
Corporate Socialism: The Government Is Bailing Out Investors and Not You - DVassallo
https://medium.com/@nntaleb/corporate-socialism-the-government-is-bailing-out-investors-managers-not-you-3b31a67bff4a
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BubRoss
I wonder if people in the US realize that when they hear the number "two
trillion" they should think "$10,000 per tax payer".

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m0zg
That'd be misleading though. Much of that $2T is comprised of loans.

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BubRoss
To who and at what interest rate?

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charrondev
On the Canadian side so I’m not sure how our recent legislation differs.

Up here the government is forcing businesses to close their doors 3-4 weeks if
they’re non-essential. We can can weather 3 weeks and continue paying leave to
the few employees we have. After that we’re out of money to rent, wages, &
utilities without any government assistance.

Small business don’t exactly sit on warchests of cash, especially if they have
business loans to pay off.

I might be biased here, but I’d prefer to maintain existing employees then lay
them off and try hiring when this is over, but no one can even see if we’ll
actually be able to reopen in 3 weeks. How long will this take? No one really
knows. If this lasts 3 months and the economy is still at a halt, we’re in
even worse shape as now we’re bled of cash and on top of that have a bunch
more debt.

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nickff
Also at a small Canadian business, and I think the vagueness on timeline and
'stimulus/bailout' is intentional. It seems very likely (>50%) this will
stretch out at least to June, and the government appears to be trying to avoid
a huge rash of layoffs.

My take is that the government is trying to get businesses to take on debt and
essentially fund stimulus spending. My advice is not to count on being back in
business in three weeks.

Sorry for the dour view, but I hope you can make it through; this is going to
be tough for a lot of us.

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jdmoreira
Why bailout? Why not nationalize it instead and hopefully privatize it back
later down the road. Or if you don’t want the nationalization headache at
least trade money for equity.

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dragonwriter
> Why bailout? Why not nationalize it instead and hopefully privatize it back
> later down the road.

That's not an alternative to a bailout, its a common bailout method: the
government purchases equity of an ailing institution, thereby nationalizing it
in whole or in part, puts it's own management in place, turns it around, and
then sells the equity on the open market.

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jdmoreira
Thanks for explaining. I thought bailout meant just giving away money or some
low interest credit to companies without getting equity in return.

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extralego
I used to think the same. Good article here with a bit more detail!

[https://www.peoplespolicyproject.org/2020/03/23/how-to-
think...](https://www.peoplespolicyproject.org/2020/03/23/how-to-think-about-
corporate-bailouts-correctly/)

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bubbleRefuge
Workers are being helped here, they are getting 600 per week + whatever the
state program gives them. In Florida, that would be around 1K per week which
is unprecedented. I think where the legislation falls short is help to states.
There should be around 1 or 2K per capita in direct aid to state governments
experiencing revenue short falls and increased demand for services with no
state 'FED' to issue money for them.

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frabbit
[https://www.jacobinmag.com/2020/03/coronavirus-recession-
glo...](https://www.jacobinmag.com/2020/03/coronavirus-recession-global-
economy-stimulus-state)

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8bitsrule
Haven't seen many people complaining about all the homeless people on social
media much in the past two weeks.

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gowld
That's because people with computers are at hunkered at home and social
distancing.

