> all under the auspices of a hard line Republican administration

> Washington under any administration will have no choice but to bail out all the state and local agencies and every insolvent pension scheme wholesale

There are underlying problems being forced to the surface by COVID that go deeper than political parties. Somewhere between the 1970s and 2000s American politicians as a class (and possibly a supermajority of voters too) have accepted that running up debt literally does not matter.

The economy is brutal. It is a fabricated social concept built on trust right up until the moment it breaks out into the physical world and things that desperately need to happen stop happening because it doesn't make any economic sense.

The persistent bailouts are making losers of people who make good long term decisions. Sooner or later, nobody will be left who makes good long term decisions. Such people have been exorcised from the financial industry.

The creditors don't seem to mind it either, happily buying hundred-year bonds with near-zero interest rates.

Also remember that every "saving" is also a "debt" on the other side of somebody's ledger. Quite a lot of that corporate and government debt is "savings"; $270 billion of it is owed to Apple alone. http://thewire.fiig.com.au/article/2018/04/24/how-apple-inve...

> The economy is brutal. It is a fabricated social concept built on trust right up until the moment it breaks out into the physical world and things that desperately need to happen stop happening because it doesn't make any economic sense.

This was one of the questions that Keynes explored - how it is possible to have productive capacity idle because there isn't enough credit for people to buy the products.

It's also the idea behind a lot of the "green new deal" schemes; do things that need to be done but don't offer a specific return, but benefit society and the planet as a whole.

> The persistent bailouts are making losers of people who make good long term decisions

How, exactly? What "long term decisions" would not have been worse off if the 2008 bailouts hadn't been made and a large chunk of Western retail banking had gone insolvent, tying up accounts until it could have been resolved? There is an important difference between "this business is no longer viable", and "this business is perfectly viable in the future but is experiencing a temporary shock which its cashflow and trade credit cannot cover".

I think that OP is referring to people who have decisions that would help them weather a bad storm such as 2008 or the pandemic. Let’s say I’m a small bank that is extra extra conservative with my balance sheet and only makes responsible loans, etc. In theory, 2008 or 2020 comes along and my business is hurt but I’m still fine because of my caution. And long term I am in a great position because my competitors are soon going out of business... except they aren’t because the government props them up.

This is essentially what’s happening to Warren Buffett right now who has a war chest is billions of dollars saved up during the good times that he’s ready to invest now. But it’s not as viable a strategy because the government props everyone up.

Yes, a lot of these are viable businesses in the long term if they can just be helped now. But if the government protects them on the downside many would argue that they should get more of a share of the upside as well.

In all fairness, Berkshire Hathaway stepped in to bailout Bank of America. It obviously paid out handsomely for Buffett and Co. long term, just find it interesting to use as an example.

Private capital does not "bail out" companies. That's called an investment.

Instead should have mentioned his investment in Goldman--not BoA--during the financial crisis, which he did counting on the bailout that was passed shortly after.

I don't believe it's too much of a leap to conclude that back in 2008 it was as close as possible to a joint effort between BRK/Goldman/the-financial-powers-that-be to minimize the total obligation GS would have to the Treasury from TARP funds.

Read somewhere the TARP investment was repaid 8 months later by GS with 23% interest, whereas they repurchased BRK's preferred stock for a 10% premium in 2011. BRK's warrant redemption in 2013 is another story, but easier for GS to account for long term.

[0] Uber, an 11 year old company, IPO-ed in 2019, losses were >1/3 of their $14 billion revenue that year.

There is a level of crazy afoot there. The shares being worth money to anyone is alarming, and indicative that something is very broken. Large amounts of debt is an obvious answer to 'where did the money to fuel this bonfire ultimately come from'

> Also remember that every "saving" is also a "debt" on the other side of somebody's ledger.

And if the money on the debt side isn't used prudently, both the debtor and saver end up with nothing at the end of a sad story. The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor. What the loan is used for in real terms (useful infrastructure, vanity projects, wasted, etc) matters.

I don't mind what the accounting identities do if I get a nice place to live, cheap electricity and lots of food. But the loans at the moment aren't going towards big construction in desirable areas, nuclear power plants and securing food supplies.

[0] https://en.wikipedia.org/wiki/Uber

Uber appear to have $7.6bn debt, reading off the balance sheet. Quite a lot for a company which shouldn't need much to cover operating cashflow.

But who are the investors? It's bloody Softbank again.

> The saver loses out more, because they could have been living it up with more resources, rather than directing them to the debtor.

Softbank also managed to lose a lot of money on WeWork. Given that one of their main backers for this is the Saudi government and royal family, whose capacity to "live it up" is already pretty high, I'm going to make an alternative argument: the rise of global inequality and lack of wealth taxes means that the only way left to channel money back to the general public is through Potemkin investments.

> nuclear power plants

If we want to talk long-term prudence, something with a massive decommissioning liability that's uninsurable is probably not it.

If you entertain the idea that a big bubble (3-5 years long) could ever happen, Uber being allowed to continue operations is an eyebrow raiser. There are risks that much of the effort that should be going in to securing a prosperous future is being misdirected.

> If we want to talk long-term prudence...

