On c/ read @jtepper2’s excellent article
“Suppressing volatility and risk only creates bigger fires. Risk is like energy and cannot be destroyed. It can only be transformed.” 4/
"This is an epochal turning point, a great reset. The coronavirus is the grain of sand that will cause the avalanche. For once the taboo of printing money to pay citizens is broken, we can never go back. " #coronavirus #covid19 @UnHerdhttps://t.co/j4WwHurZMR
This headline should read : Covid-19 has exposed the dependence on the working class and the masses . But they don’t want people to be anything more than sheep . This is is truly a world changing event
This is by far the best informational article I’ve read on the economics of the 21st century. Share it far and wide. “According to Bloomberg, since 2010, the big US airlines have spent 96% of their free cash flow on stock buybacks. Today, they’re asking US taxpayers for $25 billion...”
Well said. Isn’t that what investing is? Put money in when the company needs it, so you profit when it does well. How can you profit when they do well, then bail when shit hits the fan? That’s reckless endangerment and should be punishable by law.
Excuse me how so?
I think the stock market is great because it is easy for companies to raise capital to further new project.
While it is just as easy to invest in order to gain from successful projects.
If you understand how certain markets work and how to read people it's heaven.
For example VW and EA crisis this year shows how important it is to read keyboard warriors.
Everyone disliked them but in reality not.
Investors paniced and sold.
Someone who understood both and had the money was able to make a quick buck.
Market participants are typically leveraged, which means that when their collateral devalues they have to do a fire sale. Whether or not valuations were hot air (and especially with corporate debt and equity I guess they were) most classes of assets are pushed down. In part, you see this now with treasuries and gold losing value.
Uh yes because they are smart and you don't have to sell.
If you would check news 10 minutes a day and make up your own mind than believing what media says, you would know that holding cash for too long now is dangerous while investing is also not an option.
So what can a company do? Yes buy undervalued stock from themselves because people are panicing and undervalueing most stocks right now.
After the crisis they will emit stocks again.
The difference between stockprice now and the stocks after the crisis is pretty much taxfree profit.
And you gotta see it this way. It's normal that it's driving up the price because.
Easy example company worth 100 million ÷ 100 shares = 1 share worth 1 million.
People are selling for 0.5 million so company buys backs 50
Now 100 million worth company is split by 50 shares making each share more expensive.
And just to be clear I do know how the stock market works and that’s why I say what I say about it. deep down inside you know it’s true as well people manipulate the hell out of that shit and fuck over the general population
He also closed with the wrong point from The Great Potato Famine. Yeah the Irish were dependent on one crop, but they still had enough to feed to population if they hadn't been forced to export to England during the famine. A bad government response makes a disaster worse.
This seems written to scare people. He basically implies that ETF is synonymous with bonds. A general reader might look at this piece and come away thinking that SPY is much more dangerous than an SP 500 index mutual fund.
> For once the taboo of printing money to pay citizens is broken, we can never go back. Governments will spend money with few constraints, aided by central banks.
A) Slippery slope crap
B) In my entire lifetime, the government has spent with few constraints. The loud protests of "fiscal conservative" policy makers has only ever been present when their opponents had the checkbook.
and C) Saying it's taboo to print money for citizens highlights the inequity of our system, and the absurdity of the opinions of the writer. That is is of course not taboo to print money for corporations.
The whole article feels like a Faux News in Print piece.
I mean the fragility of our economy was already obvious I watched some documentaries in Germany about what would happen if alone transport in overseas would cease. Because of a pandemic or something similar.
At 18k the dow is finally not overinflated.
And were dropping below that.
The system has not fully flushed out, with a market that is open only 32.5 hours a week, or less than 20% of the time, and much hope/indecision/uncertainty over Papa Government deciding who to throw liferafts to.
I suggest looking at Bitcoin. A market open 24/7, crashed harder than everything else at first, and has since stabilized and risen a bit even. This is because the market has no guarantees or anyone promising anything to anyone. Leveraged trades close, weak hands fold, and the market stabilized pretty quickly.
