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Japan to subsidize 100% of salaries at small companies (nikkei.com)
421 points by yoquan on April 26, 2020 | hide | past | favorite | 243 comments

No insight into Japan, but the US in particular should be aggressively shoveling money at business payroll as well. Some reasons why:

First is to keep workers out of state unemployment insurance programs. These differ per state, but are often deliberately miserly and/or burdensome so that they motivate recipients to go find a new job. But we don't want the unemployed to hit the bricks. Payroll support is then a more easily-administered form of federal UI. (Plus state UI is written in COBOL, they will literally crash.)

Also, retaining workers will help to ensure a V-shaped economic recovery. Once the health crisis ends, retained workers can just go back to work. But layoffs followed by rehires means more retraining (not retaining), and a slower recovery.

The point is that we literally cannot pinch pennies now: anything we "save" will hit us twice as hard as a new entitlement cost, or a cost to the states, or in reduced tax revenue, or whatnot.

Money is a fiction; the real risk is mouldering factories and disused skills. If a year from now the US is trillions more in debt, and prices are 2% higher, YET we are healthy and working and productive, we will have been successful in countering the health and economic crisis. We should be so lucky.

What I saw today driving through the neighboring small town - half of the main street shops and restaurants are closed. Not just temporarily, but the space is empty and there is a big "for rent" sign in the window. I've been going to some of those restaurants for decades - and now they are all but a memory.

It is not enough to give corporations money for payroll - in NY large part of the cost of running business is the space itself. Also I don't understand all these "lending" programs - all they do is defer an even larger payment for later - most of the businesses will not be able to repay that if they have been closed for months. You are basically taking a loan to pay the rent so you can go bankrupt later. Doesn't make any sense.

I don't know what to do but we need to give money and healthcare to people independent of work. Let businesses fail (big and small) and rebuild new ones once this blows over. Corporations will only buy back stocks and and line shareholders' pockets with dividends. Single digit percentage points of the stimulus money will reach employees.

Bankruptcies aren't that bad - usually companies are not dissolved, but go through restructuring and gain a new management team (which one, knowing there is no bailout in the future, will plan better for emergencies like this one).

What we are doing now is perpetuating corporate negligence that will now factor in 100% government bailout and run on even thinner margins and bigger stock price growth and dividends for the shareholders.

Driving downtown is apocalyptic, huh. Like nothing else. Feels like end of days.

I will partially defend PPP here: the money is forgiven if "loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs." So it's more of a stipulated grant than a loan. As it should be.

The failure of PPP is administrative. Congress authorized this much money: who gets it? The Small Business Administration was supposed to administer it, but they are not equipped to do so, so they delegated it to banks, which favored businesses with existing banking relationships. That's a stupid way to distribute a stupidly-small pot of money.

I agree with "give money and healthcare to people independent of work" to the extent that this crisis continues. Congress should authorize enormous monies, and the Fed should commit to back it, until the infection rate declines to manageable levels. We can pay for it now or pay more for it later.

I do not agree that "bankruptcies aren't that bad." I do not want my hometown's businesses to be "restructured." After this crisis, we will have an economy that is massively distorted towards delivery. Amazon is going to come out of this so much stronger than my neighborhood grocery store - but there was never a problem with that grocery store.

"Corporate negligence" is a real issue: some authorized money may go to paying dividends, or executive bonuses, or other garbage, even while they impose layoffs. But if you impose oversight, you delay help to firms that really need it. One thing you can do is post-facto oversight: don't block spending, but let the American people know where the money was spent. And the CARES act sets that up pretty well.

The forced economic shutdown has decimated the entrepreneurial class in the US, particularly small businesses, I anecdotally know of many (non-tech) examples in my own circle of friends.

The jobs they created will not come back for the foreseeable future in many cases. It isn’t like they can just reboot with a clean slate, much of their capital was destroyed in the process. For a lot of businesses, “pausing” them is a death sentence, and there won’t be nearly as many people stepping up to replace them.

I think it will be worst for small businesses that have a strong component of physical "means of production" ownership: the means won't go away but they'll be owned by whoever happens to have access to cash at the massively parallel firesale.

Business that have been based on rented property anyways are much easier to restart and landlords of otherwise healthy businesses might lose less long term if they allow skipped rent in the crisis instead of enforcing it now and then go through a lot of idle months from fluctuation due țo a series of failing new tenants.

In the first days of the Italian lockdown I picked up some mentions on international news that they were intending to pause mortgages and rents for the time of the lockdown, shifting some of the economic burden on banks (who'd be far more practical to bail out) and the rentier class. Anyone able to chime in with more details about that? Was it just an announcement that was quickly subdued by well connected landlords? This approach sounds incredibly helpful and practical to me, but I could easily imagine attempts to put it in concrete legal terms to fail miserably.

> there won’t be nearly as many people stepping up to replace them.

Strongly disagree with the last point. If there is one lesson that I remember from the history of US -- entrepreneurial spirit is the reason this country exists in the first place. My only worry is that Google, Amazon and Facebook will use this time for huge land grabs in all niches.

Many stores that closed have already been on their last legs. And in the digital realm there can only be one winner (try beating Amazon at online sales or Google in search...) So you are right in the sense that it will be even harder for many people to step up against the tech giants - but this is a whole different issue.

Sorry, but that is a naive view. If you destroy the life savings of half the people that had the courage and interest to start a business, you’ve removed them from the game. You can’t start a business with no money. Do you really believe in this environment that millions of people will suddenly have the newfound urge to invest all of their (depleted) life savings in a small business? Many of the businesses that closed were profitable businesses in every sense. The government essentially outlawed most small businesses but left the business owners holding all the liabilities of their business. Few small business owners are wealthy enough to eat that kind of loss.

Imagine if the government unilaterally destroyed your house but left you with the mortgage. What are the odds that you can buy another house at that point? Pretty slim I’d say.

You are the one that is naive. I will translate.

You want to keep kicking the can down the road, so that someone that isn't you will hold the bag. Because someone will hold the bag for all this, and it isn't fair. So? Life isn't fair. Pandemics happen, and the government can't possibly bail out everyone.