I would like, in my old age, to have twice as much electricity available as when I was young. I don't really care how. But it isn't going to happen because I wished hard. We need to invest in physical changes to the world that will make life better for people. Particularly in things that aren't oil.

Look at the amount of construction that is going on in China. That is what is physically possible. That sort of activity could be usefully replicated in the West.

OK: how?

The private sector isn't going to be doing it because it's not profitable enough. The public sector won't do it because people complain about the public debt.

This isn't true, though. The US consistently elects republican administrations that jack up deficits to cover tax cuts for billionaires and nobody bats an eye. The military can blow 700bn a year with barely a peep of outrage. And unlike with infrastructure investment that money is effectively a 700bn jobs program for 3 million people that produce nothing of value.

Complaining about debt is usually a cover for bigotry. People don't want social equity or fairness because leveling the playing field is deconstructing hierarchies people were born into and base their personality on. Its why attacking institutional racism in the police is taken as an attack on the culture, personhood, and lifestyles of cops and white suburbia.

> Complaining about debt is usually a cover for bigotry. People don't want social equity or fairness because leveling the playing field... This could be a paragraph out of the millenial reactionaries handbook..not only are the concepts of social equity and fairness highly subjective and controversial but debasing majority cultural bias to construct a level playing field is so historically unsuccessful as to make it a philosophical curiosity (aside from with a singularly unsuccessful foray into the real world which ended in despotism and pogroms for all).

> How, exactly?

Keeping interest rates very low is hurting people who are saving money. Not just in banks also via pension funds[-], retirement schemese, life insurance.

It pushes savers into taking risky bets with real estates or stocks or even direct consumption (spending money instead of saving them is very risky bet on the future of events).

[-] The pensions will be low because 1) compound interest on riskless part of one's pension assets is low 2) Other assets that one will be purchasing with retirement money will be grossly inflated with cheap money chasing yields, via consumption etc.

The banks were more than willing to sit on assets than actually sell foreclosed properties at market values. So while the housing prices went down slightly, your talking maybe a 10% after a decade of 10% a year increases. The "dip" didn't even last 2 years.

I myself made an offer on a forclosed/vacant house, and the bank counter offered above the listing price.

I had friends who tried to buy already forclosed houses and literally sat around for a year+ waiting for the banks to accept their offers. Eventually like me, actually buying other properties.

Same goes for professional money managers of all kinds who simply cannot provide decent returns to their customers by buying bonds like old school. So they are forced to chase yields in other risky assets.

Also with bank savings everyone has an equal chance. With risky assets - richer people are priviledged with better access to higher returns (via better access to information, scale of investment, credit etc.). So disparities grow.

Edit: spelling

I do agree that something is broken, but "debt is too high and interest is too low" is a bad problem statement.

Low interest rates is how governments can keep the pretense that they are not printing money out of thin air and they "service" their debt and that they will repay it at some point in the future.

> When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, the price of borrowed funds – the federal funds rate – falls.

https://en.wikipedia.org/wiki/Federal_funds_rate#Explanation...

There must be strict liability against those whose bad decisions lead to incalculable suffering for countless people. Hard stop.

We can debate the specific consequences (banned from positions of authority, fines, debt, prison, etc). But we must not allow those with demonstrable bad decision making abilities to continue to play roulette with the lives of others. Likewise, good decisions cannot be allowed to justify or excuse bad ones.

Isn’t that antithetical to evidence based policy making? How can we verify a project is successful without a desired outcome to look for?

I think it started in the 60s with the Vietnam War, the Space program and Johnson's great society programs. And then Nixon took us off the gold peg, and we were free to print as much as we wanted.

MMT is pretty scary to me. It's never really been tested long term at scale and mainly exists as a theory. But I know that's the end game for the Fed and that's the trajectory we're on.

MMT is only a description of how the systems work. But if by "test it", you mean that the Central Bank is backing the public debt, Japan have been doing for, at least, twenty years.

I think you'll find it was precisely 1971.

The transparency SHOULD be good in that it should be able to show the electorate whether reps did what they said they would.

In reality it is, as mentioned above, instead used to appease a small but powerful body of the electorate.

The tradeoff they are pointing out isn't "transparency or lobbying" it's "transparency + rampant lobbying vs secrecy + less effective lobbying"

https://www.tylervigen.com/spurious-correlations

https://www.buzzfeednews.com/article/kjh2110/the-10-most-biz...

The end of super-cheap easy domestic oil has long been my go-to hypothesis for what happened around 1971. Monetary systems and policy are social constructs, but energy is physically fundamental.

Everything that has happened since then including reckless monetary policy and wage stagnation could be argued to be symptoms of the rising real cost of energy. By real cost of energy I mean physics, EROEI. Wage stagnation happens because without super cheap energy the actual physical cost of providing increasing living standards to a huge number of people become too high. Even if they live lavishly, a smaller number of rich people don't consume nearly as much energy as a huge number of middle class people. As a result the rich are not affected. Reckless financial and monetary policies can be explained by politicians who don't understand physics trying to get the magic unicorns to come back.

If either solar/wind + batteries or some form of nuclear power can be made to scale well enough, we may see a return to the post-war era. Otherwise we will not, and returning to the gold standard (or Bitcoin) won't make much difference.

