#bailouts

[dontmean2bepoliticalbut]

[odinsblog]

Such a good analogy for “privatizing the profits, but socializing the losses.”

Taxpayers, not the wealthy owners of OceanGate, will be paying the millions of dollars in costs for the search and rescue—and I almost wouldn’t have a problem with that (the coastguard rescues hapless people every day, and I don’t think that regular citizens should be forced to pay for their own rescues, because saving people is what a society should come together and do).

But the owners of OceanGate not only knew of the risks, they eschewed any kind of government regulation (like having an emergency location beacon that would have made the search far easier) because they said it would inhibit growth and profits. And I can’t help but believe that the coastguard and the navy and all of the other public agencies, are searching just a little bit longer and a little bit harder, because it’s rich people who are missing.

And don’t even get me started on how Greece’s coastguard is most likely responsible for the murder of hundreds of refugees, or how Italy and much of Europe have made it national policy for their coastguards to not help refugees at sea.

Anyway, it’s well past time for more people to start seriously thinking about how our society always bails out banks and wealthy billionaires, but tells poor people to exercise better judgment and pull themselves up by their bootstraps.

[democracyunderground]

[clinging-to-decency]

[justinspoliticalcorner]

Why Is Trump Bailing Out Argentina?

This is about ideology and Trumpian fealty, not America’s interests

Paul Krugman:

In its dealings with other countries, Donald Trump’s administration is following a clear agenda of undermining liberal values, fomenting discord and withdrawing critical financial support. One of the administration’s first acts was to drastically cut funding for the U.S. Agency for International Development, then shut the agency down completely. Independent estimates suggest that these cuts have already led to hundreds of thousands of deaths, many of them children, and will lead to millions more deaths in the years ahead. It is trying to shutter Voice of America, a federally-sponsored news agency founded to fight the Nazis and promulgate democratic values throughout the world. The administration has vocally supported extreme right-wing parties like the AfD in Germany. He has withdrawn the US from the Paris Agreement environmental accords and the World Health Organization. He has severely reduced aid to Ukraine, a democracy struggling to survive conquest by Vladimir Putin’s Russia. So it might have seemed out of character when Scott Bessent, the Treasury secretary, suddenly announced on Monday that the United States is prepared to offer open-ended financial support to Argentina:

But although in this case America is offering aid rather than taking it away, our new Argentina policy is part of the same Trumpian agenda. It’s true that the plan to aid Argentina looks quite a lot like Bill Clinton’s bailout of Mexico during that nation’s financial crisis of 1994-5. But we had a compelling interest in helping Mexico, which is our neighbor and one of our most important trading partners. We had just signed a free trade agreement with Mexico, and were also trying to bolster Mexico’s transition from one-party rule to genuine democracy.

Argentina, in contrast, is not systemically important to the United States. Argentina is a miniscule player in terms of US interests. The U.S. accounts for only about 1/8th of Argentina’s imports, less than its imports from the European Union and much less than its imports from China. It’s definitely a lot less important, both strategically and economically, than Brazil, whose economy is more than three times as big as Argentina’s. Yet Trump has completely alienated Brazil, imposing 50 percent tariffs on the nation for daring to try and convict a former president who attempted to overturn his electoral defeat. Always indulging his personal grudges, Trump has imposed sanctions on the judge who oversaw Jair Bolsonaro’s prosecution — and on his wife. It obviously doesn’t matter to him that both the tariffs against Brazil and the personal sanctions are surely illegal. Trump’s behavior has had a devastating effect on America’s interests, driving Brazil into China’s arms.

[...] But the victory celebrations were premature: Mileinomics is now in big trouble. So Bessent is offering large-scale aid — not to defend U.S. interests, but in an attempt to rescue the reputation of Trump’s preferred ideology and cult of fealty. When Milei took office in December 2023, he imposed a regime of economic shock therapy, especially severe spending cuts. He also instituted a strong peso policy, propping up the exchange rate — the rate at which the peso trades against other currencies like the dollar and the euro — hoping that the currency’s strength would bring inflation down.

[...] What? In the late 1970s both Argentina and Chile tried to control inflation with what economists call a “tablita”: an exchange-rate-based stabilization plan that slows the rate at which a currency is depreciating in the hope that this will reduce domestic inflation. In both cases the reduced rate of depreciation temporarily reduced inflation and interest rates, because investors became more willing to hold peso-denominated assets, which in turn caused an economic boom. But these booms were short-lived, because while inflation did, in fact, slow, it didn’t slow enough to avoid serious problems. With prices in these nations rising faster than their currencies were falling against their trading partners, both countries found their “real exchange rates” — exchange rates adjusted for international differences in price levels — rising. This made their domestic industries ever less competitive on world markets. Thanks to this growing overvaluation, both the 1970s tablitas ended in grief. Chile experienced an extremely severe economic crisis in 1982, which caused a 14 percent decline in real GDP. The junta that ruled Argentina at the time tried to distract the public from its economic failures by invading the Falkland Islands, which did not end well.