He's right. Add a UBI and nationalize healthcare. It's not complicated; the elites just don't want it. The ones like you.

Perhaps you can translate for me too, because I read the reply and agreed that the risk appetite for new small business owners might not be as robust given the current set of rules, which is what the commenter was saying. At least that's my interpretation. You seem to see something else in this comment.

As a result I have some clarification questions... How do they want to "keep kicking the can down the road" exactly? Your comment about the government not being able to bail out everyone only serves to reinforce the point about the risk of starting a small business.

What do you mean by "He's right"? He's right that people will line up to start new businesses and put their diminished life savings on the line after what's transpired?

Then you flippantly say "Add UBI and nationalized healthcare", as if it's just something you add to a shopping cart and "it's not complicated". So it sounds like you assume these features as part of the assumption that people will flock to starting businesses. That's not part of the discussion at all, but it's an interesting point to discuss whether that would spur the activity. It very well might as it's the "social safety net" one would need to have more confidence.

About the only thing you said that resonated with me is "the elites just don't want it". Given the growing wealth disparity and the relative flat to down real income of the average American in the last 40 years I'd say that's a fair statement.

Your final statement comes out of nowhere as you lump the commenter into this group of elites when all they were saying is "hey man, I'm not so sure people will be lining up to risk their life savings to start a small business".

Care to try again with a gentler, more constructive tone and explain how the commenter, and by extension myself, are naive with the summarized viewpoint I stated at the outset?

It's not an opinion. I'm an engineer who also trained as an economist, and I know the answers to these questions. It's just math.

It's all about the money supply. The elite want to bail out because it inflates the money supply.

You can bail in instead of bail out. Bankruptcies happen and equity holders lose, but the problem is that bankruptices reduce the money supply. Money effectively disappears when debt is restructured.

The problem we now face is that equity holders today have decided that bail outs are necessary politically. Equity is the most speculative ownership of productive capacity, but you wouldn't guess it with the way it's discussed. Wouldn't you expect that that kind of security to lose value in an unforeseen circumstance like this? The system eventually doesn't function if the government hamfistedly tries to alter price discovery to such an extent that markets stop working. That's where we are today.

So bail in. Give everyone free money. I give you an ID number and a bank account number, and I receive cash every month. That's a hell of lot simpler. Nationalize healthcare. Wouldn't a nationalized system be simpler? The lines of code per person have to be higher in a country with fifty different systems. It will cause inflation, but we don't really have a choice.

Sorry if my tone is a bit flippant, but someone has to argue for sanity here. The United States is going down a dark path in nationalizing so many USD assets. Somebody has to try to explain why.

> It's not an opinion. I'm an engineer who also trained as an economist, and I know the answers to these questions. It's just math.

Considering how many economists seem to disagree on what the proper response here is, I highly doubt it's just math.

And regarding nationalizing healthcare... That's a whole truck full of worms, and seems unrelated to an economic recovery. Couldn't you also argue that seeing the government nationalize an entire industry would decrease entrepreneurial spirit in other industries in fear of the same thing happening there?

I'm not an academic that likes to write up econometric models with 40 years of data to make myself feel smart, so I am not so ignorant to reality.

It really is just math. Every dollar we waste today on unproductive capacities is a dollar that your children will never have.

"I'm not an academic and have real world experience, therefore I'm right"

I don't think it works like that.

In a time where economists have a lot of soul searching to do, the realists are a good place to start.

> In a time where economists have a lot of soul searching to do

This might be true, but I don't know that there's been an obviously wrong set of recommendations yet during the coronavirus crisis. Do you have an example?

> the realists are a good place to start

This is almost certainly false - at least if you're including yourself in "realists". Personally, I'd look at the heretical economists first.

> It's just math.

You seem to be missing a lot of other points from your analysis.

> The elite want to bail out because it inflates the money supply...The problem we now face is that equity holders today have decided that bail outs are necessary politically.

Let's check the numbers. Collective wealth of all the billionaires in the entire world is 8.6-8.7T USD [1]. Collective retirement and pension assets in just the US is 19.1T USD [2]. So it seems that commoners, relying on the retirement and pension assets, would benefit much more from a stock market recovery than the elites.

> Nationalize healthcare. Wouldn't a nationalized system be simpler?

Maybe yes, maybe not? UK / France / Italy / Germany / Spain all have public healthcare and have ~320M people between them, roughly the same as the US. And yet, their COVID-19 deaths are ~100K vs ~55K for the US when both the continents had fairly similar advanced warnings. Why is this simpler (and presumably better, from your tone) system producing a far worse outcome?

[1] https://en.wikipedia.org/wiki/Billionaire#Statistics [2] https://en.wikipedia.org/wiki/Pension_fund#United_States

> Let's check the numbers. Collective wealth of all the billionaires in the entire world is 8.6-8.7T USD [1]. Collective retirement and pension assets in just the US is 19.1T USD [2]. So it seems that commoners, relying on the retirement and pension assets, would benefit much more from a stock market recovery than the elites.

Pensions are not equity. Pensions also usually fall very high on the cap table, saving them from restructuring in bankruptcy.

> Maybe yes, maybe not? UK / France / Italy / Germany / Spain all have public healthcare and have ~320M people between them, roughly the same as the US. And yet, their COVID-19 deaths are ~100K vs ~55K for the US when both the continents had fairly similar advanced warnings. Why is this simpler (and presumably better, from your tone) system producing a far worse outcome?

That's not really how pandemics work for one; the Milan fashion show arguably killed tens of thousands of people as a superspreading event. The US healthcare system is terrible, whichever way you slice it (cost, infant mortality, outcomes).

> Pensions are not equity. Pensions also usually fall very high on the cap table

I am talking about pension funds which have to invest their money in something, with public stock market being an obvious choice for such investments.

I'm not sure what you are going on about, you read far more into my post than I actually wrote. No policy action was promoted or implied.

My point is that the assumption that most small business owners will be able to reboot their businesses when the economic shutdown ends is almost certainly not true due to the mass destruction of their working capital. No one said anything about fairness or bailing them out, just about the unrealistic expectation that these people will be able to start new businesses, so that life will go back to normal for their customers, or that millions of people that have never run a small business will have a sudden desire to fill that gap. Many jobs will be disappearing as a result.

