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> This treatment is considered acceptable because the people who decide what is acceptable have accepted it. Wasn't that the root of the 2008 crash? The debt

> This treatment is considered acceptable because the people who decide what is acceptable have accepted it. Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar.

hedora 11mo ago
[flagged]
- hyperadvanced 11mo ago
  Yep any day now!
loeg 11mo ago
The 2008 crash was in part caused by inaccurately rating synthetic bundles of subprime mortgage debt as extremely low risk (e.g. AAA). Subprime borrowers had a much higher risk of defaulting than a AAA rating implied. On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.
- tyre 11mo ago
  Isn’t part of its creditworthiness how much debt it’s carrying? And if it’s shifting that off of its balance sheet, then it appears in better shape than it actually is.
- underlipton 11mo ago
  Until they don't. Lest we forget that Facebook's new handle was borne out of a pivot that's sunk almost a hundred billion dollars while being having been largely sidelined/abandoned. (I know that they're still doing a good deal of R&D, which is good, and a worthy investment, but 1) Carmack left, and 2) We apparently don't judge corporations on whether or not they're contributing to society, but only on whether they're in the red or black.)
- sethops1 11mo ago
  Except they're taking on a huge amount of debt, enough that it would lower their credit rating, which is why they're trying to offload it ...
- austin-cheney 11mo ago
  That's not accurate. This is debatable but subprime loans were mostly accurately rated. They were rated very low. That low rating was the ultimate precursor to the crash, because it means banks carrying those poorly rated vehicles needed to balance them with different highly rated vehicles to keep their own rating high enough to qualify carrying and lending other financial assets on their books. There were so many of these shitty loans that they had to repackage them to dilute their value/rating against their other highly rated assets, because there are limited number of highly rated assets any given bank could acquire at a moment. That dilution was called a credit default swap, which is bundling under the guise of an insurance vehicle. This magnified the problem for two reasons: First these shitty assets can now be traded in large bulk and secondly any given bank can now carry more of them before further eroding their value. That proved catastrophic because this toxic debt could not be moved fast enough by anybody that held them. Its like hot potato or musical chairs, like Bitcoin. The only real difference between those credit default swaps and Bitcoin is only that everybody knows Bitcoin is intrinsically worthless and only exists as an instrument of speculation while many people actually thought these credit default swaps were real financial assets and that they were insured.
  - loeg 11mo ago
    The other parts of the 2008 crisis are even more dissimilar to this scenario than the MBS ratings.
    - cyanydeez 11mo ago
      Right, this is more like wash trading, in that companies like Meta are trying to syntehtically make it look like there's more assets involved in AI than there really are.
      - pardon_me 11mo ago
        > more like wash trading This is it. I can see TSLA and a lot of bitcoin vehicles have done it too. Combined with the extent of tech companies proportion of total S&P500 market cap, along with expected energy price increases due to usage, will lead to a huge drop of worldwide confidence in US stocks once this bubble pops. Governments who do not take enough action to stop this behavior inevitably lead to this. The US credit rating may be at risk entirely.
- venturecruelty 11mo ago
  Enron had great creditworthiness, too. They are, famously, a very rich and powerful company today.
lenerdenator 11mo ago
> Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar. I mean, yeah, but at the same time, and? The lesson learned from 2008 was that no one was going to do anything of consequence to degenerate gamblers who kneecapped a generation's economic prospects. Then, in 2024, we doubled down on that position. The behavior will continue until an effective consequence is introduced.

hedora 11mo ago

[flagged]

hyperadvanced 11mo ago
Yep any day now!

loeg 11mo ago

The 2008 crash was in part caused by inaccurately rating synthetic bundles of subprime mortgage debt as extremely low risk (e.g. AAA). Subprime borrowers had a much higher risk of defaulting than a AAA rating implied. On the other hand, Meta has great creditworthiness. And guarantees this vehicle. So... it's not the same.

tyre 11mo ago
Isn’t part of its creditworthiness how much debt it’s carrying? And if it’s shifting that off of its balance sheet, then it appears in better shape than it actually is.
underlipton 11mo ago
Until they don't. Lest we forget that Facebook's new handle was borne out of a pivot that's sunk almost a hundred billion dollars while being having been largely sidelined/abandoned. (I know that they're still doing a good deal of R&D, which is good, and a worthy investment, but 1) Carmack left, and 2) We apparently don't judge corporations on whether or not they're contributing to society, but only on whether they're in the red or black.)
sethops1 11mo ago
Except they're taking on a huge amount of debt, enough that it would lower their credit rating, which is why they're trying to offload it ...
austin-cheney 11mo ago
That's not accurate. This is debatable but subprime loans were mostly accurately rated. They were rated very low. That low rating was the ultimate precursor to the crash, because it means banks carrying those poorly rated vehicles needed to balance them with different highly rated vehicles to keep their own rating high enough to qualify carrying and lending other financial assets on their books. There were so many of these shitty loans that they had to repackage them to dilute their value/rating against their other highly rated assets, because there are limited number of highly rated assets any given bank could acquire at a moment. That dilution was called a credit default swap, which is bundling under the guise of an insurance vehicle. This magnified the problem for two reasons: First these shitty assets can now be traded in large bulk and secondly any given bank can now carry more of them before further eroding their value. That proved catastrophic because this toxic debt could not be moved fast enough by anybody that held them. Its like hot potato or musical chairs, like Bitcoin. The only real difference between those credit default swaps and Bitcoin is only that everybody knows Bitcoin is intrinsically worthless and only exists as an instrument of speculation while many people actually thought these credit default swaps were real financial assets and that they were insured.
- loeg 11mo ago
  The other parts of the 2008 crisis are even more dissimilar to this scenario than the MBS ratings.
  - cyanydeez 11mo ago
    Right, this is more like wash trading, in that companies like Meta are trying to syntehtically make it look like there's more assets involved in AI than there really are.
    - pardon_me 11mo ago
      > more like wash trading This is it. I can see TSLA and a lot of bitcoin vehicles have done it too. Combined with the extent of tech companies proportion of total S&P500 market cap, along with expected energy price increases due to usage, will lead to a huge drop of worldwide confidence in US stocks once this bubble pops. Governments who do not take enough action to stop this behavior inevitably lead to this. The US credit rating may be at risk entirely.
venturecruelty 11mo ago
Enron had great creditworthiness, too. They are, famously, a very rich and powerful company today.

lenerdenator 11mo ago

> Wasn't that the root of the 2008 crash? The debt spiral was acceptable because people were making enough money in the present that regulators were powerless to advise against it. In a sane world people often go to jail for decades when doing this at pennies on the dollar. I mean, yeah, but at the same time, and? The lesson learned from 2008 was that no one was going to do anything of consequence to degenerate gamblers who kneecapped a generation's economic prospects. Then, in 2024, we doubled down on that position. The behavior will continue until an effective consequence is introduced.