Privatize the profit, socialize the debt.
However, GP is making a point I might take the liberty of rewording as, "privatize the profits and benefits, socialize the risks and costs."
The reworded version is certainly true in economic (not accounting) terms. The profits and benefits accrue to the private side (Walmart) through a lower cost of capital and hence a higher profit margin. The risks and costs are borne by society (the Fed) through the credit risk and the infinitesimal debasement of the currency.
No taxpayer money is being loaned out here ... so ... I mean it is good you are trying to be a voice of reason here - but the amount of misinformation and straight out propaganda in the water is astounding.
That doesn't mean there isn't an opportunity cost to providing liquidity through buying up bonds versus other socially productive forms of spending. Just because we have a magic money tree, why does that mean Walmart should be the beneficiary?
Finally, it's not the Federal Reserve's role to be socially helpful except as to fulfill their dual mandates to 1) minimize inflation and 2) maximize employment.
Pretending there's no limit and no deleterious effect seems wrong. If that were true then the Federal Reserve could just by boobs for all debts and every citizen would be debt free and there would be nothing wrong.
If every time a company struggles the gov step in, because instead of maintaining reserves the companies pay out profit, bonuses and dividends, then large companies will engineer in the need for gov assistance and their ability to self maintain will be lost.
Either way, I wasn't "pretending there's no limit and no deleterious effect". As you stated, that would be wrong. There are obvious and not-so obvious problems with central banks engaging in QE (i.e. buying financial assets as a means of injecting money into the system). But this thread was about QE via corp bonds vs the Fed handing out gifts to the public so I didn't go into that.
They can't, not how bonds work.
> Pretending there's no limit and no deleterious effect seems wrong.
Nobody is pretending. There are many potentially deleterious effects, but amazingly the set of problems people have with this have almost no intersection with the potentially deleterious effects.
> If every time a company struggles the gov step in
This is a pandemic. The government engineered a scenario which destroyed the economy to save lives. Walmart engineered nothing here.
It is astounding how little people understand of what is going on here.
> It is astounding how little people understand of what is going on here.
No, you're just a smug asshole.
Name one.
> Further, we can just change the law, this isn't some immutable truth of central banks.
Well then go change the the law instead of saying that with the law being what it currently is the fed should instead engage in other "socially productive forms of spending".
> Even within the scope of the fed's mandate we could invent ways to invest in infrastructure instead of Walmart.
Invent them then and tell us. The fed can buy bonds, they buy bonds, they can set the interest rate, they set the interest rate. If there is a company building infrastructure that issues bonds then presumably the Fed can buy them, and I'm sure they will because the Fed is trying to flood the system with money, and for the most part indiscriminately with maybe just an eye on credit ratings.
Judging by the constant stream of downvotes and upvotes, my conclusion is that people are living in two very different economic worlds. Likely defined by their access to the outlets of newly created money.
I do agree with your previous comment that "No taxpayer money is being loaned out here". "Public money" would be an appropriate description though.
The idea that it's just asset inflation and not inflation in the real economy is also wrong. The fact of the matter is that we now live in a world where raw capital is no longer a rare commodity, thus you can no longer get a significant return on a risk free asset like a bank account or a t-bill. In order to make a return you have to take risks with your capital and invest them in something value producing like a business.
You don't have a God given right to high interest rates. We've had a secular decline in interest rates for...maybe hundreds of years. That's just reality. Complaining that the Fed (and every other central bank in the developed world) is somehow screwing you by not creating them for you is foolish. The interest rate on your savings account is not important compared to the gainful employment by the populace that happens when we don't have too tight monetary policy.
It's dismissive because you're just reiterating the same paradigm the Fed has been using to get us to the state we are at. Of course the system looks consistent with the system's own rules. That is not evidence that its metrics are appropriate, nor its behavior sustainable.
> we now live in a world where raw capital is no longer a rare commodity
Also explained by the Fed continuing to print more money. Private raw capital is not in demand, because it's even easier to get newly created money. Hence the stock market continuing to go up because there is "nowhere else" for savings to go - usually private capital would slosh over to bonds during a recession.
> The interest rate on your savings account is not important compared to gainful employment by the populace that happens when we don't have too tight monetary policy.
You're significantly expanding the scope of the argument here, in an attempt to backstop with another dismissive Fed talking point. That will make any short reply look disjoint, but I will point out: 1. technological progress was supposed to make less human labor required, yet everybody is working even more. 2. women entering the workforce (good for women's self-determination, obviously), yet the labor per person has still not decreased 3. many non-productive administrative jobs have been created, especially in sectors that receive newly created money. 4. ridiculous malinvestment bets such as e-bike/scooter rental. 5. massive waste stream and unsustainable depletion of natural resources. To me, it seems like we have more than enough "gainful employment". Rather we need to stop turning the screws on the working class, especially those who still lack jobs in spite of gross overproduction.
No, the government does not acquire debts, the only entity here that acquired debts is Walmart.
When walmart wants capital they have two options, issue stock, or issue bonds. When they issue bonds buyers can buy the bonds. The bond is a contract which says that the Walmart will pay the holder of the bond certain monies.
What happened here is Walmart issued bonds, those bonds were bought by some legal entities, then the Fed bought those bonds from the legal entities that held them.
So the fed paid money, which it created out of thin air, to some legal entities, in exchange for contracts which require that Walmart pays the Fed some money (probably quite a bit more than what the Fed paid for those contracts). When Walmart pays back the principle of the Bond the money basically gets deleted and the yield is added to the Federal reserves balance sheet.
(I am not an economist, so I may be wrong on some terms here).
By devaluing currency, a cost to all holders. They can make virtual numbers, they can't make value. There's a cost, the cost is just obscured.
The way you describe it is clearly wrong, otherwise the Fed could buy everyone's debt and save the economy of the entire World. Yay, just "print money" we'll all be rich!
Please cite the inaccuracy.
however I'd like to introduce two points of discussion:
https://www.foxbusiness.com/economy/fed-bought-debt-from-wal...
first, Walmart is not the most outrageous of the list. coca cola is much worse. For all it's shortcomings, Walmart has a lot of domestic employees, around 1.5 millions. If the money from the fed directly went into welfare for these workers, it would have covered a couple months top, so it becomes a question of efficiency: if restructuring the debt buys a year or so before bankruptcy, it's still a net gain, under the assumption that being unemployed now would be much worse than being unemployed in 10 months after the current crisis is over.
second, Walmart effectively is the American version of social welfare. It's the kind of job almost anyone can get to get back on their feet. It's not too big too fail, nobody should be, but it's also not so bad a company to have around.
Walmart is currently worth, checks notes, 336 Billion dollars. It is one of the most valuable companies in the world.
It is in no danger of going bankrupt.
shareholders especially need to feel the downsides of risky decisions too, otherwise it distorts pricing mechanisms and imbalances the proper allocation of capital across the economy.
Whatever gave you the idea that Walmart had this expectation is wrong.
Step 1: Use scale-derived lower WACC and an army of lawyers as cudgels to destroy independent retail and grocery in exurban and rural communities.
Step 2: "You can't get rid of us because without any other retail or grocery there'll be a food desert here!"
Disagree; Walmart is a leech on the system, extracting the value of the labor of these employees without paying the whole cost of it. Many Walmart employees need to use real welfare programs in order to stay alive so they can keep providing discount labor to Walmart.