I'm pretty optimistic about renewable power. I glance at this every once in a while:

http://www.caiso.com/TodaysOutlook/Pages/supply.aspx

During the day California often runs on >50% solar/wind. Two decades ago that was a small single digit percentage. It's pretty spectacular. If we can scale storage similarly and then if the costs of both continue to fall for a while due to industrial scaling of production, we could be back to the 50s but with a renewable instead of non-renewable basis.

A fusion breakthrough or finally figuring out how to safely and sustainably scale fission would have a similar outcome.

BTW: I also wonder if you can explain the Chinese miracle in energy terms. China just decided to chase growth and fuck the environment, so they went wild with cheap coal. The magic was not only using cheap coal but doing so with no scrubbers (which consume a surprising amount of power) and no other energetically costly environmental controls to speak of, maximizing physical EROEI. They lifted vast numbers of people to middle class status and became a superpower at the cost of accelerating climate change and air that burns your eyes.

I'm starting to wonder if good long term decisions aren't things like learning to grow food and stocking up on ammo at this point.

Could be used for the environment too. Unlike money, CO2 and temperature are real things, and rather than worrying about imaginary stuff like money, it would be prudent to be fiscally conservative regarding our carbon budget.

So is political means of acquiring wealth - this is known as intra-species aggression and is common to all social species; this is another, older, and less efficient, algorithm for resource allocation.

Basically, every time politicians and their enforcers barge in to "fix" things they break the efficient algorithm (aka "market economy") to replace it with the older one (aka "the biggest ape gets to boss others around"). And, yes, it doesn't make any economic sense. "Bailouts" are nothing more than taking from many people by force and giving to few politically-connected ones. It's just indirect form of force: instead of simply looting, they print more money - but everybody else is prevented by force by doing the same, so they have no choice but to see the value of their money to decline and be transferred to the recipients of new money.

Importantly, the idea that state intervention is bad for the economy as a universal rule is simply wrong. In the long run, history clearly teaches that mixed economy work (e.g. a la Keynes), while laissez-faire (e.g. a la Friedman) or centralized economies (e.g. a la Communist) don’t. Striking the right mix requires society input in the form of political debate.

We desperately need this to happen now in the West. While I have nothing about Jeff Bezos as a person, but billionaires simply should not be allowed to exist. They are the symptom of a « Laissez Faire » system in terminal state.

(Those guys at least built something. Why does no one complain about America’s grandpa Warren Buffett. He just shuffled around money, plays with warrants and options (while telling others not to) and makes a couple hundred million by going to Congress and talking his book. )

One could argue that Warren Buffet should pay higher taxes. And he would agree! But unless you find capitalism itself unethical there is nothing wrong or underhanded with searching for undervalued firms and investing in them.

My biggest complaint is that that instead of paying higher taxes Warren Buffet could maybe not jawbone Congress into bailing out AIG. AIG should have gone bankrupt and Goldman Sachs (and their other counterparties) should have borne that pain, and possibly gone bankrupt themselves. Instead Warren Buffet refuses to come to the rescue of AIG, comes to the rescue of GS, and then tells Congress that the economy will freeze up if AIG and other banks aren't bailed out. That is not efficient allocation, that's crony capitalism.

What is a problem is that congressional representatives are enormously influenced by donations to political campaigns. Even if they lose a reelection there's a whole industry in place to put them into cushy jobs if they've followed their party line. And the party line is to do what the campaign donors want, not necessarily what the constituents want. That is a problem.

History teaches no such thing. History teaches that governments messing with the money supply, which is the centerpiece of Keynesian economics, leads to civilizational collapse. The Roman empire being a prime example.

> centralized economies (e.g. a la Communist) don’t

Government messing with the economy by manipulating the money supply is just a different form of central planning, and doesn't work for the same basic reason that Communist central planning in the Soviet Union didn't work.

I always had an impression that all the money everywhere was always something issued by the government and its supply effectively controlled by the governments: even many centuries ago there were laws that forbade forging the money, even at the times when the money was made of gold. The way I understand it, the worth of money was seldom, even in old times, the weight of the metal. Otherwise nobody would have cared about the forgeries?

So the question is, is there any historical example of money long enough disconnected from the issuers "messing" to be even able to argue there is such thing?

If I understand the more modern thinking of economists, it's not that the money in older times functioned differently (that there wasn't a "trust" component), it's just that there were limits due to the dependence on metals availability. But the economy was never "just a sum of the issued money".

Of course not; the economy is all economic transactions, not just the quantity of money.

No. Government having a monopoly on the issuance of money is a relatively recent development.

> even many centuries ago there were laws that forbade forging the money

That forbade forging/counterfeiting money issued by the government, yes. But not issuing different money altogether.

Historically, government-issued money has not always been available everywhere people wanted money, so other forms of money would be created to fill the gap. It is only in recent history, with the advent of paper (and later electronic) fiat money, which removes all practical limits on how much of it governments can create, that government issued money has become available everywhere to the point where the incentive to create private forms of money to fill a gap is basically gone.

> The way I understand it, the worth of money was seldom, even in old times, the weight of the metal.

The worth of the money was always supposed to be based on the weight of the precious metal, such as gold, that it contained.

