

Wall Street jumps (S&P up nearly 6%) at open after global bailout - jfi
http://www.reuters.com/article/idUSTRE6341EA20100510

======
sown
These enormous debt relief loans wouldn't feel so bad if they'd just stop
doing it over and over again.

When a plane crashes or any other engineered system fails, analysis is
(supposed to be) carried out and we try to make it so that it doesn't happen
again.

When economies crash we loan them out and never really analyze or try to
correct what made that crash happen, or at least that's the way it seems.

~~~
borism
that's an imperfect analogy.

No economy (besides Iceland and Latvia perhaps, and even they haven't
defaulted yet) has crashed so far. All are having engine problems though. What
those bailouts are doing is buying some time before the crash, so we can
hopefully restart engines or glide to a safe landing. That's the phase we're
in now. Unfortunately I'm not very optimistic that our flight crews can still
manage to save us.

~~~
anamax
> What those bailouts are doing is buying some time before the crash, so we
> can hopefully restart engines or glide to a safe landing.

That's the argument for doing the bailouts. The reality is probably that
they're just delaying the inevitable and making it worse. And that trillion
dollars is money that we won't have to help pick up the pieces.

To put it another way, the bailouts are like giving an alcoholic another
bottle of Jim Beam. Yes, it stops their jitters now, but they'll soon be even
worse off than they are now.

~~~
borism
oh, that argument is getting soo tired... even though I agree with it on some
level.

you see, capitalism is based on confidence. lose confidence and you lose
everything. buying time helps to restore confidence. does it make system more
stable? no. but it helps to prolong system's life. it's like Ponzi scheme - we
need to keep it running, because when it stops...

or do you have a better idea?

~~~
anamax
> that argument is getting soo tired

The relevant question is whether it is correct, not whether it is "tired".

> buying time helps to restore confidence

No, it doesn't. At best it delays the time when confidence is lost. In
reality, it increases the cost of that loss of confidence. (And, it's not
confidence, but this message is tedious enough.)

> do you have a better idea?

Yes - take the hit as soon as possible. It costs less then and you haven't
spent much trying to avoid it. Win win.

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brown9-2
I wish that the media would break it's habit of assuming that an upwards
movement in the stock market indices acts as anything like an effective
judgement of a government program/policy.

Wall Street wasn't able to accurately digest the seriousness of the housing
bubble crash until it was too late, what's any different this time around?

~~~
CWuestefeld
I think you misapprehend what the market tells us. People invest in the market
in order make money: if they expect that there's a greater amount of money to
be made they'll invest more; if the amount to be made is lower, they invest
less. If people are trying to get into the market (i.e., they think more money
is to be made), prices rise; if the opposite, prices go down.

So the movement of the market doesn't tell us that anything is "good" or
"bad", it can only tell us if investors believe that it will lead to an
increase or decrease of investment income.

In the case of the USA, it should be obvious that the government pumping
billions of dollars into businesses (banks, GM, Chrysler, etc.) will lead to
people invested in those business getting more income, so prices of those
investments rises. That is despite the fact that this money is earned (after
the final accounting) on the backs of taxpayers that _aren't_ invested. Thus,
the bailout is a transfer of wealth from the poor to the rich.

That said, the markets are hugely chaotic. Anybody who thinks he can say that
a market movement is due to one particular piece of news is talking out of his
butt. The market is a huge, distributed computer. When it's reasonable to
believe that a single piece of news is so significant that everything else is
just noise, then _maybe_ we can guess. But the normal day-to-day news reports
that attribute gains and losses to specific news items are pipe dreams.

~~~
roc
> _"it can only tell us if investors believe that it will lead to an increase
> or decrease of investment income."_

I think that's rather his point. It's well-understood _here_ that movement in
the market is but a tiny window into a huge range of financial bets.

But the overwhelming majority of _financial reporting_ perpetuates the myth
that the window is providing a value judgment on the economic impact a
particular action.

E.g. We know an uptick following a bailout is as likely caused by a desire to
cash in on a sucker's rally as by optimism about long-term value. But articles
such as the above link persist in suggesting that the uptick means the bailout
is good, or helpful, or assuages actual concerns.

~~~
CWuestefeld
Upvoted - good criticism of my criticism. My reading was concentrating more on
the "good or bad" part, rather than what area they're attributing the area to.

------
ct4ul4u
The title is misleading. This isn't a global bailout. This is the European
Union protecting its currency by stating that the Union will stand behind the
sovereign debt of member countries. It has little to do with the rich and
everything to do with preserving the EU.

------
RyanMcGreal
Good old socialism-for-the-rich.

~~~
anigbrowl
This money is not being given to private companies, it will be used to
purchase government bonds and/or guarantee existing debts of individual
European countries.

~~~
jbooth
Debts which are overwhelmingly held by the wealthy.

I mean, I don't see better options in the short term, either. It'd just be
nice if we heard a little less about how infallible the markets are and how
things like regulations are just "destroying value for no good reason" next
time the economy's doing well.

~~~
anigbrowl
Well, I don't hold those views, but think markets have some limitations and
that regulation is an important task in any economy - in fact I've taken a
good amount of flak on HN for my support of the current reform bill winding
its way through Congress.

I take issue with chracterizing it as a bank bailout when it isn't, just
because of simple inaccuracy. Nor do I think you can just say all debt is held
by the wealthy. Government bonds are often held by other governments, pension
funds, mutuals on behalf of their citizens/members. It's not as simple as a
bunch of MBAs and tycoons lighting their cigars with banknotes.