Why in the world is the US bailing out Argentina?! Because the nation is an ally of the USA and that its leader, Javier Milei, is perceived to be aligned with Trumpism.

[choppedcowboydinosaur]

Here's an article that goes into more detail about why the 50 year mortgage Trump is proposing is bad.

Trump's 50-Year Mortgage Will Bring More Inflation and Corporate Bailouts | Mises Institute

Total mortgage debt will increase as actual ownership in equity will go down. If homeownership does increase, it will be “ownership” of the

[dispatchesfromtheclasswar]

[mostlysignssomeportents]

Learning from Silicon Valley Bank's apologists

My weird hobby is taking pictures of signs, especially “vernacular” signs, handwritten and odd. The best kinds of signs tell you what other people think you are thinking, or what you don’t understand. I’ve nabbed over 4,600 of ‘em:

https://www.flickr.com/search/?user_id=37996580417%40N01&sort=date-taken-desc&text=sign&view_all=1

If you’d like an essay-formatted version of this post to read or share, here’s a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2023/03/15/mon-dieu-une-guillotine/#ceci-nes-pas-une-bailout

I think you learn more about the world by delving into others’ misconceptions than you learn from their factual understandings. Facts are out there for anyone to discover, but when someone inadvertently affords you a glimpse into their wrong beliefs, well, that’s something that can’t be learned in any other way.

Which brings me to the apologists for Silicon Valley Bank, who are busily churning out incredibly revealing bad takes about why bailing out SVB was the right thing to do, and why you’re wrong to call it a bailout, and why all of this is Very Regrettable but nevertheless The Right Thing To Do.

Here’s a terrible reason to support the SVB bailout: because if we let all the tech companies who did business with it fail, you might not be able to get into your house anymore after your smart-lock fails because the cloud service it depends on cuts off the startup that made it because their bank account went up in a puff of smoke:

https://www.wired.com/story/silicon-valley-bank-collapse-fallout/

Look, if you think the fact that my Internet of Shit door-lock failed because the company that designed it made no plan to let me into my house if they went out of business would make me sympathetic to that company, you are out of your fucking mind. If that happened to me, it would make me want to tear the lock out of my door, hunt down the CEO of the company that made it, set the lock on fire, and throw it through their front window.

Here’s another terrible reason to support the bailout: if SVB’s depositors lose their money, every other large depositor will flock to Morganstanley, on the theory that Morganstanley is too big to fail, and will behave just as recklessly, but will never be allowed to go under precisely because they are so structurally important:

https://marginalrevolution.com/marginalrevolution/2023/03/can-the-svb-crisis-be-solved-in-the-longer-run.html

I’m pretty sure this is true! It doesn’t make me want to support an SVB bailout though — it makes me want to break up Morganstanley, regulate the everlasting shit out of the resulting fragments, and create massive public banks that are run by and for their depositors, insulated from the reckless, speculative conduct of these maniacs who keep crashing the world economy:

https://prospect.org/economy/2023-03-15-federal-reserve-banking-public-option/

One more very bad reason to support the bailout: “it’s not a bailout.” The Biden administration wants us to know that SVB’s creditors and shareholders aren’t being bailout here, just the depositors — everyday folken with more than $250,000 in liquid cash in their checking accounts. Whomst amongst us can’t relate to that?

https://www.nbcnews.com/meet-the-press/first-read/biden-administrations-message-dont-call-bailout-rcna74628

There are a lot of totally normal people who would suffer if not for this bailout — the people who clean the toilets or answer the customer-service calls for tech companies aren’t stock-option-fattened bros in Patagoinia vests. They’re totally normal working people who took no risks and bear no responsibility for the failure of SVB.