Another poster suggested what is likely to happen and I already see the wheels turning in my city: cash-rich investors/companies will swoop in to pick the carcasses of dead or distressed small businesses, acquiring the assets of the best ones at a steep discount to what would have been required pre-shutdown. That is a poor outcome for small business owners and will change their risk calculus going forward.

This assumes there's a choice. If there's no jobs to be had, then the choice is "sell stuff or starve".

Not all small businesses need capital to start. And a lot that did start with capital didn't really need to (I've seen so many people rent an office as their first move, for a business they could easily run from home).

To use your analogy: imagine if the government wrecked your house, but left you with the mortgage. You can't move anywhere, can't buy another place, can't rent anywhere. You'll have to rebuild from the rubble.

Sure, that would make an inspiring Hollywood movie.

But in real world terms, it just sounds like a large number of Uber drivers.

"You'll have to rebuild from the rubble."

This terrifies people more than anything...and the more entitled someone is, the more they fear it.

So what you’re essentially saying is that it’s small businesses that should be paying for COVID-19?

Nobody should be paying for COVID-19, but everyone will be. I don't think there's any amount of financial magic or government support that can rescue small businesses from an indefinite loss of all their revenue.

The odds of being able to buy another house are far higher if I had the money to pay off the first mortgage. The government literally and figuratively prints money. In trying to avoid as deep a global recession as we are headed into, it seems the government could use this ability in some fashion to help those who's houses have been destroyed, to buy another house.

"You can’t start a business with no money."

Yes it costs maybe a couple hundred dollars to legally start a business. So you are correct in the most literal sense, that it does take some $ to start!

But if you have a mindset that it takes anything more than that, I'm here to tell you from firsthand experience that you're wrong :/

> My only worry is that Google, Amazon and Facebook will use this time for huge land grabs in all niches.

That is exactly what I was thinking of while reading the grandparent comment: that one of the worst things to fear from this crisis, is coming out of it into a world with further consolidation of global power into a handful of entities, and even more authoritarian governments.

The pieces are already being put into place, like contact tracing APIs, however well-intentioned they may be.

The stratification between the rulers (who can already still go anywhere and comfortably wait out a global crisis on private estates or islands) and the ruled, the monitors and the monitored, could end up being worse than any fictional dystopia.

> like contact tracing APIs, however well-intentioned they may be

I share many of the concerns you've expressed, but worrying about the contract tracing API that was recently put forward is (hopefully) unwarranted. A faithful implementation of the joint spec published by Apple and Google would preserve your anonymity until and unless you published your secret keys. Moreover, the overall design is cryptographically sound (unless I missed something recently?) and appears to be decentralized (at least in principle) so in theory you won't have to trust the behavior of any binary blobs unless you choose to do so.

For more insight into the design (and security) of such systems, you might take a look at the TCN protocol (https://github.com/TCNCoalition/TCN) or the DP-3T protocol (https://github.com/DP-3T/documents).

Let's assume there is no technical way the contact API can be misused. You've still conditioned massive swaths of the population to be electronically tracked, boiling frog and all.

> You've still conditioned massive swaths of the population to be electronically tracked, boiling frog and all.

I don't understand what you mean by tracked here? Until and unless you release your secret keys, the numbers your phone was broadcasting are just random gibberish to anyone other than you.

If you have Bluetooth enabled in the first place, you're already broadcasting a MAC address. Many devices now rotate that specifically to prevent tracking, making it equivalent. In fact the only real differences from your device's MAC are the bit width (tracing numbers are significantly larger) and the fact that tracing numbers are cryptographically derived from an underlying secret.

As far as conditioning massive swaths of the population to be electronically tracked, I'm afraid that ship sailed quite some time ago. Cellphones inherently reveal your (coarse) location in order to operate, modern vehicles carry extensive electronics packages that phone home to the manufacturer, and a seeming majority of people voluntarily upload significant portions of their geotagged lives to various service providers.

I'm about as privacy conscious as you'll find these days, but my only concerns regarding the contract tracing API relate to battery life and the security implications of leaving Bluetooth on all the time (it seems like there's always another zero day being announced).


> automated electronic location tracking that is to be submitted to authorities

A minor (but absolutely essential) correction - your diagnosis keys are to be submitted to a database, not your actual location data. Only those who observed one of your previous broadcasts will be able to make the connection.

The notion of a mandatory app or device that tracks location in a centralized manner certainly does make me uneasy. Thankfully that's not (yet?) the reality, but (the same as you) I can easily imagine that an appeal to security might be made in the future to justify such a requirement being enacted.

But the current API, while correlated with that issue, isn't actually related to it in a causal manner. On it's own, the published protocol miraculously manages to yield almost no privacy whatsoever. Even better, none of this actually requires cell network connectivity. You could hypothetically manufacture a Bluetooth-only device (thus no location data leakage via the cell network) whose sole purpose was to facilitate contact tracing!

If we're able to achieve effective contact tracing without giving up our privacy, perhaps it will critically weaken any hypothetical future push for a mandatory app or device that could be used for centralized tracking?

"The forced economic shutdown has decimated the entrepreneurial class in the US..."

Not all entrepreneurs are "decimated"...many are in a position to prosper :)

Technically, "decimated" denotes the destruction of a minority subset, which is how I was using it. :)

My business is as good as it has ever been, and I do not work in any of the obvious verticals that would benefit from COVID-19, but all evidence suggests my case is an outlier.

That's nuanced yet fair; TIL

There is precedent - losing a war. Economies do recover. Germany recovered from being bombed/burned/bankrupted flat in WW2 to become the economic powerhouse of Europe.

Other countries did not recover so well, mainly because they chose more socialist economic polices.

No, it wasn't because of the Marshall Plan. Most of the MP money went to other countries, not Germany.

Unfortunately it took a couple of generations! At a macro level, everything will be fine eventually, you're right. But short term pain regardless.

It took from 1948 or so to the 1960s, less than one generation.