The supply is going to cut in half in about 50 days, a stark contrast to the ridiculous money printing going on which pulls purchasing power out or your pocket and the pocket of anyone holding any dollars.
Bitcoin has a hard cap supply of 21 million. No one can decide to print more of it.
It is permissionless. You can send as much money you want, to whomever you want, wherever they are, any time of the day you want, without a third party examining and approving or denying your decision.
It is the best form of money the world has seen. A base protocol layer that can be built on top of for applications that we havent yet seen. Kind of like the early internet never saw the advent of Netflix.
Exit this system before the exit doors are jammed. There is still time
At the very least, learn more about it. Any talk by Andreas Antonopolous on YouTube is a good place to start.
The sheep in you is making you feel so smart in a chess game already played out by the wolf at the top of the chain.
I’m more than a realtor douchebag.
If the govt told you to jump off the bridge to save yourself and gave you all the stats on why. Televised it everyday, you would listen to them wouldn’t you. Fucking sheep.
Who’s started the world health organization? Two families. The person that is running WHO is an ex-Marxist that crumble his own economy before being handed that job. And now runs that WHO.
Watch the movie contagion. And see how well this plays out today. It’s so ironic that it’s almost like they fucking knew what the mass sheep would react
Come call me a douchebag to my face, bitch, and you’ll eat your teeth.
Fucking punks run your cocksuckers on line with no consequences like you’re some sort of badass.
You’re a little bitch and we both know it.
You’re more than a realtor? Yeah, we know. You’re ignorant bitch, too.
Ex-Marxist? Your tin foil hat is on too tight again, o clueless one.
Turn off faux “news” and attempt to learn something you ignorant fuck.
Stfu douchebag and read a fucking book.
Learn something in the couple of months of being quarantined like a little bitch you are.
Your puny brain couldn’t grasp shit by the balls if it was handed to you by your bf.
Bet you wont even read who that guy is, and keep on complaining like a dumb dog waiting for his owner who left him.
They’re giving corporations 1T a month versus a regular family of 4 only 3k a month during this time... how fucking big of a difference is that?
If you were to not make your payments, these corporations would file bankruptcy on your bitch ass.
If these corporations can’t make their payments the government bails them out.
2008-2009 banking industry got bailed out for not having money.
2020, it’s the automakers, airlines and cruise industry that can’t make their payments.
Boeing spent 45B in buying back their stocks last fucking year.
And this year they’re asking for 50B from the taxpayers to stay afloat for their business.
If you went bankrupt and couldn’t pay your bills, who’s gonna bail your dumbass out. Ain’t the government that’s for damn sure.
Yeah can t really compare the stock market and world economy of 1918 to today's, apples to orange orchards . So many differences related to scale, global economy interconnectedness, volumes, computer trading, tactics and strategies etc.. way to many differencess...makes my head hurt.
No, liquidity and volume always increase market efficiency. He's referring to fundamental differences in the economy.... Not to mention frickin wwi
Edit: ping /u/zgish - debt and leverage ratios, on the otherhand, would be fascinating to see in comparison and across other pandemics and demand shocks. Liquidity would be amplified (up or down) by leverage (imo).
Censorship prevented reporting on it in the country, and governments basically ignored it to avoid panic that might affect war production. No economic crash if you just let it burn through the population, even if it took more casualties than our involvement in Europe.
The market isn’t dropping because of a virus, it’s dropping because consumers are panicked and being ordered by law to stay home. This is economically unprecedented. The Spanish flu only serves as precedent from public health perspective. The economic perspective is unprecedented.
>The million dollar question is once the pandemic is over does this lead to structural changes to society and financial markets
Raoul Pal has been touting the same narrative.
If structural changes do occur, do you have any idea what they might look like and how they may impact society and markets? To take such drastic action has me imagining the changes would have quite grim affects in the beginning, but would then lead to a healthier financial system.
Meh... more Eternal Bear bullshit. Markets will be back in a year or two and guys like this can go back to pissing in the wind with their unfounded pessimism. Expect a bunch more I told you so articles in the coming months
It was interesting to see how quickly all sides of politics agreed on the need for UBI while it has been a hot topic of discussion over the past few years.