But come on. Does anyone seriously believe that the absolute fucking ghouls who came out against a barely-there student debt cancellation as a precursor to literal Stalinist gulags are advocating for endless billions for SVB’s depositors because of the janitors?

https://www.forbes.com/sites/mattnovak/2023/03/12/larry-summers-says-now-is-not-the-time-for-moral-hazard-lectures-about-bailouts/

Listen: people aren’t pissed off about the bailout because they want startups to fail. They’re pissed off because they are living in the century of “socialism for the rich and rugged individualism for the poor”:

https://www.reddit.com/r/LateStageCapitalism/comments/iaqdrl/as_martin_luther_king_jr_said_in_1968_this/

They’re pissed off because the Treasury official who presided over the theft of millions of houses by corrupt, bailed-out banks after the 2008 Great Financial Crisis and then wrote academic articles defending the decision to “foam the runways” for the banks with everyday Americans’ homes is about to join the Federal Reserve Board:

https://pluralistic.net/2023/03/06/personnel-are-policy/#janice-eberly

They’re pissed off because Biden reneged on his promise for muscular, sweeping StudentDebtCancellation in favor of a self-immolating weaksauce version that would barely dent the crushing financial devastation faced by millions of young people:

https://pluralistic.net/2022/05/03/utopia-of-rules/#in-triplicate

Only to have the illegitimate dotards of the Supreme Court make even that symbolic gesture moot:

https://www.npr.org/2023/02/28/1159606491/student-loan-forgiveness-supreme-court

(As to what Biden should do about it? The same thing Trump would: Pack the court. Pack the fucking court. Pack it. Just do it. The court’s legitimacy could not sink any lower. There is no downside. Do it.)

The rage at well-capitalized startups being rescued from unearned distress isn’t motivated by a free-floating techlash rage at “bros.” It’s rage born of the fact that young Americans are being put on the hook for their dead parents’ debts:

https://pluralistic.net/2021/05/19/zombie-debt/#damnation

There is infinite political will and bottomless appetite for money creation when VC-backed companies face distress, but when the death of your parents is followed by years of brutal debt-collector armbreakers chasing you from phone number to phone number, it’s just crickets.

There’s no question that the SVB failure resulted from a series of extremely technical phenomena that offer a fascinating peek into the behind-the-scenes forces that power an economy built on private banking and home ownership as the sole means of intergenerational wealth transfer.

But the fact that this is a complicated circumstance doesn’t mean that laypeople don’t have a right to be furious about it. We should all be suspicious of the inevitabilist narratives of the “experts” who claim that none of this could have been avoided:

https://prospect.org/economy/2023-03-15-qa-daniel-davies-venture-capitalist-bailout/

When finance “experts” tell you that you have no business opining on this highly technical matter, just remember that these are the same experts who were paid fantastic gobs of cash to certify that all these failing banks are just groovy, mere weeks ago:

https://www.wsj.com/articles/kpmg-faces-scrutiny-for-audits-of-svb-and-signature-bank-42dc49dd

Those same experts were caught bribing government officials to help their top staff cheat…on ethics exams (!!!!!!!!!!!!):

https://pluralistic.net/2021/06/04/aaronsw/#crooked-ref

Even if it turns out to be true that the kind of risk that SVB was exposed to is an inevitable consequence of an economy built on private banking and housing as an asset, rather than a human right:

https://www.bitsaboutmoney.com/archive/banking-in-very-uncertain-times/

Remember that those choices are not inevitable. The decision to make housing the primary driver of intergenerational wealth transfer is both recent and very, very stupid:

https://gen.medium.com/the-rents-too-damned-high-520f958d5ec5

Private banking doesn’t need to be an unregulated free-for-all, nor does it have to be the only game in town:

https://publicbankla.com/

As SVB’s apologists insist that tech startups should be preserved lest our IoT gadgets brick themselves, or that SVB should be preserved so that the Morganstanley cancer doesn’t creep into more of our social organs, or that bailing out SVB is acceptable because it’s to defend elite startup founders, not ultrawealthy bank owners, they are missing the fucking point.

But they’re missing it in a useful way. Like any weird sign, these bad takes teach us a lot about how the people who utter them model our own beliefs. They think that people like smart gadgets. They think that we don’t want the finance sector reformed. They think that we’re motivated by schadenfreude, which means that they also think we’ve forgotten about broken student debt promises, about robosigning and the foreclosure epidemic. They think we are fully onboard with rugged individualism for the poor and socialism for the rich.

These bad takes reveal a profoundly out-of-touch elite, the spiritual descendants of the French aristos who went to the guillotine with sincerely baffled hearts, unable to imagine why anyone would be this angry at them.

Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” It’s even more difficult to get a one percenter to understand something when the system that insulates them from the endless, spiraling economic wreckage of our new feudal economy is on the line.

Next Monday (Mar 20), I’m doing a remote talk for the Ostrom Workshop’s Beyond the Web Speaker Series.

[Image ID: A sign reading 'Pull on handle to open closet. Handle is rigid and doesn't turn.']