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Comment by toomuchtodo | Hacker News Reader

> 1) What do you do about bonds? A very large proportion of all debt is packaged into bonds, and reducing their yield will have a substantial effect on many pensions

US Treasury pays bondholders some, but not all, of the interest income due. Shared haircut between bondholders and the taxpayers. This is a catastrophic loss with a nation state providing what amounts to insurance, and incredibly cheaper not only economically, but from the struggle and hardship many would face from foreclosure and relocation.

> 2) Who is going to pay the wages of the people paid to administer these loans? Are they going to accept a deferral of their wages?

PPP loans (forgiven when used for payroll) for mortgage servicers. Those folks are still going to be needed to account for bondholder payments, with the Treasury picking up the tab instead of homeowners.

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A taxpayer bailout solves a bunch of problems, at the expense of non-mortgage holders (AKA renters). It seems unjust to take from renters and give to property-holders, given that the latter are generally more affluent, and knowingly took a risk (by taking out a loan).

> It seems unjust to take from renters and give to property-holders, given that the latter are generally more affluent, and knowingly took a risk (by taking out a loan).

Life isn't fair. Renters have landlords with mortgages also, and renters are just as challenged as homeowners currently (30+ million unemployed, 1/5th of the US working population). Broad policy decisions have some moral hazard to be deprioritized.

The goal isn't fairness, it is to return to economical equilibrium as rapidly as possible.

Your proposal would stabilize the situation, but I am not sure why this bailout is better or worse than other proposed bailouts. We can't go bail everyone out, unless we want to go into hyperinflation.

I am not saying I have an answer, I just think there are deep problems with these ideas.

There are always deep problems when the problems are complex. This does not mean you take your time. Just as the Obama administration quickly moved GM through a Chapter 11 reorganization [1] despite objections by free market proponents and shareholders (to save GM workers' jobs), and drastic actions was taken by the Treasury and the Fed to save certain financial services firms (merging them into stronger entities) after the failure of Lehman Brothers during the 2008 GFC [2], complaints can saved for the history book on the topic. In the meantime, move fast to avoid suffering at scale.

I'm not saying you're wrong, by any means, but that you have to be comfortable with your solution being unfair and suboptimal. It is not the best course of action, but the least worst course of action.

[1] https://en.wikipedia.org/wiki/General_Motors_Chapter_11_reor...

[2] https://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80...

I would be comfortable advocating for an intervention if it were a Pareto improvement. Unfortunately, such an alternative is not readily apparent.

As a renter and voter, my preferred policy solution is to suspend rental evictions, let the foreclosures go forward as mortgages are a risky asset, then let the market sort it out at auction. That sounds like a more market-oriented solution to me.

Over 62.5 percent of American homeowners have a mortgage, worth collectively over $10 trillion dollars (total equity is ~$18 trillion). You are entitled to your opinion, but are in the minority.

The percentage of homeowners who have a mortgage says nothing about how many rent vs own. That said, the relevant number seems to actually be higher.

64.2 percent of Americans are homeowners. Still a majority compared to renters.

> Still a majority compared to renters.

I'd noted it was higher so that would follow, yes. I left out the precise number because I saw some variation in the across sources and couldn't be bothered to dig into the details as it didn't make a difference anyway.

How many homeowners also rent? I have a mortgage on a cabin in Idaho, but rent in California. I would vote to support the renters, because although I'm practically neutral, homeowners have at least 1 asset and are generally better off in wealth and savings.

Also, majority rule is probably not the relevant metric here (even if renters + owners were mutually exclusive sets). We have a long history of not going strictly with the majority.

Not sure if you'd feel the same if the building you're renting in ended up in the foreclosure bucket, then bought by someone who wants to kick everyone out of the building and raze it.

> That sounds like a more market-oriented solution to me.

Market-oriented solutions in times like these tend to (continue to) optimize for profit and fail to consider the humans involved. No thank you.

Thanks for pointing out the big elefant in the room.

It looks like this is the ‘new normal’ though. Pushing people to take on debt as it’s almost interest-free and you might even get help from the government paying it back, all to double up on past mistakes and sustain the current asset valuations.

If anything, given the last crisis, we should be focusing on how to address this crisis in a way that helps renters. After all, the average homeowner who can't pay their mortgage becomes a renter.

We can just bail them out too.

We're probably going to have to just give most-to-all renters a few months of free rent here pretty soon anyway.

At least bailing out mortgage-holders has zero real world cost. Bailing out renters costs actual real money (since it doesn't just defer a loan, but actually prints new money to cover it).

The Fed can’t keep money printing forever. You’ll see.

> The Fed can’t keep money printing forever.

Based on Japan, this does not appear to be the case (Bank of Japan holdings are ~110% of GDP). We can print until we can't, and from economic indicators, we have a ways to go before inflation (hyper or otherwise) is going to be cause for concern (education and healthcare aren't inflating because of currency devaluation, but because of regulatory capture).

Those indicators are provided by the government itself. And even if you believe those clearly doctored numbers, there is a cause for concern. Particularly with the amount that’s being added to the money supply daily. It’s not sustainable.

Let's pretend that government statistics are wildly manipulated, and that your thesis is sound. I ask the following:

1. Reliable rebuttal data sources to government inflation statistics.

2. Proof that it isn't sustainable besides conjecture (as I mentioned, Japan is economically stable and a first world country with an enormous amount of debt that will never get paid back, while parts of Europe have negative interest rates and still have a relatively high standard of living).

Yes, if you’re not first world (Venezuela, Zimbabwe) this doesn’t work. But the US dollar is a reserve currency and US treasuries are the safest asset in the world. When you need to spend good will in currency value form, you spend it.

The economy isn't actually money. The economy is really stuff; money is just a mechanism for moving the stuff around.

The problem is, if we want stuff (food and cars and electricity and software), someone has to make the stuff. We can print money until the cows come home, but that still fails if there aren't any cows.

Japan has managed to keep producing enough to run the actual economy, and has shuffled paper around to keep the books from breaking. The US can do that, too, for a while. But the economy that produces stuff has to come back before too long, or we're going to have actual shortages in a way that printing more money cannot solve.

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