However, once you've gotten everybody to believe that, say, all your gold coins contain some standard quantity of gold, which determines their value, the temptation is irresistible, judging by the historical record, to then secretly debase the coins by substituting a much cheaper metal for gold for part of them, so the actual weight of gold in them is less than the standard amount, but still telling everybody that they're the standard gold coins so they will continue to be accepted at the same value, based on the standard weight of gold instead of the debased weight.

Of course, such a secret never actually keeps for very long, and once word gets out that you're debasing your coins, their actual value in the marketplace goes down. Or, to put it another way, prices in terms of your coins go up--it takes more of your coins to buy the same goods and services. This is why monetary debasement always leads to price inflation.

> Otherwise nobody would have cared about the forgeries?

Governments always care about forgeries because they don't like competition in the business of issuing money, since that business is a source of revenue (look up the term "seignorage").

> is there any historical example of money long enough disconnected from the issuers "messing" to be even able to argue there is such thing?

The incentive to debase the money you are issuing, once you've gotten everyone to accept it at a certain value, is certainly not limited to governments. Fractional reserve banking comes from the same incentive: if you've gotten everybody to believe that, say, every gold note your bank issues is backed by a standard quantity of gold in your bank's vault, the temptation is irresistible, judging by the historical record, to then start secretly issuing more notes than you have gold, but still telling everybody that your notes are all 100% backed by gold, so they will continue to be accepted at the same value. Of course this never works for too long either, and since it's easier to print paper notes than to mint debased coins, inflation with debased paper money tends to happen faster and be more of a problem than inflation with debased coins.

So the difference between a private issuer of money and the government issuing money is not that the latter will debase money but the former won't. The difference is that if one private issuer's money gets debased, but there are multiple different private issuers, such as banks, people can simply stop using the money from the bank that debases it. So in a private, competitive situation, there is actually an incentive to not debase your money, which can counteract the incentive I described above towards debasement. In short, there is a limit to how bad things can get if private money issuance is allowed.

But if the government debases the money, while it's also enforcing a monopoly on money issuance (and also, most likely, requiring things like taxes to be paid in the money it issues), there is no other money people can choose, so an entire economy can be ruined.

The problem is, a big part of the value in the economy never gets to be an explicitly "issued" money, and that was so even many centuries ago. So your belief in the magic of the "hard" issued money appears to me to be just a wishful thinking, even without the historical support since the earliest times. Different forms of debts are older than any precisely defined issued money, and all the forms of debts are what actually drove the economies.

Most famously, the period of democracy in Athens started only after Solon abolished the accumulated debts, which speaks a lot about the dynamic of their economy during all the times before that point was reached.

It appears to me that sooner or later the current world will have to accept that we need a Solon-like act to end the period we're in.

For an appropriate definition of "value", yes, I'll agree with this.

However, I don't see how it conflicts with anything I said.

> Different forms of debts are older than any precisely defined issued money, and all the forms of debts are what actually drove the economies.

Debt certainly plays a role in how economies develop. However, again, I don't see how that conflicts with anything I said.

> the period of democracy in Athens started only after Solon abolished the accumulated debts

First, I don't think historians are in agreement about exactly what Solon did and whether it amounted to abolishing all accumulated debts.

Second, while many historians credit Solon with laying the foundations for Athenian democracy, it did not actually start until well after Solon's death, after a considerable period of autocratic rule following the seizure of power by Peisistratos. So even if we grant that Solon abolished all accumulated debts, I don't see any clear connection between that and democracy.

> sooner or later the current world will have to accept that we need a Solon-like act to end the period we're in

Meaning, abolish the accumulated debts? That's basically what the US government is doing to its debt by continuing to print money; since all of the US government's debt, and pretty much all of US private sector debt, is denominated in dollars, printing more dollars dilutes the impact of all that debt on the debtors. It's not clear to me that this is a good thing. Of course, it's also not clear to me that continuing to accumulate debt is a good thing. But while the current financial and economic system certainly has plenty of issues, I don't see how "abolish all accumulated debts" is a good way to fix them.

Ultra liberal economics lead to accumulation of wealth by few super riches. This happens to be one of the reason the Roman Empire fell because all this money could not be spent on keeping the army in working conditions. Super riches of the time hoarded the necessary gold for themselves.

But don’t put that on Keynes’ tab. It’s twistedly wrong.

Yes, it is. Keynes said at one point that the government printing dollar bills and burying them for people to dig up would be a valid form of economic stimulus.

> This extreme monetarism you describe is... Friedman’s!!!

Milton Friedman did not advocate anything like the arbitrary manipulation of the money supply by the government that is practiced by the Federal Reserve. (He was in fact a consistent opponent of the Federal Reserve; he thought it should be abolished.) He advocated tying the growth rate of the money supply to the growth rate in real productivity, with no discretionary element at all.

> Ultra liberal economics lead to accumulation of wealth by few super riches

No, the government printing money and giving it to a few favored parties, which is exactly what the Federal Reserve does and always has done (the favored parties have almost always been financial institutions, no surprise given the background of most Fed members), leads to accumulation of wealth by a few super riches.

> This happens to be one of the reason the Roman Empire fell because all this money could not be spent on keeping the army in working conditions.

