We've built everything with growth as an underlying assumption with no ability to pause things and focus on essential services for a month or two and then start back up.
Probably ironically banks will be able to make even more money as people pull into credit lines to go over this hump
Constructor Bill now can’t pay. Bob’s Drywall is a creditor and is on the hook for a product he already shipped. Now Bob’s Drywall Supply can’t pay the company that provided him with Net 90 terms.
So Bob and Bill are now insolvent. And they fire their employees.
Suggesting that creditors somehow deserve “pain,” is just cruel. Creditors don’t “inflict pain” on people — they provide capital to people with a reasonable expectation of getting paid back. Of course I don’t care much about the Payday Lender/predatory lenders so much, but suggesting that creditors deserve some sort of payback is ridiculous. The vast majority of businesses rely on credit, without credit, you would have an economic collapse. And they aren’t the “least important” parties — they are the most important because they’re the ones providing the capital for businesses to operate.
“Yesterday Rick Santelli, who reports from the floor of the Chicago Board of Trade the for CNBC, unleashed a rant against Obama’s newly announced housing bailout plan, intended to help some homeowners refinance mortgages and avoid foreclosure.”
1: https://opinionator.blogs.nytimes.com/2009/02/20/rick-santel...
Occupy Wall Street, on the other hand, was the group that was specifically against bailing out the banks. The Tea Party was more about not helping regular people.
It's not obvious at all.
The comment you were replying to said "can't pay the booze suppliers" so it's pretty clear they we using the normal business definition of creditor.
Now, of course, what of Construction Materials, Inc? Surely they buy the raw materials from someone and ...so on. Everyone does - or should do - the same: don't adjust the terms, simply accept that the past due items are past due and will be paid a bit later than normal.
Eventually it will hit a bank or large financial institution, and they ought to do the same: accept the situation and wait. It's costly when businesses go bankrupt and everyone knows that this situation is affecting everyone else and will blow over in about six weeks.
This applies even to the banks at the top of the chain -- at least until you get to (in the U.S.) the Fed itself, which can will money into existence if needed.
If bubble up economics becomes a thing I want full credit.
If the 700 billion dollars for quantitative easing went to 200 million U.S. adults, that'd be $3,500 apiece. If spent at the rate of $700 a week, that'd be five weeks' worth.
This is like looking at just the income statement as sign of business health. Balance sheet and cash flow are pretty important.
In my personal view 'The Market's purely reflect consumer confidence. They appear divorced from actual reality, aside from how that affects the mindset of easily panicked lemmings.
And the stock market varies wildly on a daily and monthly basis without affecting the prices of almost anything.
It seems clear to me that money is not even close to affected by consumer confidence the way the stock market is.
T-shirts, on the other hand, much more slowly change to match confidence, for the same reasons. If you think people collectively over- or undervalue T-shirts, it is rather hard to make money off of that mistake. In part because it implies moving physical stock, but also because they are a relatively refined product. Markets for natural resources see some of the same fluctuations as stock markets, although not to the same degree.
It’s also unclear how long it will take everything to recover, if they do continue to fall.
Oh, BTW, the floor is hard-set at zero, which they'll never get to, since -- given there is no underlying financial issue, and that demand is going to be higher than ever once we're done with this -- all these companies have intrinsic value.
Yes, of course, the market won't go to zero. But some firms will go under, and we don't know how severe the economic impact will be. Just because the crisis began with a natural disaster rather than a financial one doesn't mean there can't be serious financial impact.
But back to pandemics. Pandemics typically result in major booms due to (a) the die off, (b) the pent-up demand, and (c) the fact that everyone still trusts the financial system. The 1918 pandemic certainly caused major GDP losses, and short-term pain, but also caused the 20s
Short of a bailout, that’s not going to be easy to recover from. And even a bailout won’t be enough to bring about a full recovery anytime soon.
- Local and state governments provide bailout funds to suffering local businesses
- Said governments issue new bonds to pay for this relief
- Fed uses the recently-announced QE funds to buy the government bonds
The question then becomes if communities can get organized enough to approve this, and then convince ratings agencies that the new bonds are good.
https://www.economist.com/finance-and-economics/2020/03/12/c...
Everyone else should wait for the upward trend to make sure it's not going to get much worse. You want to "predict the staircase" and not "the floor".
"Don't try to catch a falling knife."
Not a financial advisor, standard disclaimers, etc.
As someone with an economics degree I can assure you that a complete and utter collapse of aggregate demand is an underlying financial issue.