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>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These

by fuoqi 3y ago

>But many enterprises simply took advantage of easy bank loans to refinance their existing debt without adding new spending or investment to the economy. These companies eventually became loan addicts; and as with any addiction, increasing doses were needed to generate diminishing effects. Sounds like a description of the Western economic situation to me.

zukzuk 3y ago
Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.
- satvikpendem 3y ago
  Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
  - p_j_w 3y ago
    Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?
    - satvikpendem 3y ago
      The PPP loans were literally this. They were even more favorable since most were forgiven.
      - ang_cire 3y ago
        And PPP loans were not available (legally) to individual workers, only to the Business Owner class. Sure, it was expanding the criteria of bailout from "superwealthy business owners" to "average business owners" and "politicians playing at business owners who set up a shell company", but that's not really refuting their point that the government only cares about protecting capital. "Here's $600 to live on for 6 months, poors. How much could a banana cost? Oh, also here's $600,000 if you own a small business!"
        JumpCrisscross 3y ago
        > PPP loans were not available (legally) to individual workers They were available to contractors. Workers got extended unemployment and forebearance benefits. If you have an actual solution to propose, go for it. But complaining with misaligned facts isn’t particularly productive.
    - JumpCrisscross 3y ago
      > Where can I go to get such favorable loan terms from the government? Oh, I can’t? Subsidised student loans, SBA loans, et cetera. It’s also noteworthy that TARP-like bailouts are no longer the precedent: guaranteeing deposits while letting the bank fail is.
      - satvikpendem 3y ago
        Indeed, too big to fail is not seen as viable anymore, which should make the parent happy, but I'm guessing they have more ideological issues with these sorts of loans and of capitalism itself, unfortunately.
    - Vt71fcAqt7 3y ago
      The governemnt forced banks to give out loans to people who couldn't pay them in the name of euqality. These banks sold the risk to investors as Mortgage-backed securities because banks aren't in the risk business but risk management: creating the Great Recession. ... Trillions of dollars are given away to the poor every year in the US, with no expectation of getting it back.[0] Adding "favorable loan terms" on top of this will literally lead to the exact outcome you are describing in 2008. We can debate the bank bailouts, which I think is worthwhile, but comparing them to personal loans is naive. [0]https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...
  - johnnyworker 3y ago
    > perhaps a loss when adjusted for inflation How is that profit?
    - satvikpendem 3y ago
      It's a profit if you don't count inflation, if you do it's a small loss, just as the article says.
      - johnnyworker 3y ago
        So, a a small loss, profit if you don't count inflation, and giant profit if you count it in 1950 money, got it.
        satvikpendem 3y ago
        Well you can choose to understand it however you want, including comparing it to 1950s money for some reason, but that's on you.
        johnnyworker 3y ago
        Well, if you "don't count inflation", why stop there? Might as well count it in even more favorable ways. I wondered if there might be a good reason for it, but you just snarkily rephrasing what I quoted tells me there probably isn't -- so it's a loss. Because inflation is not something you can just ignore, when I buy something with money I don't get asked if I want the money to be counted as 1980 money or whatever, it's always "now" money. If by the time the loans get paid back inflation ate up the profit, there is no profit, and the criticism of it socializing loss while keeping profits private remains valid.
        satvikpendem 3y ago
        My point is that it doesn't matter if it's a profit or a small loss, because people think companies were simply given billions of dollars of free money. The fact that the US government was close to or did break even from bailouts dispels this notion. So there is no socialization of loss while keeping profits private, as the companies had to pay out what they took.
gsatic 3y ago
Dont remind them why banks collapsed and why interest rates arent dropping any time soon. Focus on China, Russia, Elons cage match etc.
- golergka 3y ago
  You mean the bank collapses where banks had all the assets to cover their customers deposits and just lacked immediate liquidity for the bank runs, so that they were bought out by other banks who assumed all of their obligations, and none of the customers or taxpayers actually lost any money?
worrycue 3y ago
> Sounds like a description of the Western economic situation to me. How so?
JumpCrisscross 3y ago
The American economy is growing in real terms, with inflation a continuing risk. Beijing is “putting pressure on prominent local economists to avoid discussing negative trends such as deflation” [1]. These are opposite problems. We are also in a high-rate environment that is leading to defaults in the property sector [2]. Again, the opposite of extend and pretend. [1] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd98f8 https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9... [2] https://commercialobserver.com/2023/03/default-floor-brookfield-blackstone-columbia-property-trust/ https://commercialobserver.com/2023/03/default-floor-brookfi...
steve76 3y ago
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by fuoqi 3y ago

zukzuk 3y ago

Yup! Complete with the inevitable government bailout that socializes failure while privatizing profits.