I don't know where you're getting your history from, but it's wrong. The reason the empire had trouble paying for a competent army was that it had debased the coinage so much that people were refusing to take Roman coins as payment. It even got so bad that the Roman government itself, knowing that its coins were worthless, stopped accepting them in payment of taxes and insisted on payment in kind instead.

The emperor Constantine managed to get hold of a large supply of gold bullion and used it to mint new gold coins, which were accepted in payment of taxes. That helped for a while as the empire could use these to pay the army and the civil servants; but many people could not afford to buy the new gold coins and therefore could not pay their taxes, so the improvement didn't last too long.

It also didn't help that the size of the army and civil service kept increasing, for no tangible reason, which just increased the tax burden.

This does not make it the center piece. The center piece of Keynesian economics is that state intervention is necessary to moderate the booms and busts in economic activity.

> Milton Friedman did not advocate anything like the arbitrary manipulation of the money supply by the government that is practiced by the Federal Reserve.

Sorry, but clamping the growth of money supply with a k-rule, irrespective of the market cycle, is the arbitrariest manipulation I can think of.

> No, the government printing money and giving it to a few favored parties (.../...)

We can agree there that governments giving money to the already super wealthy is a bad think. But why does it do that? Because same super wealthy have become so wealthy they can influence government.

Which brings me to your case on Rome. The reason why Roman emperors debased their coins was because they had emptied their coffers on other things yet /needed/ to keep the army strong for what was essentially a looting regime to survive. At the end of the day, Emperors are not governments, they are another form of super-rich protecting their short-term positions at the expense of longer term stability.

Ah, our old friend No True Scotsman. Sorry, not buying it.

Not just "state intervention", but state intervention of a particular kind, namely, manipulation of the money supply. Keynes' basic theory was that in a depression like the Great Depression, the problem was that there wasn't enough money in circulation, because people would not simply let both prices and wages fall in order to establish a new equilibrium between supply and demand. So, he said, the solution is to simply print more money.

> clamping the growth of money supply with a k-rule, irrespective of the market cycle, is the arbitrariest manipulation I can think of

I personally don't favor Friedman's solution either; I don't think the government should be manipulating the money supply at all. But to call determining the money supply by a known objective rule "more arbitrary" than determining it by the whim of regulators does not strike me as a sound use of language.

> We can agree there that governments giving money to the already super wealthy is a bad think. But why does it do that? Because same super wealthy have become so wealthy they can influence government.

No, you have it backwards. The super wealthy influencing government comes before the government giving money to the super wealthy, not after.

In the case of the Federal Reserve, it came into being because the super wealthy got tired of the government coming to them for loans to bail it out every time there was a financial panic. Why did the government come to the super wealthy for loans? Because the super wealthy had already gotten favors from the government through influence--for example, monopoly privileges over transcontinental railroad routes in order to outlaw free market competition. So naturally the government would come to the super wealthy expecting a quid pro quo.

Once this had happened a few times, the super wealthy figured out a better (from their perspective) solution: create a system of central banks that would allow them to transfer wealth to themselves directly, stealthily, by manipulating the money supply, instead of having to openly go to the government for favors. And sell this system to the public as a means of "preventing" future financial panics. The Panic of 1907 presented a perfect opportunity to put this system in place, and by 1913, the Federal Reserve system was law.

> The reason why Roman emperors debased their coins was because they had emptied their coffers on other things yet /needed/ to keep the army strong for what was essentially a looting regime to survive.

Governments always spend more money than they have, on white elephant schemes that do not benefit society. So of course governments are always looking for ways to avoid having to face the consequences.

But that is a very different claim from the claim you originally made, and I rebutted, that the Roman empire fell because the ultra rich were hoarding all the wealth. In fact the Roman emperors appropriated the wealth of the ultra rich pretty much the same way they appropriated the wealth of everybody else. The reason for the shortage of real wealth in the later Roman empire was not that it was being hoarded; it was that it was being squandered and destroyed by ruinous public policy.

This only means "socialism for the rich, brutal unregulated capitalism for everyone else, because it's their fault they aren't rich anyway".

Never before in history have we attempted to store wealth at this scale for things like retirement.

In a world that was continually growing at a pretty solid pace (i.e. since WW2) that was sort-of conceivable because the bigger next generation effectively created more space for that.

But now people live, and retire, for muuuuuccchhhh longer.

And sovereign-wealth funds, retirement funds, insurance funds, etc, are much larger.

And population growth is slowing (and with, financial growth).

Some very hard things to square coming up.

https://slatestarcodex.com/2017/02/09/considerations-on-cost...

NYC, due to its population density, certainly has a higher potential for pandemic death than anywhere else in the US, but there's good reason to believe that NY didn't reach anywhere near that potential, due to the interventions taken by the community which prevented that from happening. We see much worse infection and death rates in some areas of the world with less dense population, due to different responses. So there's no reason to believe that the rest of the US can't get just as bad as NYC, and worse. And given the almost complete lack of response in some parts of the US, I think we'll get to see what that looks like; if not in the next few weeks, then in the fall when cold weather hits.