Germany also had the problem of wholesale death of its men of working age. The currency was repudiated. The government at all levels had ceased to function.

But there was also a lot of capital brought in from outside (which isn't quite the same as a money printing spree that happens everywhere at once) and what was left of pre-war financial elite was more concerned with keeping a low profile and pretending that they were on vacation or something like that for that last ten years than with leveraging their power into an even firmer grip. It's a very different situation and those differences could be very meaningful for the outcome.

I don't see any reference to that in things about the German Economic Miracle.

After the 1st world war, Germany was paying crippling amounts of reparations to the winner countries. That wasn't so successful, lead to hyperinflation and the Nazi power grab. So after the 2nd world war you had the Marshall plan, debt forgiveness, and trade integration between the western European countries. This was the basis of the EU pacts that live till now.

Just to fill in the gaps. Countries in the Russian sphere of influence actually refused the Marshall plan because it would make the commies look bad. And they didn't have nearly as good recovery as Western Europe. So it probably had some effect.

The eastern bloc countries never caught up with any of the western countries. Their economies didn't really get into gear until after the collapse of the USSR.

The strong correlation of postwar prosperity is with how much of a free market was embraced.

It's the same with post-war Japan. They embraced the free market after being burned flat in WW2, and rose to world dominance by the 1980's.

Alternatively, one could argue that postwar prosperity was strongly correlated with friendly diplomatic relations with the US, the only major world power that didn't have its entire industrial capacity reduced to rubble during the war. Saying that the Eastern Bloc countries floundered solely because of a lack of a free market when they were militarily occupied by a disastrously incompetent foreign power sounds like an oversimplification to me.

It was more about central planning, collectivisation of private property, and lack of management (directors where assigned based on politics), than occupation by force. Austria was under soviet occupation till 1955, but they were still lucky to become a free market country afterwards. Romania was occupied till 1958, Hungary from 1956, Czechoslovakia from 1968. Poland and Bulgaria were not occupied after 2nd world war, but their economy was still in shambles.

I need to ask, what so socialist policies are you suggesting and which countries?

"decimated" means to reduce by 1/10th. I doubt that's what you meant here.

>which one, knowing there is no bailout in the future, will plan better for emergencies like this one

The government making your business illegal for multiple months is not an emergency businesses should have expected, or be expected to expect.

>and run on even thinner margins and bigger stock price growth and dividends for the shareholders.

Thinner margins, stock price growth, and dividends for shareholders are all good things that we want more of not less.

It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out. It's compensation.

> Thinner margins, stock price growth, and dividends for shareholders are all good things that we want more of not less.

This isn't a recipe for a robust economy, it's a recipe to enrich the rich. You might want that, but the majority of the population is not benefitting from that. Employees benefit from robust companies who have some money saved up for a rainy day, and from wages that track cost of living. When a majority of workers are impoverished and can't afford a month without income, that's directly related to thinner margins and dividends for shareholders.

> It's also bullshit to call financial aid from the government, that's needed because of government action, a bail out.

No it’s not bullshit and it’s because of a pandemic mostly, very little because of government action. The government will make it legal again soon to open your business but many will still need aid for time to come because there will be less demand.

Will we be subsidising empty restaurants, hotels and airplanes for an entire year or more because it is not ‘their fault’?

Probably, because if we don't then we'll face a shortage when demand for those things rebounds.

It is true that current emergency is not the one to be expected. But it is made much worse for the people which depend on everything to come from the employer. If healthcare comes from a "job" - shouldn't the "job" anticipate pandemic in that case? Employers enjoy the benefits of employee's dependency during normal times, but the second things go sideways - they don't want to pay extra to guarantee medical coverage when it is needed the most.

I agree on your second point but this is a flip side of market economy that we have all subscribed to - there are good times and bad. If capitalism is the way to go, then companies that can't survive (for whatever reason) should go under. This pandemic and government decisions affect everyone equally. Lets put our money where our mouth is. Otherwise we should switch to socialism and call it a day.

Small business failures aren't like tech startups where you can go raise a new VC round next week.

Many people will have their livelihoods and retirements destroyed and can't even restart their existing business, let alone start something brand new. And that's assuming they don't get sick with the coronavirus.

One solution could be some form of mandatory rent holiday, although it might already be too late.

The sensible landlords should not be charging rent to their small business tenants right now. If the lose them all, then their properties will be worth considerably less when the dust settles.

Some landlords have mortgages to pay too - so in that case "rent holiday" is basically "landlord pays for tenant". But commercial real estate seems to be a different beast. I've witnessed a large amount of commercial property being empty for years at a time (5+) in a fairly expensive area of NY. Commercial landlords in this case probably owned the buildings outright and were in agreement to keep rents high even if it made it longer to find the next tenant. It probably is not like that everywhere, but I was really surprised that half of the building would just sit unoccupied for so long.

I have heard that with commercial space you can take building depreciation costs and write that off as an expense so it might be not as expensive for a landlord to keep the property vacant as you would imagine. Also sometimes as I understand it is new tenant who has to clean up and bring the building up to code to open, and if there is plenty of other properties to lend they might find something with less upfront costs.

Location is everything in cities like NY, especially for businesses that rely on people traffic so few hundred feet closed to rail station might be a lot more expensive so they just wait for tenant that can utilize that.

Suspending mortgage payments should be looked at also

They have forebearance of 180 days and you can extend another 180. But this will unwind very badly because it's still due yet the renters and homeowners won't be in a position to pay lump sums. From a Planet Money episode, essentially the mortgage servicers will go bankrupt as they are the only ones that can't defer payments in the flow. You have renters, landlords, banks, mortgage servicers, investors and the federal government guarantees a lot of mortgages. It seems most plausible that homeowners who don't pay will end up with longer mortgages versus a balloon payment they won't be able to handle.

Do you also default on all of the bonds that are backed by mortgages?

The current proposal in Congress reimburses landlords and mortgage holders with taxpayer money subject to stipulations. This proposal is actually much cheaper than the UBI esque one.

My naive understanding is that the empty storefronts offset as a tax loss from a more lucrative line of business from the matrixed holding company that owns the property. The empty storefront on 5th Ave. doesn't matter to the owners because the numbers work out on a spreadsheet.