What does everyone think will be the repercussions a few years from now once MMT becomes locked in place?
A UBI is inevitable. The cycling of money through the economy is what matters, not the overall accumulation (within reason) of it.
Taxes (and loopholes) on the rich easing throughout the world has led to too much wealth sitting in unproductive uses like bank accounts and in property. It kills enterprise as now it doesn't flow onto them.
The only way to combat it is a correction in wealth redistribution from higher taxes from earnings coupled with a UBI. There also needs enforcement to remain working / value-add study to be eligible so that human labor is being used efficiently. We will still see a divergence of individuals, however it will be harder for them to get incrementally further ahead.
Also the automation of the economic will kill low skill jobs meaning we need to be more highly specialized as a minimum. That needs support and a society means we are all in it together so need to support people during that time.
The flip side of it is, we should see less crime (there is a relationship between rate of crime and socioeconomic status) and people making better decisions overall (there is research that poor people have lower IQ, not all the time, just when they are poor [link if you think I am lying](https://www.independent.co.uk/news/science/poverty-intelligence-aging-brain-low-income-inequality-a7333506.html)).
Edit: Also anecdotally we should also see people in better health since they have the money on preventative medical treatment (like dental) which should have cost saving benefits.
Thanks for the reply. So if Money moving through the economy is all that matters, and USD is the only safe haven at the moment, and the printers go into overdrive, how do you think people will protect their wealth without taking too much risk?
USD is only as safe as any other reserve currency.
Like anything, the best way to preserve wealth is diversify. There isn't one absolutely 'safe' asset class.
Back to UBI problem is people have forgotten what society is. It's us all paddling a raft together. There isn't any prize if you accumulate or protect wealth if everyone else is too poor and hungry to paddle. You still go backwards as a society.
In the extreme cases we get the revolutionary uprisings that changed the western world from absolutism to democracies. The world changed with the industrial revolution, wealth inequality leads to instability, which leads to poor outcomes in society.
What evidence is there of MMT taking hold (outside of like Bernie’s advisers)?
If the cost of borrowing and inflation are both low, as they currently are, there isn’t really any great economic cost in conventional (Keynesian) stimulatory spending. When the increase in GDP is greater than the interest repayments on the debt the policy is fiscally worth doing. You don’t need quack heterodox theories to motivate stimulus.
And that's putting aside the optics of MMT in a country like Australia where the media surrounding government budgets can seemingly decide elections.
People are going to yell from the mountain tops if the US gov go ahead and bailout industries only to leave the average joe struggling like in the gfc. This will increase political movement for the left (who want MMT) in the upcoming election.
Stimulatory spending and even something like UBI is not MMT. Unless you think current government welfare is also MMT (You'd be wrong). UBI is just a welfare payment, it isn't coupled to any macroeconomic theory of how government expenditure is financed.
Yeah look I'm not against a ubi. It creates opportunity to cull Centrelink complexity which is costing us an arm and a leg in IT systems costs.
But really no-one has talked about it as a permanent thing in Australia except in fringe groups.
That was the same in the US (mainly Yang) a few months ago, now it's looking like on-going UBI may be inevitable with both sides of politics calling for it due to corona and the current financial crisis. I wouldn't be surprised it they dont even bother issuing bonds to fund the handouts. Once precedent is set in other capitalist western nations, I could imagine Australia wouldn't be troubled following suit.
This is an absolutely fantastic article (warning: long read) on the absolute shitshow that has been the markets for the past 3 weeks, and likely to be going on in the future.
I genuinely can't encourage anyone to read this more.
Some choice exerpts:
In 1987 Per Bak, Chao Tang, and Kurt Wiesenfeld found that while sandpiles may be individually unpredictable, they all behave the same way. The critical finding of their experiments was that the distribution of sand avalanches obeys a mathematical power law: The frequency of avalanches is inversely proportional to their size. Much like forest fires, the less frequent they are, the more catastrophic they are.
It’s the same with financial markets and the economy. We will experience years of quiet, interrupted by sudden avalanche. Years of slowly adding grains of sand can end abruptly — to our great surprise. Today in financial markets, many unsustainable trends have been building, and the coronavirus is merely the grain of sand that has tipped the sandpile.