Things aren't normal here. I can definitely see how one might mistake things for being normal because businesses are opening up and people are going outside, but if you look more closely, about half of the shops and restaurants remain closed, and the places that are open are operating at half-capacity. If you talk to the business owners, things are rough. Some local businesses aren't staying open because they're making money, they're staying open because they lose less money by being open (which is a big difference). The hope is that they'll be able to start operating profitably again, but that's far from guaranteed.

I really doubt that we have insight yet into how this is going to play out.

7.3 million germans are currently fourloughed. That is 21% of the workforce!

The numbers demonstrate this. The pictures and essays from New York based journalists say something different.

Also, it's an election year, and that politicized decisions on reopening.

Here in Colorado, mostly business as usual, but kids are miserable because camps and pools are closed.

Which states are those exactly?

What a nonsense. Like if the USA is the only one doing it.

Everybody is doing it and at the same time.

I hope this help some people to dispel this myths about the "public debt" and living to the grandchildren expense. What markets are covering this public debt when everybody is doing it at the same time?

If something, this situation show how strong the modern economy is. Think about it, a big part of the economy just stopped and the supermarkets are full and there are not supply problems.

People are suffering because they are not payed, not because there is not food available. Compared that to what would happen in other times in history if a relevant percentage of the population stopped working globally.

Other countries, specifically China, have been trying for years to come up with an equivalent. They see it as an alternative to the instability of the US dollar. Problem is the dollar has been stable and the alternative provides almost no advantage to other countries who aren't China, or US embargoed.

I don't know what that means. In the current international arrangements all the important currencies are floating against each other all the time.

The value of the dollar (respect other currencies) comes from being the currency of one of the most valuable economies in the world.

This will mean that not only the third of GDP will effectively disappear, but also that all inflation which was exported into the outer world until now will come back at once. This will launch a crisis an order of magnitude bigger than 08, which can be QEd anymore, because no one outside and probably inside US will buy gov bonds anymore (it's effectively already true today, but for now it's compensated by a low money velocity due to the pandemic). Without cheap money US business will lose a lot of its competitive advantage. And don't forget that capital today is much more mobile compared to the beginning of the 20th century and thus positive feedback forces are that much stronger.

This will mean that "one of the most valuable economies in the world" is in a very shaky position. I really-really hope that this scenario will not end in a nuclear war...

P.S.: Japan is in a different position, IIRC most of its debt kept inside the country. Plus it's a creditor nation, while US is a massively debtor one.

This beg the question of where is the money coming in the current situation, where all the major countries are following the same policies.

At the same time, you are saying that "foreign investors" and "governments" are buying bonds with negative inflation-adjusted profits because they have "faith" in the US economy. So, in the last years, at the same time the deficit and the public debt went up, the "faith" has gone up as show by the interest rate.

Here is an alternative view: the markets are powerless to determine the interest rate against the central bank. An example, Italy and the crisis of debt of 2011. They had a debt crisis until the ECB decided there will be not more crisis.

The markets dance to the song that the Fed sing. I don't know what more have to happens for people to start accepting it. The federal government don't need the markets, the markets need the bonds.

Normally, printing money in such fashion (I hope we agree that Fed + government does essentially that today? MMT proponents just propose to make this process honest and transparent) would increase inflation, but in 08 this inflation got mostly "exported" into foreign countries and today, as I've said, it's compensated by low money velocity (see the Fisher equation). Money velocity was steadily dropping for many years and it's another serious indicator of structural problems of modern economy (one can view it as one of the consequences of the rising wealth inequality). But the main problem in my opinion is that I doubt that Fed will be able to drain liquidity fast enough when velocity starts to rise, which may launch all the described positive feedback forces, thus making situation geometrically worse.

A free lunch can not be infinite, one day you will have to pay. The scenario which I've described is just one possibility of how the current system may crumble.

We have piles of rich natural resources, an educated populace, good infrastructure, and high mobility. Sure, some of those aren't where they were decades ago, but we still have an incredibly strong foundation to build on. America is much more than just the USD.

What is the endgame though?

Can the governments keep adding new debt at the rate they have been adding in the past 12 years?

Can they just keep going into negative rate teritory? For how long?

Will we eventually see -1000% interest rates so that the government/public debt can be maintained?

edit: actually, the government does not need -1000% interest rates to service an infinite amount of debt, it just needs real 0% interest rates and the ability to issue more debt.

So now I have to wonder: are those pictures representative of the US as a whole?

But no, it’s not representative. Most of America doesn’t live in New York, DC, Seattle, etc. Nothing is boarded up in suburban Annapolis where I live, and almost nothing was ever completely shut down. Restaurants had a steady stream of takeout orders, etc.

I remember seeing board ups there very early in the shutdown.

Even a lot of grocery stores are boarded up now, and quite a number of convenience stores like CVS stopped operating in half their locations and where operating, with reduced hours.

In this context, it's natural that closed business would board up even absent riots.

The Hacker News crowd doesn't see it coming. Give them a few months; they'll start to be personally affected by it, which will trigger an inescapable realization. I see it coming: the next great depression. There are many creative ways to stop it, and they all involve re-distributions of wealth because that is essentially the root of the problem: the finance, make-believe funny-money & assets have no value, and we've starved the buyer, so no one has incentives to trade anymore. Great job! Hope your ideologies were worth it. And, when people are dying, instead of blaming some "natural" phenomenon that totally "naturally" occurs, blame yourselves!