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blaser-waffle
No morning commute, no stepping over human poo, no one trying to sell you
drugs in the Tenderloin, etc. when you're at home.

~~~
david_w
Or, alternatively, not in San Francisco,CA. USA, as many people aren't.

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Stranger43
The real question is why/when restructuring through bankruptcy became seen as
something society should avoid rather then embrace?

There is a huge argument to be said for the government acting like an buyer of
last resort for critical assets/activities belonging to organization under
bankruptcy, rather then acting as an lender of last resort for companies
trying to stay out of bankruptcy court.

Lets keep in mind that bankruptcy under almost all western legal systems allow
for the continuation of viable economic activity and resale of valuable
assets, i.e. in a lot of cases most salaried employees keeps their jobs even
after the parent company goes bankrupt.

From an market theory and moral perspective we need an functional system of
restructuring through bankruptcy for any free market based system to starve
off the (according to Marx inevitable) decline back towards aristocratic
mercantilism.

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downerending
The general answer is that governments (i.e., bureaucrats) are not thought to
be very good at stepping in and running corporations. In addition, presumably
all of those bureaucrats already have things to do and don't need the
headache.

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Stranger43
Is that empirical based knowledge or theological doctrine?

The idea that an service cannot be efficiently provided by government is an
idea that tend to be thrown around a lot in US politics despite evidence from
Europe that on public utilities government/state/city owned/controlled
utilities is cheaper/better then private companies when allowed to compete
directly side by with private enterprise.

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downerending
It's one thing to have the government provide a service as part of a carefully
planned operation. It's another thing entirely to put a bunch of government
workers suddenly in charge of a large corporation.

 _Hey Joe and Jane in GSA, GM just went bankrupt. Could you please drop your
other responsibilities and run it from now on?_

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Stranger43
So what your saying is that the common corporate practice of lifting CEO's
across sectors into companies they have no experience with directly is an
recipe for disaster?

The government have exactly the same options to hire experienced people as any
company in existence, so if the government cant replace bad manage neither can
the private sector.

Once you have a bailout you have by definition incompetent owners and an/or
management team that cant do their job properly, bankruptcy forces that to
become clear by forcing the incumbent owners to face losses, bailout on the
other hand keeps the rot in place.

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abstractbarista
If I'm an investor, which I am, they are indeed bailing me out too. 55% of
Americans hold equity. So 55% of Americans are being bailed out. Let's get
that number to 100%, so we can move on to other issues.

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Build3Wai
My rough estimate is 10% of $6T US bailout goes to people Vs corporations by
end of May.

Your estimates? Is it true that Banks encashed $1T at 0% the Sunday before?
Why did Mortgage rates go up?

~~~
Donald
Mortgage rates went up because 10 and 30 yr bond yields have spiked. Also,
during the yield collapse a few weeks ago, banks got flooded by refi requests
and it exhausted banks’ supply of available dollars for mortgages.

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bubbleRefuge
Banks have an practically infinite supply of money. They just issue it when
they create loans. What they lack is the capacity to process the loans, not
the funding.

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LatteLazy
The whole point of capitalism is that owners are rewarded and everyone else
get's fucked. That's really fucking obvious. The key to living under
capitalism is to become an owner (of capital) as soon as you can and stop
being a worker. Anyone talking about any other strategy is talking nonsense.
The proletariat will not rise up any time soon and capitalism is not going
anywhere.

So everyone's best bet is to stop moaning and get with the program. We can't
beat them, join them.

~~~
Build3Wai
Fair characterization of industrial capitalism, perhaps. How about network
capitalism of the type described by Yochai Benkler?
[https://www.benkler.org/](https://www.benkler.org/)

~~~
blackflame7000
I think fundamentally humans want to compete instead of cooperate and that a
tiger can't change its stripes.

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cloverich
Honest question, given the tens of thousands of years of humans cooperating to
form groups of increasingly large size and interdependence, what makes you
think there is more competition than cooperation happening?

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blackflame7000
Because after tens of thousands of years we are no closer to the utopian ideal
as the cavemen were. Also because you can't cooperate for a mate.

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cloverich
In caveman times you were _far_ more likely to be killed via violent
encounter, starve to death, or die from minor accidents or infections, etc.
The average life expectancy was about 20 years, and a painful death was highly
likely. And while you can't cooperate for a mate, there is no shortage of
mate's to go around and likely millions of suitable matches for any particular
person today. So however far from utopia we might be now, we are certainly
_far_ closer than caveman times.

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morceauxdebois
There is no such thing as corporate socialism, its called oligarchy. How long
must the rest of the world suffer before the Americans open a dictionary?

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sullyj3
That's not as rhetorically powerful.

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david_w
I love Taleb; he's a certified creative genius, better-than-chance-would-allow
prophet and a regular guy with Good Judgment, all three at once- a rarity. I
think he is wrong on this one however.

Wrongest observation in the article:

"For the very fact that we are saving airlines indicates their role as
utility"

An industry can be essential to society and still not be a utility, and that's
a feature, not a bug. Nationalizing an industry implies the State has the
knowledge to run it. But an entire industry of experts is already dedicated to
doing just that. Nationalizing it implies the State would pay those same
people or their equivalent to do what it is they already do. Why would it do
that ?

This is true of critical and non-critical industries. The government does not
possess the knowledge to run specialized industries. That's exactly why
Socialism always fails, and yes, it does always fail.

In America at least, even "utilities" are not State owned, at most they are
regulated, and the constant object of regulatory capture because of it.

