3 ms·

How so? Does this capital being private ensure "this time will be different"?

by aylmao 2y ago

Parfait__ 2y ago
They should be free to decide how to spend their money?
JumpCrisscross 2y ago
> Does this capital being private ensure "this time will be different"? South America didn't have a mix of domestic and foreign investors deploying massive quantities of private money into capital assets in the 60s and 70s. They had governments borrowing to fund their citizens' consumption. Massive difference on multiple levels.
- aylmao 2y ago
  > They had governments borrowing to fund their citizens' consumption. The problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right? This can also happen with private capital. 2008 was a bust caused by private banks, for example. AI hasn't proven to be profitable yet [1], and I'm not sure it'll makes a difference, for the success of projects like this, wether the money is coming from government or not. In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill. [1] https://www.cbc.ca/news/business/ai-generative-business-money-revenue-1.7264014 https://www.cbc.ca/news/business/ai-generative-business-mone... [2] https://www.investopedia.com/articles/economics/08/government-financial-bailout.asp#toc-the-savings-and-loan-bailout-of-1989 https://www.investopedia.com/articles/economics/08/governmen...
  - JumpCrisscross 2y ago
    > problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right? In part. It was money borrowed by the state. That means when it can't be paid back, it's automatically a systemic issue. And it was money borrowed to fund consumption. There was no good reason to ever expect it to be paid back because it wasn't funding productive activity. > if this turns out to be a bubble it will be taxpayers who end up fronting the bill Very possibly, particularly if part of the package are e.g. federally-subsidised loans. Before that, however, private parties will almost certainly lose tens if not hundreds of billions of dollars. That cushion, together with those parties being spread between domestic and foreign sources, is what makes this less risky to the United States than similar relative-magnitude projects in South America. (Plus the fact that this is a capital asset versus consumption.)
  - abduhl 2y ago
    >> In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill. Haven’t all three examples you note (2008 crash, auto bailout, and SV prop up) resulted in a net return/gain for the taxpayer?
- nfw2 2y ago
  Moreover, if a government is funneling taxpayer money into the projects of a few citizens, that is a clear red flag of corruption. Whereas if private entities are deciding to invest their own capital into infrastructure, it's unclear what the complaint even is
ahmeneeroe-v2 2y ago
Capital owners allocate their capital to their "pet projects" all day every day. That is how the whole thing works. I'm not saying "this time will be different". I'm saying this is business as usual.
- rchaud 2y ago
  $500b is not business as usual for any corporation. Centralized planning doesn't fail because of government bureaucrats, it fails because there is too much spending to be decided on by too few people. Zuckerberg lost $30bn or more trying to create a VR amusement park. Scale that up to $500bn and see how much waste and dead-weight losses are created.
  - JumpCrisscross 2y ago
    > $500b is not business as usual for any corporation "Up to $500bn" is business as usual for Silicon Valley post-2021.
    - ahmeneeroe-v2 2y ago
      This is the real answer. There isn't $500B.
  - ahmeneeroe-v2 2y ago
    1. This isn't a single corp, it is multiple corps. For a sense of scale, MSFT alone spent ~$55B in Capex last year. Check out this[1] for a sense of how much different industries spend each year. Note that this will cross several industries including Power, Telecom, Software, electrical equip, etc. 2. There is no commitment to spend in a single year 3. There is no actual contractual commit here, this is a press release (i.e. Marketing) 4. There is not actually a $500B pile of gold being spent. This is more of a "this is how big we think this industry will be and how much we may spend to get exposure to that industry" [1] https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/capex.html https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
  - ahmeneeroe-v2 2y ago

How so? Does this capital being private ensure "this time will be different"?

by aylmao 2y ago

How so? Does this capital being private ensure "this time will be different"?

Parfait__ 2y ago

They should be free to decide how to spend their money?

JumpCrisscross 2y ago

> Does this capital being private ensure "this time will be different"? South America didn't have a mix of domestic and foreign investors deploying massive quantities of private money into capital assets in the 60s and 70s. They had governments borrowing to fund their citizens' consumption. Massive difference on multiple levels.

aylmao 2y ago
> They had governments borrowing to fund their citizens' consumption. The problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right? This can also happen with private capital. 2008 was a bust caused by private banks, for example. AI hasn't proven to be profitable yet [1], and I'm not sure it'll makes a difference, for the success of projects like this, wether the money is coming from government or not. In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill. [1] https://www.cbc.ca/news/business/ai-generative-business-money-revenue-1.7264014 https://www.cbc.ca/news/business/ai-generative-business-mone... [2] https://www.investopedia.com/articles/economics/08/government-financial-bailout.asp#toc-the-savings-and-loan-bailout-of-1989 https://www.investopedia.com/articles/economics/08/governmen...
- JumpCrisscross 2y ago
  > problem here being that it was money spent that was never earned back, and money that eventually had to be paid back, right? In part. It was money borrowed by the state. That means when it can't be paid back, it's automatically a systemic issue. And it was money borrowed to fund consumption. There was no good reason to ever expect it to be paid back because it wasn't funding productive activity. > if this turns out to be a bubble it will be taxpayers who end up fronting the bill Very possibly, particularly if part of the package are e.g. federally-subsidised loans. Before that, however, private parties will almost certainly lose tens if not hundreds of billions of dollars. That cushion, together with those parties being spread between domestic and foreign sources, is what makes this less risky to the United States than similar relative-magnitude projects in South America. (Plus the fact that this is a capital asset versus consumption.)
- abduhl 2y ago
  >> In fact, if the 2008 bank bail-out, auto industry bail-out, the Silicon Valley bank prop-up, and other such actions by the US government are considered [2], if this turns out to be a bubble it will be taxpayers who end up fronting the bill. Haven’t all three examples you note (2008 crash, auto bailout, and SV prop up) resulted in a net return/gain for the taxpayer?
nfw2 2y ago
Moreover, if a government is funneling taxpayer money into the projects of a few citizens, that is a clear red flag of corruption. Whereas if private entities are deciding to invest their own capital into infrastructure, it's unclear what the complaint even is

ahmeneeroe-v2 2y ago

Capital owners allocate their capital to their "pet projects" all day every day. That is how the whole thing works. I'm not saying "this time will be different". I'm saying this is business as usual.

rchaud 2y ago
$500b is not business as usual for any corporation. Centralized planning doesn't fail because of government bureaucrats, it fails because there is too much spending to be decided on by too few people. Zuckerberg lost $30bn or more trying to create a VR amusement park. Scale that up to $500bn and see how much waste and dead-weight losses are created.
- JumpCrisscross 2y ago
  > $500b is not business as usual for any corporation "Up to $500bn" is business as usual for Silicon Valley post-2021.
  - ahmeneeroe-v2 2y ago
    This is the real answer. There isn't $500B.
- ahmeneeroe-v2 2y ago
  1. This isn't a single corp, it is multiple corps. For a sense of scale, MSFT alone spent ~$55B in Capex last year. Check out this[1] for a sense of how much different industries spend each year. Note that this will cross several industries including Power, Telecom, Software, electrical equip, etc. 2. There is no commitment to spend in a single year 3. There is no actual contractual commit here, this is a press release (i.e. Marketing) 4. There is not actually a $500B pile of gold being spent. This is more of a "this is how big we think this industry will be and how much we may spend to get exposure to that industry" [1] https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/capex.html https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
- ahmeneeroe-v2 2y ago