According to this first-hit google result, in 2017 82% of world plywood production was in Asia

https://www.wbpionline.com/features/global-plywood-industry-...

No wonder the IMF head said we need a "Great Reset". This can't end well...

Wrong. The Fed is part of the government; it's just a part that's not described anywhere in the Constitution. But we've long since given up on the idea that the government should be limited to what's actually described in the Constitution.

Under the CARES Act, there is a huge chunk of money that the Treasury is obligated to back into Fed assets. Specifically "investments in programs or facilities established by" the Fed.

So on one hand, the Treasury is obligated to invest (buy) assets from the Fed. The Fed has some leeway in what it sets up, but the bill also states that the Treasury can attach “such terms and conditions . . . as the Secretary determines appropriate.” So, in essence, the Secretary of the Treasury gets final say in what the Fed sets up.

Therefore, what is actually going on is the Treasury can say "Fed, go buy up assets X" and then hands them the money from the CARES Act to do so. Or, in other words, now the Fed is acting as a banking institution for the Treasury.

https://www.brookings.edu/research/explaining-the-new-fed-tr...

> I have very clear memories of the political battles of the 1980s and 90s when my parents’ generation were in their prime working age. They demanded two contradictory things from government. First, they wanted their taxes reduced dramatically. Second, they wanted all the perks and services they were already receiving.

I can't put it any better. The government, to my parents and collateral relatives (uncles and aunts), is simultaneously evil for taking Social Security taxes from paychecks, and also good for paying out Social Security to them, but they don't register the cognitive dissonance.

> So instead the gap was filled with debt, unrealistic future promises, attrition, and a can that was kicked down the road. Society went way out on the risk curve in search of “growth” that didn’t actually exist anywhere but on paper.

Yep. The idea that Social Security is paying it forward (or paying it backward) is just too tough.

> The meme will be simple and palatable. These were benefits that were earned from years of hard work. These are the deserving recipients of what is due them. That’s completely different from just handing out fake cash to random slackers and wastrels who squander the money on Netflix and Amazon Prime without contributing to society.

I can hear the sarcasm in the author's inflection. And I can also hear its stark effectiveness in my parent's complaints.

The only reason it was implemented as debt is that it works from the start up. But it's possible to transition slowly from one model to the other one. There are political reasons why they're not doing that, but honestly, I think your parents are right to ask for what they were promised to receive. Maybe it's impossible to materialize the money now, but that doesn't make them wrong.

That is a terrible idea, given that the market goes up and down, and not everyone necessarily makes enough money to fully fund a 401k style retirement account. The only winners in that situation are the retirement fund managers, and people at the top of the income distribution who suddenly don't have to pay for the less fortunate.

Much the same argument can be made WRT pensions, which are guaranteed benefit systems. Its the company/govemerments responsibility to assure that the pension is funded sufficiently to grow. Market failure risks, and the like are the responsibility of the pension, which can do a better job of averaging returns over decades than the individual can. Say someone wants to retire in 2008, instead of their 401K dropping by 40% and eating heavily into their principal they are just part of a larger fund which can absorb that hit with the understanding its over funded from the previous 20 years of returns and the fact that it could be additionally funded a small amount over the next couple decades to make up for the loss if to much of the principal is reduced.

Its basically the same argument for any kind of insurance. You spread the risk over a larger pool and everyone benefits.

Basing it in private entities is just asking for problems. Actually I've heard that there are a few countries that have something like that, but I don't remember which ones.

The fact that for most of the countries it isn't considered, no matter the party in power in each moment, makes me suspicious of everyone's intentions. Sometimes it seems politicians doesn't like when citizens are too happy.

Am I being cynical? Maybe. When I read in the article that the government massively buying real state is socialism, my first reaction is that prices will keep dropping and someone will buy cheaper later.

Consequently, you should also take a look at the Georgia coronavirus case volume. But it's as if nobody gives a damn.

The lockdown seemed to have the opposite intended effect, in the first few weeks.

Now, however the city is void of tourists during what would normally be a very, very busy season.

Why _wouldn't_ the businesses be boarded if they're unattended for a few months?

(Note that boarding up businesses predated riots by months, in my experience).

This is not that unusual in the US, and happened in previous years in LA and Oakland.

It's not to close long term - it's to survive until the next day or week.

Edit - E.g. This business which was not out of the ordinary when it boarded up end of March. https://www.instagram.com/p/B-GT1hhgPZS/?igshid=12qp4pjwu2jv...

Stonestown Mall, which is a long way from downtown SF, suddenly boarded up McD and Target during the protests.

https://www.textise.net/showText.aspx?strURL=https%253A%2F%2...

I can probably just skip the blank space and read the text but I assumed the images were meaningful since they are taking so much leading space, that might not be the case though.

E.g. I guess these 200 MB in 60 pngs could be reduced to cca 2 MB jpgs all.

Apparently he was going after some other indirect angle about people ragging on cities doing poorly and those same people being dependent on revenue from cities.

The first would have been a far more fitting essay, in my opinion.

