Silicon Valley Learns to Love Socialism for the Rich

I think it's just typos. The third paragraph alone has the misspelling "SBV’s"

Don't believe everything you read on the internets...

Edit: we're currently at 1200feet going 30 000 miles per hour.

I hope they got their $487 trillion back.

The first is trivial, but the second is horrific. That's like citing someone tweeting about bailing out their leaky rowboat as "support for bailouts."

To elaborate, I'm convinced that Jerome Powell knew something like this was bound to happen.

However, in my opinion, the decision was made that it would be more feasible to address any issues that arose from rate hikes than attempting to address the potential consequences of inflation runoff.

> MMT economics

https://www.investopedia.com/modern-monetary-theory-mmt-4588...

«Modern monetary theory (MMT) is a heterodox macroeconomic supposition that asserts that monetarily sovereign countries (such as the U.S., U.K., Japan, and Canada) which spend, tax, and borrow in a fiat currency that they fully control, are not operationally constrained by revenues when it comes to federal government spending.

Put simply, modern monetary theory decrees that such governments do not rely on taxes or borrowing for spending since they can print as much money as they need and are the monopoly issuers of the currency. Since their budgets aren’t like a regular household’s, their policies should not be shaped by fears of a rising national debt.

- Modern monetary theory (MMT) challenges conventional beliefs about how the government interacts with the economy, the nature of money, the use of taxes, and the significance of budget deficits.

- These beliefs, critics say, are a hangover from the gold standard era and are no longer accurate, useful, or necessary.

- MMT is used in policy debates to argue for such progressive legislation as universal healthcare and other public programs for which governments claim to not have enough money to fund.»

Weird how people said the very same shit about Trump in 2016 (that it was all a byproduct of astroturfing and social media). At this point I think social media is just what pundits defer to when they're being sore losers because the black box they run as is an easy scapegoat for a lot of things. Also Biden's cabinet is full of old school Keynesians, so I really have no idea what you are on about when referencing MMT. You can tell he's no true proponent of MMT because he actually cares about defecits and talks about his impact on them fairly often in speeches.

The US government lets a lot of unconscionable things happen. How can we move things like Medicaid reimbursing enough (or even as much as Medicare) so that more healthcare providers accept it so more poor people get healthcare up the priority list, to near where “not letting startups collapse” might be?

Why not round-robin the dollars, so the people with the most uninsured cash take most of the hit?

Why? They took on direct financial risk. They are "sophisticated" financial actors unlike the general public, with access to professional advice on managing their risk profile.

I think it would be better for the economy and the long-term prospect for American innovation to ensure a robust start-up sector, and thus support the current plan to cover the banks deposits (and probably make a profit at doing so, so won't even cost taxpayers). But I don't think these companies have any sort of "moral right" to their deposits against the interests of the rest of society.

The bank owners? Yes, they have.

What did the depositors do wrong? You're saying in a just world, the individuals and businesses who just decided to open a checking account—at a top-20 US bank—deserve to lose everything? What did they do wrong?

The owners should be forced to sell the whole business for $1.

Would a just world have bankers in the first place?

The government intervention was the right move.

The point is how fascinating it was to see several otherwise loud Uber-libertarian SV VCs suddenly, and once again loudly, discover socialism and the necessity of government intervention when their own money was at risk.

If their response to this is that, maybe there is a balance to be struck and there is an important role for government regulation, in certain cases, fair enough. And maybe the fact that people they know, who did nothing wrong still suffered, and needed the government to step in to help them, might indicate that there are substantially poorer people who may also be in a bad shape either due to no fault of their own, or due to minor misjudgments becoming magnified due to circumstances who could also do with help from the govt, such as, maybe, the homeless.

But I’m not optimistic that will be the case.

Sure, but zooming out a bit - by caving in, you make this part of "the plan". For banks and their customers.

But if companies knew that no such bailout is incoming, they would act differently.

FDIC insurance is mandatory. It is not a "market" product.

They are asking for an extraordinary extension of this program to recover losses incured by bad market behavior.

I think you're generally trying to refer to communism where everyone's the generally assumed to be equally "owning" a thing, so if we all own it, anyone can be the boss.

Socialization is often the act of governments taking responsibility or ownership of production in order to satisfy the needs of the greater populace.

Although the general act is similar, materially they are very different. The bank was a for profit entity made to put money in the pockets of their owners. It failed. If you let the thing fail in capitalism, the losses incurred are put upon the limited liability owners until their investment is zero, then the money is gone, forever. Nobody gets a dime. That's capitalism. If depositors paid for insurance above 250k and ended up reaping those insurance wins, THAT is capitalism.

Inversely, if a (quasi) government agency swoops in to bail out said failing business, it's "socializing" the liabilities left by the company. This is why you often hear the bailout credo, "private profits, socialized losses". The losses that would be incurred are paid directly or indirectly by the entire population. In this case there's a one-degree of separation extra from the federal government bailing out the depositors, vs. the federal reserve. The net outcome is that a bank that acts poorly and loses a bunch of their customers money can expect governments to prop up their mistakes. So fuck it, live fast and break shit because gov'ment going to bail me out!

The truth is "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer who doesn't use a bank."

Strictly speaking, the loss of the depositors money is being socialized across bank customers.

The special assessment on banks will be cash-flowed through charging regular people for more financial services. They have their ways, remember "8 is great"?

https://www.forbes.com/pictures/fkmm45eegei/eight-is-great/a...

> "No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer"

Technically, this is of course correct. If there are $100 of deposits backed by $100 of bonds which will mature in 5 years, the treasury can of course satisfy all withdrawal demands on that $100 because it has infinite money, and the treasury will with 99% certainty get back all $100 because these are AAA bonds which will almost never default.

Unless they do.

But regardless, even if they DON'T default, the treasury will be made full and the taxpayer will bear no cost, technically.

But this par $100 bond is actually worth $87 today, so the treasury could have actually bought it up on the open markets instead for $87 and pocketed the $13 difference as profit for the taxpayer. That that are foregoing this possible profit is omitted in the quote above... I'm not saying they should do this, I just think that the fed is being a bit abusive with terms here.

In any case, buying up distressed assets to provide liquidity is just Quantitative Easing. Which we all know doesn't have any weird secondary or tertiary effects, right?

Except depositors above $250k did not have depositors insurance. How is the government stepping in to provide insurance for people who didn’t have insurance not socialism?

Or put it another way, there was absolutely no capitalistic private market solution to this. VCs weren’t on Twitter demanding Chase to come in and save the SVB depositors. They were asking the government. If this was a simple non socialist, capitalist intervention, how was it that only the government was willing to do it?