Losses reduce the taxable income, they are not tax credits. If you're paying a 20% tax rate, you still lose 80% of those losses.

The landlords have bills of their own. Very few of them own their properties completely (which doesn't make sense anyway with low interest rates).

If you stop rent payments then you must also help landlords and property owners with their mortgage.

That's a false equivalence. Landlords have huge equity advantages that the renters do not.

That said, I agree, we should be deferring mortgages and canceling rents.

Here’s what I don’t get

Everyone is paying downstream until you hit the lenders.

What are the lenders’ costs? What if they pause repayment for 3 months and tack it on to the end of their loans?

Presumably if all the lenders downstream did this, we could really hit pause.

You think the lenders don't have anyone to pay? Many mortgages are packaged up into bonds [1]. Those bond coupon payments are often times what retired people are using for their fixed income to pay their bills.

[1] https://en.wikipedia.org/wiki/Mortgage-backed_security#Marke...

Alright, but didn’t we send those retired people checks?

By the way this is another reason why UBI is good in a crisis. It creates a floor for people to buy food etc. while we suspend rent payments and mortgages for a few months. And with no disincentive to work like we have now.

Anyway... so who do the retired people need to pay when everything is on pause? Social Security and Medicare cover a lot of the basics. If they have investments yielding enough for them to live on, then they have savings that they can use 0.5% of in three months.

Not to mention, the stock market is down, we can pause bond yields for the retirees for a few months also. The only thing I wouldn’t pause is sovereign debt, since we can print money to service it and confidence in that is paramount.

(Another reason why McConnell’s stance on letting states go bankrupt is dangerous. I would have liked to see states and cities have the ability to issue their own complementary currencies.)

What's false about it? Equity only exists if they paid into it, and is no different than any other savings.

Is it now unfair that some people have saved more cash than others?

That advantage only works at time of sale, and that only happens when there are people around that can buy what is being sold. Houses here were stacked ten high and ten deep for miles with foreclosure signs in front during the last recession; a lot of them stayed that way for a long time.

The property values are not going to be affected by any individual landlord, but keeping a reliable tenant may be extremely valuable during the recovery. Getting a good tenant is often difficult, and getting any tenant at all can be near-impossible in a recession.

Individual bankruptcies are not bad.

Mass bankruptcies are terrible.

Agreed. Most important thing is to flatten the bankruptcy curve.

Completely agree with the sentiment and view of the situation.

One nitpick, there are two types of bankruptcy for businesses, chapter 7 and chapter 11.

Chapter 11 is for restructuring the business and keep it running, but it's very expensive (around $100k in legal fees in California), and it only really makes sense for businesses that have a decent outlook for the future, so it's mostly an option for mid/big-size businesses.

Chapter 7 implies shutting down a business for good. Assets are liquidated and the business completely terminated. There are also big legal risks for the company owners/officials of starting the same or similar business again after bankruptcy, as they can be accused of fraud (basically mis-using chapter 7 to avoid debt liability to then continue pursuing the same business).

Usually chapter 7 is the only real alternative to small businesses, and given the legal risks, it's unlikely they can come back to life afterwards.

This crisis will be truly devastating for a lot of businesses.

> Bankruptcies aren't that bad - usually companies are not dissolved, but go through restructuring and gain a new management team (which one, knowing there is no bailout in the future, will plan better for emergencies like this one).

That is what i was thinking lately too. We have bankruptcy procedures for a reason, big companies wont disappear they will be restructured and continue to exist and shareholders can decided with their pockets if they want to refinance a certain business. Going back to its intended way that "shareholder value" is a two way street. It cant always be sunny.

Changing the incentive structure would benefit us all.

And probably the best thing to get everything back on track is pumping money through the population and not single big entities.

To be honest, I don't think the president would like the rent to be pardonned, like France is doing.

It's too much loss for his private "business" and of his son in law.

The current proposal in Congress reimburses landlords for their loss. It has stipulations though, such as a 5 year rent freeze.

Congress is housed by the democrats. Then it still has to be approved by the senate + signed by the president I presume.

We'll c

Congress is the House and the Senate combined.

> Not just temporarily, but the space is empty and there is a big "for rent" sign in the window.

That's crazy. I can't imagine much demand for retail space at the moment, so why would a landlord kick out a previously good customer in order to let it go empty.

Once places open back up, nobody is going to be opening new resturants any time soon, so rents will be way down on any new tenant.

> why would a landlord kick out a previously good customer

I don't think they did. If I owned a small restaurant or a book store - having been closed for a month would be devastating in itself. Seeing no light at the end of the tunnel (another month to re-open, and then probably months of very few customers, on top of a crazy unemployment rate) I'd voluntarily cut my losses and settle with landlord to end the lease early. I'd assume that what had happened.

There's no reason to pay rent if your lease expires. My current company has no office because the lease expired in the shutdown. There's no new office lined up, because they don't know when they'll need one.

Yep, governments mistaking a solvency crisis for a liquidity crisis is going to kill lots of businesses that otherwise could’ve survived.

It’s more efficient to implement a universal basic income.

Having to funnel it through businesses just adds dead weight. Many businesses are no longer economically viable or sustainable, and that will only continue to accelerate as time goes on. We place far too much emphasis on jobs, which doesn’t work in the age of automation as humans become, at least productivity-wise, more and more unnecessary.

Once you decouple a person’s worth from their productivity though, then you can start to better see the inherent value that exists in everyone which is both foundational and immutable.

Not even proponents of UBI pretend that it’s the end of human labor. The original idea is that you replace all welfare programmes with one payment.

If you remove human labor from the economy, you’re facing a 50-60% fall in GDP overnight, undermining UBI and ever other human activity.

Every person has inherent worth, but that doesn’t mean that everyone can live without being productive in the near future.

I think you might have misread what I’m trying to say. Human labor is becoming increasingly unnecessary, with the key point here being increasingly.

The pool of available work will never completely disappear, but as the job pool decreases in size due to being replaced by some combination of machine/computer, providing stimulus through the intermediary of businesses begins to fail as it no longer reaches people efficiently.