Rather than encouraging moderation, central bankers and policy makers have been reloading the all you can eat buffet and persuading everyone to come back for third and fourth plates. The European Central Bank and the Bank of Japan have been buying corporate bonds, and central banks have kept funding at zero rates, which has encouraged a massive increase in indebtedness over the past decade.
Entire industries are zombies. The most indebted and bankruptcy prone industry has been the shale oil industry. In the last five years, over 200 oil producers filed for bankruptcy. We will see dozens if not hundreds more bankruptcies in the coming year. They were all moribund with oil at $50 dollars; they’re now guaranteed to go bust with oil at $30.
The absurdity of the policy was perfectly illustrated recently in Europe. The European Central Bank has been busy buying bonds, and recently it bought bonds from LVMH, the luxury conglomerate owned by the world’s richest man Bernard Jean Étienne Arnault. The bonds had a negative yield, meaning that the ECB was paying LVMH to borrow. LVMH used the ECBs money to buy Tiffany.
If rates are now so low that billionaires are being paid to borrow, monetary policy has reached the limits of its usefulness.
Central banks became enamored of their own success as fire fighters, and they have busily been trying to put out fires by encouraging reckless behaviour, prizing low volatility above a robust financial system, viewing “risk management” as preferring no financial corrections ever.
They should accept that sometimes putting out every single fire creates greater conflagrations. They should be humbler about the extent and limits of their power.
I don't really agree I'm afraid! The article spends a lot of time trying to act as if this crisis is a product of failure to regulate/reform the financial system following the GFC and then concludes that the answer is UBI and not to worry about budget deficits?? Which are nothing to do with correcting what it sees as a weak financial system!
So far it seems the financial system is actually holding up quite well with CBs providing essentially unlimited liquidity in short term/repo markets and banks making use of larger capital requirements.
You can argue that low interest rates have made CBs less powerful in this crisis but it isn't what has caused this crisis!
Its other closing points, despite being unrelated to pretty much everything that was said, were also quite weak imo:
> What politican will be disciplined enough to stop spending?
The UK for the last 10 years
> What central banker will raise rates when it is unpopular to do so?
Literally any central banker. This is why they are independent of politicians.
> Today we are reaping the whirlwind of the last financial crisis.
Not really, this is an external shock rather than an endogenous shock from within the financial system.
> Rather than pursue lower leverage, less debt and more robust institutions and more responsible corporate behaviour, investors and companies instead learned that they would be bailed out in a crisis.
In many cases, banks are a lot more prudent and resilient than the last financial crisis following the setting up of the BoE's Prodential Regulation Committee and Financial Policy Committee.
The last crisis wasn't about the behaviour of companies in general too (which the article seems to infer), just banks - which are significantly less leveraged and more robust today.
> Central banks became enamored of their own success as fire fighters, and they have busily been trying to put out fires by encouraging reckless behaviour,
In the banking system they've literally acted to attempt to systematically eliminate it.
> prizing low volatility above a robust financial system,
The two go hand in hand. If you want a robust financial system you have to put in place mechanisms to reduce volatility happening in the first place. The VIX represents uncertainty which a solid financily system should help to reduce.
> Their refusal to do so I think actually does step from the political, as too many people were over leveraged on their mortgages
Encouraging buyers to become even more overleveraged as borrowing is so cheap. Young people can no longer afford to get on the ladder, and their savings do not grow.
Yeah just saying central bankers don't really do what's popular. It just so happened that they believed that low interest rates were best for the economy post-crisis (which is a popular policy for the majority of businesses and politicians!)
Whether or not they have been successful as a policy choice is another question though. It would've been a big risk to raise them, kill of a load of zombie firms and make people unemployed!
It was also trying to improve low inflation though - if they raised too quickly they could have risked a deflationary spiral.
The BoE's mission has always been to 'promote the good of the people' too so they do to some extent consider people as more than just utility maximising economic agents! To what extent that represents opportunity for political discretion is another question though.