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That rolls back the lack of trust in that specific project but does not prevent contagion (“who’s next? Who else was doing this?”) Moves like this are supposed
by bobthepanda 4y ago
That rolls back the lack of trust in that specific project but does not prevent contagion (“who’s next? Who else was doing this?”)
Moves like this are supposed to be reassuring to the broader market. Punishment is something done after an error but does not guarantee that someone else also didn’t do this, and punishment doesn’t go back in time and undo actions.
If you are not decisive enough the markets can quickly spiral into contagion, however rational that may be. (See: the prolonged cascading during the Euro crisis)
- NotYourLawyer 4y agoI dunno, I think that’d be a pretty good signal to the market that these kind of shenanigans aren’t gonna fly and won’t keep happening.
- bobthepanda 4y agoThe important thing to signal is not that, but that’s necessary to do later. The important thing to signal is that investments are safe, even if other investments might fall prey to the same issue. Doing just the former means that everyone is suspicious of everything they currently hold, and will be too spooked to invest even in new perfectly good ones until they get clarity on everything, causing the market to seize up. Justice and auditing takes time, but the need to refinance bonds is pretty much constant.
- MichaelZuo 4y agoIt probably wouldn't restore things back 100% to where they were before. But it probably would have restored a large amount of trust.
- bobthepanda 4y agoNothing magically restores total trust, but the important thing is that the ball needs to keep rolling, even if a bit slower.