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> That's the damage; reducing demand even more Not saying your pet theory is wrong. But it does sound a lot like cutting off your nose to spite your enemies fa

> That's the damage; reducing demand even more Not saying your pet theory is wrong. But it does sound a lot like cutting off your nose to spite your enemies face.

jerf 4y ago
The key element you're missing in that analogy is that a lot of this failure and damage is going to occur anyhow. Economic fragility is baked into the cake. We're looking at a down cycle for everyone here. There's no option where we all hold hands together in happy harmony and the economy just keeps going up for everybody, or likely, we'd take it or some approximation of it. In this environment, weighing out whether you can cause proportionally more damage in your enemy's collapse by some action or other becomes distressingly rational. Contemplate a payout matrix that looks like the Prisoner's Dilemma, except the payout for snitching while the other player doesn't is still negative, instead of zero. If that's your game theoretic situation, complaining that a player took an option with an expected negative payout is a null objection. There was no alternative. So the game changes. This is part of why I say it's different than a decade ago. We did have some approximation of a hold-hands-and-be-happy option and we did take it. One can quibble about the details; I'm definitely on team "can was kicked down the road" rather than "everything was fixed, hooray", but hey, that's debatable.
- lordfrito 4y ago
  I get what you're saying. The Chinese would hurt the US economy by a mass sell-off of Treasuries, but they'd be dropping a bomb into their own economy as well. Alternatively, they could ramp-up to some sort of a localized/proxy hot conflict, and get their military-industrial base firing on all cylinders. It was WWII spending that pulled the US out of the depression. The wikipedia article on war economy [1] says "War is often used as a last ditch effort to prevent deteriorating economic conditions or currency crises, particularly by expanding services and employment". I find it difficult to believe that any sane nation-state would purposely bomb their own economy just to hurt an enemy, when a much better option exists economically (war footing). Likely what China would do would be a combination of the two. Still it's food for thought. Our economies are definitely intertwined, and there are levers that can be pulled. [1] https://en.wikipedia.org/wiki/War_economy https://en.wikipedia.org/wiki/War_economy
  - jerf 4y ago
    The news is moving quickly, and now I can show you an example of someone hurting themselves to hurt someone else more that has happened just since this discussion: https://www.cnbc.com/2023/03/15/credit-suisse-shares-slide-after-saudi-backer-rules-out-further-assistance.html https://www.cnbc.com/2023/03/15/credit-suisse-shares-slide-a... The Saudi National Bank was not obligated to give Credit Suisse more money; that is not what I'm talking about. They are not obligated to send good money after bad. However, they were also not obligated to internationally announce that they in particular aren't giving them any more money. This is transparently obviously stupid; even without giving them more investment if they wanted to maximize the value of what was left, they shouldn't have said anything. This is not the same magnitude by any means as China selling off treasuries, but it demonstrates what I'm talking about here, that it is becoming distressingly rational realpolitik to hurt yourself if it hurts someone else more. A BRICS ally taking a bit of damage (not even a lot necessarily, I mean, the expected value of that investment wasn't that high anyhow, but they just conclusively nuked it) in order to topple a Global Systemically Important Bank in the West might just suit them fine.
    - another2another 4y ago
      >However, they were also not obligated to internationally announce that they in particular aren't giving them any more money. Hmm, I think you're reading into it way more than there was. The messaging from the Saudi NB was more 'We're not putting more money in because we're happy enough with the plan to turn CS around, and anyway.. we couldn't if we wanted to because...' But that doesn't sell clicks, so the media turned it into a 'man bites dog' story to scream that the SNB was abandoning CS to its fate and it's all doomed. >they shouldn't have said anything. Yes in that situation keeping schtoom would have been the better thing to do, but not everybody can get it right every time. However I doubt very much whether the SNB hoped to wound us evil people in the west as they seem to be mostly rational market participants hoping to make a long term bet on a Swiss bank.

> That's the damage; reducing demand even more Not saying your pet theory is wrong. But it does sound a lot like cutting off your nose to spite your enemies face.

jerf 4y ago

The key element you're missing in that analogy is that a lot of this failure and damage is going to occur anyhow. Economic fragility is baked into the cake. We're looking at a down cycle for everyone here. There's no option where we all hold hands together in happy harmony and the economy just keeps going up for everybody, or likely, we'd take it or some approximation of it. In this environment, weighing out whether you can cause proportionally more damage in your enemy's collapse by some action or other becomes distressingly rational. Contemplate a payout matrix that looks like the Prisoner's Dilemma, except the payout for snitching while the other player doesn't is still negative, instead of zero. If that's your game theoretic situation, complaining that a player took an option with an expected negative payout is a null objection. There was no alternative. So the game changes. This is part of why I say it's different than a decade ago. We did have some approximation of a hold-hands-and-be-happy option and we did take it. One can quibble about the details; I'm definitely on team "can was kicked down the road" rather than "everything was fixed, hooray", but hey, that's debatable.

lordfrito 4y ago
I get what you're saying. The Chinese would hurt the US economy by a mass sell-off of Treasuries, but they'd be dropping a bomb into their own economy as well. Alternatively, they could ramp-up to some sort of a localized/proxy hot conflict, and get their military-industrial base firing on all cylinders. It was WWII spending that pulled the US out of the depression. The wikipedia article on war economy [1] says "War is often used as a last ditch effort to prevent deteriorating economic conditions or currency crises, particularly by expanding services and employment". I find it difficult to believe that any sane nation-state would purposely bomb their own economy just to hurt an enemy, when a much better option exists economically (war footing). Likely what China would do would be a combination of the two. Still it's food for thought. Our economies are definitely intertwined, and there are levers that can be pulled. [1] https://en.wikipedia.org/wiki/War_economy https://en.wikipedia.org/wiki/War_economy
- jerf 4y ago
  The news is moving quickly, and now I can show you an example of someone hurting themselves to hurt someone else more that has happened just since this discussion: https://www.cnbc.com/2023/03/15/credit-suisse-shares-slide-after-saudi-backer-rules-out-further-assistance.html https://www.cnbc.com/2023/03/15/credit-suisse-shares-slide-a... The Saudi National Bank was not obligated to give Credit Suisse more money; that is not what I'm talking about. They are not obligated to send good money after bad. However, they were also not obligated to internationally announce that they in particular aren't giving them any more money. This is transparently obviously stupid; even without giving them more investment if they wanted to maximize the value of what was left, they shouldn't have said anything. This is not the same magnitude by any means as China selling off treasuries, but it demonstrates what I'm talking about here, that it is becoming distressingly rational realpolitik to hurt yourself if it hurts someone else more. A BRICS ally taking a bit of damage (not even a lot necessarily, I mean, the expected value of that investment wasn't that high anyhow, but they just conclusively nuked it) in order to topple a Global Systemically Important Bank in the West might just suit them fine.
  - another2another 4y ago
    >However, they were also not obligated to internationally announce that they in particular aren't giving them any more money. Hmm, I think you're reading into it way more than there was. The messaging from the Saudi NB was more 'We're not putting more money in because we're happy enough with the plan to turn CS around, and anyway.. we couldn't if we wanted to because...' But that doesn't sell clicks, so the media turned it into a 'man bites dog' story to scream that the SNB was abandoning CS to its fate and it's all doomed. >they shouldn't have said anything. Yes in that situation keeping schtoom would have been the better thing to do, but not everybody can get it right every time. However I doubt very much whether the SNB hoped to wound us evil people in the west as they seem to be mostly rational market participants hoping to make a long term bet on a Swiss bank.