Yes, this argument is one shared with some arguments for minimum wage. When a sector of the economy can set wage freely, it often races to the bottom on price competitiveness, neglecting automation and training improvements; businesses that attempt to raise their quality get pummelled by the higher costs and risks relative to competition. A rising minimum wage standard therefore encourages modernization of the work environment.

With UBI a similar effect is had on the demand side: If you assume a higher base of income, then consumer credit, payday loans, friends-and-family-favors, etc. become less of a necessity for low-income workers. Higher-income workers with long-term debts like mortgages and student loans become free of their debt more quickly, and face fewer consequences if their income takes a hit. The workforce is therefore disentangled from a set of predatory financial interests that chain them to needing their current job and to stay in the good graces of their financial backers. Even a very small amount of UBI will create a substantial reduction in poverty traps, domestic abuse, and labor mistreatment.

For similar reasons I have recently been entertaining the idea of government as employer-of-last-resort. Essentially, have the government spend lots of money on creating businesses designed to employ the unemployed, with good working conditions and pay, and don't immediately focus on making the operation profitable. This would, I hope, create positive pressure on wages and conditions in low-skilled jobs: no stream of desparate people they could rely on, and an alternative employer raising the bar.

I wasn't thinking of COVID-19 when I contemplated it though. It's not a new idea of course.

> Human labor is becoming increasingly unnecessary, with the key point here being increasingly.

How can you justify this statement given the relatively low unemployment numbers pre-Covid?

This sounds like the same refrain heard at least since the early 1900's: Productivity and automation will set us free! Redistribute capital and income!

On the more pessimistic end, some people have always roiled against labor-saving technology.

In either case, both are predicting some future where humans are less necessary. Funny how this never seems to happen.

There will always be short term pain from displaced workers, but in the long term we will always have a need for humans to work. Technology is a multiplier and supports human effort.

Headline unemployment numbers measure the fraction of workers who are trying to find jobs but can't. The fraction of Americans who have jobs peaked in 2000 (https://fred.stlouisfed.org/series/EMRATIO), and there's reason to believe that the downtrend started earlier (https://fred.stlouisfed.org/series/LNS12300001) but was masked by the removal of structural barriers against women entering the workforce.

Automation is not a bad thing. We should endeavor to make things as efficient and labor-saving as possible.

Without a mechanism like UBI, however, wealth will get trapped into increasingly concentrated funnels and effectively stagnate. This is bad not only for the people that get left behind, but also bad in general for the economy as a whole as an economy sustains itself on the constant flow of back and forth between buyers and sellers and consumers and suppliers.

As more and more people get replaced through automation, the available pool of money from consumers decreases. If it gets to a point where this becomes too low, the economy effectively comes to a standstill as the products and services companies can offer, even as they become increasingly cheaper to produce due to the productivity gains from automating away human labor costs, stop getting bought due to insufficient funds from consumers.

Sorry, perhaps I have misunderstood. What I thought you meant was that it would be more efficient to create a UBI for everyone now, rather than pay people via the payrolls of shuttered companies. I’m assuming you meant financially efficient. I was disagreeing with that because it seems like a suboptimal time to attempt something like UBI (both in historic terms and in the midst of a major pandemic), and because we’re going to need a ready made workforce when the pandemic ends.

“The pool of available work will never completely disappear” - I would say there’s no evidence the pool of available work for humans will even _decrease_ in a highly automated economy. It’s possible to have a 99% automated economy with human labor many times its present level. Disappointingly–despite all of our best efforts–new work always seems to arise in this universe.

My contention about the long term prospects for UBI is that before we spend the proceeds of our massively automated economy, we should first try to create it. The challenge is awesome, and the economics uncertain.

Of course, I too would like free money when available :)

> there’s no evidence the pool of available work for humans will even _decrease_ in a highly automated economy

That depends on how you define "available work". Historically automation has replaced the jobs requiring the least skill with fewer jobs that required more skill. As the skill cutoff rises, the eligible labor pool shrinks. Assuming the trend continues (in fact it appears to be accelerating) at some point the vast majority of humans won't be capable of any work that might still be available.

“Historically automation has replaced the jobs requiring the least skill with fewer jobs that required more skill”

This is a compelling narrative, but it’s not true. Technological unemployment has not historically accompanied increased levels of automation. There are some economists who project that this will change, but that would be a break with the past.

Probably worth remembering that the current wave of automation struggles to replace jobs we consider “low skilled”, because they actually require high skill (they are impossible to automate with current tech) and are performed for little money (so the capital investment in automation is uneconomic).

It most certainly is true! How many fields are tilled by hand today, instead of by tractor? How many jobs can be done today by someone who is illiterate? History is full of obsolete occupations.

I never claimed that mass technological unemployment had occurred historically, only that the minimum skill level required for employment has been steadily rising over the past ~150 years at an accelerating rate. The observation that "new jobs were always created in the past" fails to take into account the fact that the new jobs have _always_ required more skill than the old jobs they replaced.

Almost by definition, automation will perpetually struggle to replace the jobs we _currently_ consider low skilled. If they were easy to replace with current technology and expertise we presumably would have done so already. Those that remain are complicated enough not to be worth automating (yet), and thus remain the bottom of the barrel (for now).

Globally, there were estimated to be 3.3 billion employed people in 2018: https://www.un.org/development/desa/dpad/publication/world-e...

That’s more than the entire global population was in 1964. So it’s not exactly like there’s a dwindling base of extremely high skilled jobs and majority unemployment. You are right that the minimum skill level is rising for many desirable jobs in developed countries. There are still plenty of jobs to be done that can be taught in one afternoon though.

It’s true that in many sectors in developed countries–such as agriculture–fewer workers use automation to achieve a higher level of productivity than historically. However, most industrial jobs lost in developed nations are a result of outsourcing to low cost economies, not being out-competed by automatons. The people who no longer have to toil in the fields didn’t just give up on life; they ended up as hairdressers, therapists, accountants, decorators, shopkeepers, software developers etc.

