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Comment by GaryTang | Hacker News Reader

I don’t see it happening under the Democrats. They will influence the fed to keep rates low while Biden is in and continue to try and push more stimulus.

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And why do you think it would happen under Republicans whose last President was loudly and publicly pressuring the Fed to keep interest rates low?

Something no Democratic President (or other Republican President, for that matter) has ever done.

Fed chairs have always received a lot of political pressure from the ruling party. Most administrations do it quietly. Yellen was particularly cozy with the white house in her day as fed chair, which is why she is now treasury secretary.

The past three presidents haven't understood the danger of keeping rates low, but so far it has paid off for them.

If something slightly helps you but completely wrecks the whole economy after you've left office, you do it. That's the joy of anglo-style democracy...

Yes unlike to all of those other political systems that are perfectly happy to crash the system now when it hurts less, like..... I am sure we can come up with examples... any day now....

The Northern Europeans don't have the same love of bubble we do. They plan long term.

The Chinese are facing the same temptations we are now. At least some of the time they make longer term choices. I won't pretend that's always the case, but at least some of the time it is (eg the current Evergrande situation).

They have their own political issues so I'm definitely not saying we should just copy them. But their ability to plan more than 2 years ahead is a major advantage they have over us...

It can be argued that Evergrande being allowed to take on so much debt is actually evidence of Chinese officials not taking a long view on things. Presumably the pressure to pump up the GDP was so great in previous years (not unlike executives in capitalist America with their quarterly reports) that they allowed corporations to become what they currently are.

Exactly. Evergrande is simply the tip of the iceberg. There is a huge amount of bad debt in the Chinese banking system that has been hidden for various reasons and while the most obvious examples are starting to explode the big fear (for Chinese leadership as well as foreign markets) is that once the first dominos start to fall the entire rotten edifice might collapse. China was an extremely bad example to pull and to be honest was just the sort of example I was hoping someone would bring up as a contrast to 'anglo-style democracies' because it is so easy to tear apart.

We can back and forth about whether Evergrande was well managed or well regulated. I mostly agree if that helps.

But the point I was making is that when a big company goes bankrupt, at least in this case, the CCP let it happen and didn't just keep it alive on zero interest loans. That's the right decision in the long term but it's painful in the short term. That's a decision the US and UK have been unwilling to make since 2008.

No, that is not what happened. Evergrande has been kept alive by the CCP and fed zero interest loans through lax banking regulations and massive property speculation by the public. The bubble it represents should have popped in 2008 but was protected and left to fester by the Chinese government because it was politically unpopular to do so. They can no longer hide the reality of these unsustainable bad debts and so the international market is turning on it, but the CCP can't afford to prop it up either and are desperately trying to figure out a way to soften the crash. This is a long-term failure of over-building and a massive property speculation bubble that is popping; it is not an indicator of a country that is doing the right thing because it is smart in the long term, this bubble is popping because they can no longer hide the problem and the short term pain will include wiping out a large chunk of the nascent middle-class.

Iceland was hit very hard by the great financial crisis. Their banking sector was devastated. The dutch almost completely lost ABN Amro.

And of course Sweden had a major financial crisis in the mid-1990s.

I'm not saying other countries don't have issues. I'm saying that the anglosphere is unusually unable to make difficult decisions. When other places have issues (financial crisis or large company bankruptcy events) they get on with them. For the last 12 years we've sat on low interest rates because no one wants the short term pain of putting them up even though that just makes it worse in the long term.

Take Ireland: big sovereign debt issue after 2008. No issue today because they got on with austerity and bounced back. Iceland (I believe) also made tough decisions (allowed bankruptcies). The Dutch aren't running their whole economy around keeping ABN Amro afloat either.

That's the issue here: everyone makes mistakes but do you take the hit and clean up or pretend it isn't a problem and just keep extending credit...

I don't know what you mean by keeping rates low. Interest rates have been going down for a long time. 0% is just another boring destination as 1% was.

0% is fundamentally different than 1%. Modern monetary theory disagrees, but there is definitely a big difference between "cheap" and "free."

Also, I mean since 2008. Pre-2008, rates were pretty healthy, but central banks haven't had the courage to raise them back to that level. Economically speaking, we are not in a crisis, and we have not been for a long time.

For that reason exactly — Trump had to scream and pout publicly in order to keep rates down. Meanwhile, Democrats operate with much more tact & better PR.

Yeah, I am no trump supporter but found this whole affair hilarious. Federal reserve kept the interest rate near zero from 2008-2015, and only started raising them rapidly in 2016. To a neutral observer, it felt political that they didn't start raising rates in 2012, and instead started QE3 which was as big as QE1 and QE2 combined!

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