His other main point, that this is not a Black Swan, it's a White Swan (a
disaster they should have seen coming and planned for) is stronger. However
the exact scope and duration of this event is itself something of a Black
Swan, no? The entire world is in lockdown for an unknown duration. Did you
want that priced into every airline ticket you buy? It's not a rhetorical
question, you have to decide if this is something you yourself would have
wanted, back in the beforetime.

For that matter, how does a nationalized airline industry raising your taxes
to pay for Black Swans sound to you? Think that's where the money would
ultimately really go? How's your Social Security lockbox doing?

The reason we stem the bleeding in our industries like airlines isn't because
their lobbyists incite Congressfolk to sin or even because they're utilities
in all but name. Life could go on if the major airlines all failed all at
once. After some time, there would be new airlines and until then charter
planes for critical things and telecommute, like now.

The reason we bail them out is because the net downstream cost of not doing so
is many times the net cost of doing so. People have to have jobs to go back to
after this is over. There has to be an _economy_. There has to be industries
with jobs to go to.

The demand for air travel will certainly be there, air travel is not a new
invention waiting to catch on, is it? So the question to be answered is: is it
wiser to birth a new airline industry or treat the wounds of the one you have?
Here I define wiser to mean: less costly to the government and less ruinous of
people's lives.

In the US at least, everyone is getting hard cash presently to see them
through, #masshole not withstanding. Many industries and even banks(!) are
stepping up in all sorts of creative and genuinely helpful ways. This will
pass; we will survive thanks to people's willingness to endure #lockdown for
the sake of others. Everything else beyond that is gravy from historical and
biological perspectives.

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nodesocket
Without businesses there are no jobs. I don't understand why people are so
outraged about small business and corporate stimulas during this crisis. What
exactly is their counter plan?

~~~
s1artibartfast
One solution I find interesting is that the government exchange equity for the
bailout and hand it over to the American workers.

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unlinked_dll
My family and friends who lost their jobs or got furloughed can't pay their
rent with equity.

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s1artibartfast
When I suggested equity for bailout, I mean the the government would provide
cash. Instead of it just being a handout to businesses , they would receive
equity in exchange

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unlinked_dll
Is anyone talking about bailouts without equity? I thought that was implied,
since it's how they handled the automaker bailout 12 years ago.

But regardless I don't see the efficacy of bailouts for most companies.
Besides a few critical businesses like the airlines and Boeing, the money
would do very little to help the workers who have been laid off or furloughed.
The government needs to pick up that tab directly, or else the cash isn't
going to be used for it.

~~~
s1artibartfast
My understanding is that they are talking about "free" bailouts without
equity. This article [1] suggests this is the case for the airlines, which
would receive a "grant", and small businesses, which would receiving tax
credits. It is unclear to me if this is just a mischaracterization by the MSM.

I expect that workers will see very little of the 2 trillion dollar bill.
$1000 for an estimated 30 million workers (~10X current numbers) would be
about 1.5% of the bailout. 3 months of unemployment for the same would be
about 10% of the total.

[1] [https://www.cnbc.com/2020/03/25/coronavirus-stimulus-bill-
up...](https://www.cnbc.com/2020/03/25/coronavirus-stimulus-bill-updates-
whats-in-the-2-trillion-relief-plan.html)

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unlinked_dll
The checks are going to a more like 120 million households (ballpark, haven't
checked the BLS), and your unemployment ballpark is 10 million shy of the
estimates.

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readme
IIRC the stimulus bill does not allow for stock buybacks. So, I am not sure
how they're bailing out investors.

Wait until the unemployment numbers are out in a couple weeks. When the
government shuts businesses down, people lose jobs.

Let's not forget everyone who has a 401k and was hoping to retire this year.

To add to how wrong this headline is, the government is literally sending
everyone a check.

I am sure some guy on medium is more capable of sizing this up than our entire
senate and house of representatives, though. You should trust him: it's
corporate greed.

CSPAN is the place to go if you want to know what's really happening.

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jdmoreira
The author is Nassim Taleb. A highly respect figure on HN among many other
circles. You might have also heard of one of his books "The Black Swan"

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readme
well I stand corrected on that, it looks like he does have some experience
with what he's writing about

However I don't agree with the comparison of the 2008 bailouts with the
current stimulus bill at all. Those definitely were corporate socialism, but I
think we have progressed as a country since then.

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grecy
> _Those definitely were corporate socialism, but I think we have progressed
> as a country since then_

Please provide reasons with sources to back up your opinion.

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readme
This isn't wikipedia.

