before FTX even existed) without being involved in their creation. SBF had its hands into a lot of things, including Solana and Serum (SRM), which represented $2.2 bn in USD when FTX went down (but which since crashed by 75% or something). SBF owns 9% of RobinHood. I'm not saying it, Chamath Palihapitiya is. Here's a recent talk between him and Coinbase's CEO. Jump at 20 minutes when it starts on crypto: https://youtu.be/Id7cNqwqt1I https://youtu.be/Id7cNqwqt1I I do personally think Chamath Palihapitiya is right and we connect the dot with the article from TFA, this does indeed go much further than just SBF. Another one just for the gigs I recently read (facts needs to be checked): SBF's mom (lawyer and teacher at Stanford) ran a fundraising political campaign rooting for Biden. A few days after Biden announced he was running, SBF was apparently the biggest donor. Will they hand that money back to people who were scammed? Speaking of parents who raised ethical kids... Elizabeth Holmes, who defrauded investors, had as a parental example a father working at... Enron apparently. Just a coincidence of course. Daddy wasn't aware of anything. And he can be very proud of the way he raised his daughter. In french we say it's "un panier de crabes" (a pack of crabs). Thanks to these guys' examples I know how to not raise my kid.

deleted 4y ago
[deleted]
theGnuMe 4y ago
I mean... something about glass houses: https://www.institutionalinvestor.com/article/b1qf5t2ymwfcl5/Hindenburg-Research-Goes-After-Wall-Street-Celebrity-Promoter-Chamath-Palihapitiya https://www.institutionalinvestor.com/article/b1qf5t2ymwfcl5...
boringg 4y ago
Are you referring to Chamath the king of pump and dump SPACs? A bit rich to be using him as a source.

peterweyand 4y ago

I'm mostly concerned about government debt and bond yields. When governments start having a harder time bailing out the larger economy this can cause all sorts of problems, england atm is a prime example. If many governments start having this problem, FX contagion can start playing havoc with industry as no one knows who to export or import from or to.

hsuduebc2 4y ago

https://archive.ph/uk2L8 https://archive.ph/uk2L8

Ifkaluva 4y ago

I think it's remarkable that this article was published /before/ the FTX implosion.

chatterhead 4y ago

Just more scamming that will be overlooked cause the right people get paid. It's always that way. The economy must be separated from the government the same way religion was if we are to ever have true economic freedom and self-determination.

ur-whale 4y ago

https://archive.ph/uk2L8 https://archive.ph/uk2L8