We’re not remotely close to automating vast numbers of jobs, and even when we do there will be more jobs to be done. Comparative advantage tells us that even if the machines are way better than people at everything, it will still make economic sense to put people to work at what they can do best.

UBI, by the way, is not necessarily a replacement for all social welfare programs. I don't believe that's the original or modern idea outside of right of center circles.

I've seen plenty of folks who advocate for it alongside food stamps, rent control, universal healthcare, social housing, etc.

That’s a fair point, I was conflating it with a negative income tax when I said that. You’re right, there are advocates for UBI that would maintain all social programs too.

> Once you decouple a person’s worth from their productivity though, then you can start to better see the inherent value that exists in everyone which is both foundational and immutable.

A valuable point.

US included a payroll protection program (PPP) in the CARES act last month, which pays for payroll for small businesses with some forgiveness provisions. The forgiveness terms are very roughly summarized as, "don't lay anyone off and the government will cover 8 weeks of wages for anyone making less than $100k / yr". News this week is that a second round of funding will go out for the program.

Anecdotally, 100% of the legitimate small businesses in my area have been denied access to PPP due to lack of availability of funds.

The research of others has shown that the lack of funds is due to big businesses receiving them. Seems to kinda go against the purpose.

Anecdotally I have several friends who run small businesses that received funds. My employer did as well.

I’m so glad for them and you. I really hope that’s party of a larger trend. It’s just not a trend here.

The total funding was barely enough to cover 1 million small businesses, and there are close to 30M in the USA that are affected in some way by this pandemic. The second round of funding was just passed but the pace is too slow.

Most small companies will be bankrupt within 3 months without any cash flow.

too bad much of the money got eaten up by large corps


Yep, companies are losing the ability to pay employees all over the US right now. Stay at home orders are almost certainly the right thing to do - the government needs to make it easy to do them.

I am curious, why stopped at a one time 1,200 dollar check?

If the Congress had already ordered to print money, they surely can do more than that and for longer. Instead they delegated to existing programs for the rest, which aren't optimized enough to roll out that much money at this short period of time.

Hey, if anything can handle the volume it's the cobol.

But you'll also have an explosion of the bugs and exceptions noone ever wanted to pay to fix that get manually sorted every morning by the two 67 year and twice retired old devs who didn't get laid off to save money.

The $600/wk benefit that the Feds added was precisely to make unemployment sufficiently generous that people would not be motivated to go find a new job right now.

Boosting state UI is a good idea and I'm happy the Feds did it. But every state's UI is designed to be short-term help in a functioning economy. No US state has a "pandemic-ready" UI, and in many states unemployed workers are literally unable to reach state admins on the phone because of the call volume.

That's why the Feds should be striving to keep workers out of the overwhelmed state UI programs. "Stimulus" now is incredibly cheap, perhaps even negative cost, because the alternative is people sitting at home on the phone for hours, hoping to reach a state UI admin. That is not an exaggeration.

Do you think the feds can set up a whole new system to funnel billions of dollars to small companies in a short time? Quicker than unemployment systems?

Agreed, good point. The Feds should not set up a "whole new system", but also not expect much from state UI, which wasn't designed for this crisis. So what should the Federal response be?

To start with, the Feds should identify existing agencies with the capacity to administer payments. Like the IRS: one coarse-but-quick approach is for the Feds to instruct the IRS to eliminate SSI withholding. That makes it cheaper for every business to employ workers. Beyond that I don't know; this is where Federal leadership should step in.

The Feds do have a system to funnel billions of dollars out of small companies once a year, so in theory that pipe could go the opposite direction.

Why use the same old pipe when you can make more jobs laying new ones?

That's not the alternative. Millions of people have been serviced completely through online portals. There's no phone call required.

The tech is definitely old and a few states are still dealing with issues preventing payments but it's rapidly getting fixed. UI is still faster for continued payments than the federal govt, as seen by the pace of the original $1200 stimulus checks which have yet to reach the majority.

Yes, but this is a bonus on top of existing state benefits. And as mentioned upthread, it's actually proving surprisingly (or... not) difficult for people to actually apply, qualify for and receive benefits in some states.

How easy it is for some to back and say that the government should be doing this or that. As these attitudes of entitlement continue to supplant those of self reliance, what happens?

"...Payroll support is then a more easily-administered form of federal UI. (Plus state UI is written in COBOL, they will literally crash.)"

Given how PPP just played out and considering the history our government has with opacity surrounding public-private finance...do you believe that such a broad strategy in US could be done with competence and integrity? If so, how?

"The point is that we literally cannot pinch pennies now: anything we "save" will hit us twice as hard as a new entitlement cost, or a cost to the states, or in reduced tax revenue, or whatnot." Could you elaborate on this premise?

"Also, retaining workers will help to ensure a V-shaped economic recovery."

There is no ensuring of anything! Positioning it as "will help ensure" is a linguistic setup strangely reminiscent of how politicians like to manipulate words (and people).

But "Money is a fiction"...what does this even mean?

The health crisis doesn't "end" by itself. I'm sure most people would rather get back to work than stay at home and receive free money. Let them do that.

This is true, and even the negative consequence- "trillions more in debt"- is a (to a first approximation) fiction.

Central bank balance sheets are supernatural entities of essentially infinite capacity. We need to use them now.

We don't necessarily know how to properly measure the various economic entities and activities we care about when balance sheets are used this way- but that's an accounting problem. We can clean it up in post.

Luckily we have Trump in power, and not Hillary... I think that he will do whatever is needed.

Hahaha. Yes, the man telling us to inject bleach. Thank goodness.

Don't stop drinking your city water and you'll be alright.

My take you could very quickly funnel money through payroll companies. They have all the contact and banking information needed. Lots and lots of small businesses use payroll companies.

Steps would be pretty easy, business sends paperwork to the payrol company, they cut the checks, and bill the Feds.


Many small business are minimally impacted. A small government contractor updating a website is hardly going to need additional government assistance when everyone is already remote.

Trying to hand out money to all small business is a nightmare which does not actually accomplish much for the money.

small businesses are dying everywhere, I'm not sure if we're in the same reality.