He's correct about cities and their importance, but there's a lot going on with macroeconomics that seems to be 'weaponized' by a lot of people, rather than discussed carefully and critically. I suppose the latter happens in academic journals that don't see much public exposure.

Remember the doom and gloom people who predicted runaway inflation during the last financial crisis?

I'm no expert, so it's difficult to parse out the legitimate worries from people Pushing An Agenda.

ITS ON FIRE!

OTOH, it took about a week before the roads/stores were full again. Around here there are plenty of closed businesses too, but the ones that are open seem about as busy (if not more) so than usual.

While the idea of shutting everything down during a pandemic to keep from wiping out 50% of the population/whatever might be a good idea. It was pretty apparent early on that this was low single digit % and overwhelmingly people with existing serious conditions. Telling those people to self quarantine really was the only solution. Its readily apparently that nothing actually changed in the month we stayed at home in TX. No vaccine, no additional personal protective equipment, nothing. So we all just sat at home and destroyed a large part of the economy for nothing. Particularly since to have done it "right" we would all still be sitting at home waiting for a vaccine or whatever. Given the current time-frame it might be another 6+ months. Even the testing hasn't gotten good enough to test everyone in contact, much less even find everyone who has been in contact. Maybe the one thing we now know is just how effective good masks can be. Not that anyone is even wearing masks anymore at some places (home depot for one).

So, big waste, nothing gained, and states saying closed until something changes are going to be in a world of hurt. I predict they will be forced open by politics long before either the testing/tracing or vaccine situation changes sufficiently to make a difference.

You would be talking a few percent of people staying home collecting unemployment (say 2-4%) which is about 1/3 of the current national unemployment. Yes, there probably would be a decline in restaurant/etc business because people were "social distancing" but nothing like stopping everything that wasn't a grocery store. But even then it would not be as bad. Overwhelmingly the older generation is the one at risk, and is already retired and staying home. It was the young 20 somethings working "service industry" that were all sent home. The ones with the lowest health risk, and the largest financial need.

AKA, it would be a big recession, but nothing like what we are about to experience.

Are you asserting that case count in the US would be the exact same without Shelter in place?

So, yes we might be saving lives, but that is a small fraction of the total rates. Aka, we might be changing the death rate from 2% to 1.8%..

But, since we are mostly talking about the aged and infirm, its a herd culling. So you might be giving .2% another year or two to live until they die from other causes.

Which is why, there is a persistent bit of pessimism being heard from certain parts of the research community warning that this might be more like the flu than we are willing to admit. AKA, its possibly going to be with us for a long time. We have spent the last 100 years working on flu vaccines and treatments and lowered the fatality rate by maybe 90%. That 60k deaths a year in the US are with large parts of the population being vaccinated, and piles of treatment options.

oh wait.

There are a lot of pictures of boarded up businesses, and the theme seems to be that taxes will suffer so that pensions suffer so the retirees suffer so the federal government will give them money. And that might not work if confidence in the dollar wanes.

Is that it?

- - - -

Empty streets are a good thing because the pandemic is still on. Without hella tests and a vaccine distance and soap are our friends. The metaphor I think of is an invisible fire. Until we have ways to see the fire the best you can do is keep the fuel (you and me) apart.

- - - -

The economy will reconfigure. "Reboot the economy!"

The whole point of markets is that they act as a kind of natural cybernetic governor (in the mechanical, not political, sense of the word.)

Those empty buildings and store fronts will come back to life as soon as possible. The physical infrastructure is not getting damaged by the virus.

People want to work, start businesses, build homes, go to school, all that. The demand is there.

- - - -

As an aside,

> First, they wanted their taxes reduced dramatically. Second, they wanted all the perks and services they were already receiving.

FWIW, you could do that by trimming a tiny bit off the defense budget and improving health care efficiency.

(Defense and health care are the two largest parts of the US budget.)

- - - -

Speaking of which I think people will continue to value the dollar as long as the USA maintains it's military supremacy. We're the 800-lb gorilla still.

What? Certainly that can't be true.

Some people are lucky and never get cavities.

Others are unlucky and need constant fillings despite a stringent oral health regimen.

Keep in mind that when level 4-5 self driving vehicles finally do arrive, studies have shown that people will tolerate much longer commutes, especially if they can work, sleep, or just relax in their car. That will push urban sprawl even further out and reduce city population density also.

* Photos of boarded up storefronts are used to imply that these stores are out of business. They're not, the reason they're boarded up is because of BLM rioters.

* Photos are not good evidence of real estate availability. No data is used or sought.

* I don't accept the handwavy notion that people leaving the city will automatically tank pension funds. The closure of the Chinese restaurant in the city is the opening of the Chinese restaurant in the suburbs. People still want to be near stores and restaurants and they can get that without being in the city.

* Even less do I accept the notion that everything we as a society undertake should ultimately benefit pension funds. This is a euphemism to get people to believe that corporate interests are your interests. The average American is not invested in the market and the people that are invested should have been made aware that market returns are not guaranteed.

I do agree that we are seeing an emergency in the Fed's debt spending. Future historians will probably look at the Coronavirus meltdown as the Gavrilo Princip moment that exposed the house of cards.

I agree that they shouldn't be used to imply the business is permanently closed. The effect in the photos is still pretty striking.