satvikpendem 3y ago
Not sure why people point to bailouts as some sort of gotcha, they're loans, not free money. The US government made a profit from the 2008 bailouts: > Early estimates for the bailout's risk cost were as much as $700 billion; however, TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation. https://en.wikipedia.org/wiki/Emergency_Economic_Stabilization_Act_of_2008 https://en.wikipedia.org/wiki/Emergency_Economic_Stabilizati...
- p_j_w 3y ago
  Where can I go to get such favorable loan terms from the government? Oh, I can’t? I have to get monumentally wealthy by wrecking the economy and driving our society into its biggest financial crisis in 80 years first?
  - satvikpendem 3y ago
    The PPP loans were literally this. They were even more favorable since most were forgiven.
    - ang_cire 3y ago
      And PPP loans were not available (legally) to individual workers, only to the Business Owner class. Sure, it was expanding the criteria of bailout from "superwealthy business owners" to "average business owners" and "politicians playing at business owners who set up a shell company", but that's not really refuting their point that the government only cares about protecting capital. "Here's $600 to live on for 6 months, poors. How much could a banana cost? Oh, also here's $600,000 if you own a small business!"
      - JumpCrisscross 3y ago
        > PPP loans were not available (legally) to individual workers They were available to contractors. Workers got extended unemployment and forebearance benefits. If you have an actual solution to propose, go for it. But complaining with misaligned facts isn’t particularly productive.
  - JumpCrisscross 3y ago
    > Where can I go to get such favorable loan terms from the government? Oh, I can’t? Subsidised student loans, SBA loans, et cetera. It’s also noteworthy that TARP-like bailouts are no longer the precedent: guaranteeing deposits while letting the bank fail is.
    - satvikpendem 3y ago
      Indeed, too big to fail is not seen as viable anymore, which should make the parent happy, but I'm guessing they have more ideological issues with these sorts of loans and of capitalism itself, unfortunately.
  - Vt71fcAqt7 3y ago
    The governemnt forced banks to give out loans to people who couldn't pay them in the name of euqality. These banks sold the risk to investors as Mortgage-backed securities because banks aren't in the risk business but risk management: creating the Great Recession. ... Trillions of dollars are given away to the poor every year in the US, with no expectation of getting it back.[0] Adding "favorable loan terms" on top of this will literally lead to the exact outcome you are describing in 2008. We can debate the bank bailouts, which I think is worthwhile, but comparing them to personal loans is naive. [0]https://fiscaldata.treasury.gov/americas-finance-guide/federal-spending/ https://fiscaldata.treasury.gov/americas-finance-guide/feder...
- johnnyworker 3y ago
  > perhaps a loss when adjusted for inflation How is that profit?
  - satvikpendem 3y ago
    It's a profit if you don't count inflation, if you do it's a small loss, just as the article says.
    - johnnyworker 3y ago
      So, a a small loss, profit if you don't count inflation, and giant profit if you count it in 1950 money, got it.
      - satvikpendem 3y ago
        Well you can choose to understand it however you want, including comparing it to 1950s money for some reason, but that's on you.
        johnnyworker 3y ago
        Well, if you "don't count inflation", why stop there? Might as well count it in even more favorable ways. I wondered if there might be a good reason for it, but you just snarkily rephrasing what I quoted tells me there probably isn't -- so it's a loss. Because inflation is not something you can just ignore, when I buy something with money I don't get asked if I want the money to be counted as 1980 money or whatever, it's always "now" money. If by the time the loans get paid back inflation ate up the profit, there is no profit, and the criticism of it socializing loss while keeping profits private remains valid.
        satvikpendem 3y ago
        My point is that it doesn't matter if it's a profit or a small loss, because people think companies were simply given billions of dollars of free money. The fact that the US government was close to or did break even from bailouts dispels this notion. So there is no socialization of loss while keeping profits private, as the companies had to pay out what they took.

gsatic 3y ago

Dont remind them why banks collapsed and why interest rates arent dropping any time soon. Focus on China, Russia, Elons cage match etc.

golergka 3y ago
You mean the bank collapses where banks had all the assets to cover their customers deposits and just lacked immediate liquidity for the bank runs, so that they were bought out by other banks who assumed all of their obligations, and none of the customers or taxpayers actually lost any money?

worrycue 3y ago

> Sounds like a description of the Western economic situation to me. How so?

JumpCrisscross 3y ago

The American economy is growing in real terms, with inflation a continuing risk. Beijing is “putting pressure on prominent local economists to avoid discussing negative trends such as deflation” [1]. These are opposite problems. We are also in a high-rate environment that is leading to defaults in the property sector [2]. Again, the opposite of extend and pretend. [1] https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd98f8 https://www.ft.com/content/b2e0ad77-3521-4da9-8120-1f0c1fdd9... [2] https://commercialobserver.com/2023/03/default-floor-brookfield-blackstone-columbia-property-trust/ https://commercialobserver.com/2023/03/default-floor-brookfi...

steve76 3y ago

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