Sure, yet I can name a few that are more profitable now than they where 6 months ago. It’s really a question of industry not company size that determines how their handling this.

Both realities exist.

what? Small businesses are shuttering permanently all over the country.

Many != Most != All

Some companies are suffering others and are uneffected and a few are even benefiting. Restaurants may be shut down, but farmers are still growing food, and some tiny toilet paper factories are operating at 120% capacity. Trying to subsidize everyone erodes the idea of capitalism, it’s politically expedient but that’s not to say it’s a great idea.

If "erodes the idea of capitalism" is the best argument against it then I'm not sure that is as compelling as you seem to think.

Destroying the foundations our society is built on for temporary gain is generally really bad. People look at say gerrymandering and think, it’s just how you play the game. But, they forget elections are there to avoid civil wars.

On it’s own, just this time, it’s no big deal. But this is the 4th black swan extraordinary event leading to bailouts in the last 20 years and they don’t stop coming. If we are giving up on the idea of capitalism, perhaps we should consider what we are replacing it with.

What? Non sequitur about gerrymandering aside, capitalism is not "the foundation of our society" in either a historical sense or a sociological one. It's our current mode of operation, but it's by no means axiomatic.

We should be looking at the "black swan" events as systemic failures of capitalism and be looking for ways to replace it.

What exactly do you feet is the foundations of our society other than a representative democracy using a capitalist economic system? We don’t have much else that actually cross all elements of society.

Our society certainly didn't start as a representative democracy or a free market -- slavery was very much still a pillar of the government and economy.

Fast forward a hundred years to the early 1900s and you have things like the Kern Resolution finding peonage and unfree labor in West Virginia mines.

Another century later and today we have ~7 million people under the purview of the prison system in the US [1], including people in prison for debt. (And in many places, these people are used for forced labor.) We have poverty level minimum wages and many systematic failures that prevent people from participating in democracy. It's subtler now than it was a hundred years ago, but there are still plenty of people who are excluded from participating from the economic or democratic institutions in this country.

Also, even if everyone had access, we used to have a vigorous labor movement, and socialism was considered a valuable part of our society. [2] There are plenty of people today who would argue that our society is at least partly socialist (and should be more socialist).

You can't claim a representative democracy and capitalist economy if there are unfree people and forced labor. Or if there are unequal access to either.

[1] https://www.prisonpolicy.org/reports/pie2020.html [2] https://en.wikipedia.org/wiki/Solidarity_Forever

We still completely suppress the vote in DC and among felons etc. While the relative magnitude of disenfranchised has decreased that’s about it.

So, if your argument is we where something other than a representative democracy that’s fine. But, you’re making a semantic argument.

Capitalism had always been a mix of pure capitalism and government intervention. In the US we see this in many sectors over long periods of time.

It's confronting now because a small amount of it is going to people instead of corporations where it isn't as visible.

The US government was not giving companies handouts during the 1918 pandemic. The idea of these handouts are a very recent idea.

You are correct about 1918. That led to a recession in 1919 and 1920.

The lessons learned then led to the New Deal as a response to the crash of 1929, and that did include handouts.

The timeline does not match up between the 1920 recession/depression and the 1918/1919 pandemic. The end of WWI was a much larger deal. https://en.wikipedia.org/wiki/Depression_of_1920–21

Try charting the pandemic here: https://en.wikipedia.org/wiki/Depression_of_1920–21#/media/F.... VS. https://en.wikipedia.org/wiki/Spanish_flu#/media/File:1918_s...

If you want to make that argument, fine - I don't think it's an important distinction.

The point is that we learned from that and reacted differently in 1929.

This has nothing to do with capitalism. Companies plan for contingencies in the normal course of business.

A major halt of economic activity in order combat a pandemic is not normal, and no different than similar drastic changes that have occured during world wars. Serving the people, especially in exigent circumstances, is the entire purpose of government. Keeping the commercial sector artificially afloat is in the best interests of everyone so that we have a quick recovery instead of a global depression.

Subsides where not handed out for the 1918 pandemic and no recession occurred. Hell this was the middle of WWI and society survived just fine.

So, your argument is society has become more brittle over time, but that’s hardly a reason to make companies even more dependent on government handouts. People and companies are over leveraged, based on assumptions that don’t line up with reality. The basic capitalist idea is lot let them benefit or lose their shirt when reality hits them in the face.

Wartime spending was the subsidy. It always kickstarts the economy although it also changes several industries that are retooled for the war effort.

There is no such thing as a completely free market. There are constant regulations and oversight by government to provide a fair and stable environment to conduct business. When that changes, government again steps in to restore the balance. Again, it's there to serve the people. What exactly is the benefit of letting everything fail and plunging the country into another depression?

Wartime economies during the first half of the 1900s were very different than now. The US Military was essentially subsidizing industry through contracts to support the war effort, increasing government spending to unprecedented levels: https://eh.net/encyclopedia/u-s-economy-in-world-war-i/. BTW, they financed this by printing money. A lot of it. They did all this because they recognized that the war was an existential threat to America. It would be interesting to see what the reaction to the flu would have been without WWI going on, but in many ways, the government reaction is not so different — simply targeted at different industries. One benefit of the reaction then as opposed to now is that less of the subsidies went into the hands of finance and more to businesses who actually employ people.

However, I can agree with you in principle. Let’s start with the banks though — who have received so much in subsidies over the last two economic downturns that they’ve actually made money. Oh and can’t forget investors, who have been kept afloat by the Fed pumping money into the economy. If we let them fail in practice, it is likely that large companies/hedge funds/investors would be much more careful. But of course, that would also eliminate much of the wealth held by people in tech. Probably yourself included? Are you ok with that in service of pure capitalism?

I guess this all comes down to what kind of society you want to build. Part of the myth of prosperity after the US turn towards a service economy and away for manufacturing has been the idea that scrappy entrepreneurs can build their own businesses. So much of society and economic policy has been built around that idea. If we remove that, economic inequality would probably be too much for the average person to bear — where will the jobs come from when 74 percent of the employers are gone? The unrest that would appear in our society then would surely make 2020 feel a lot more like 1918 as well.

Making it illegal to do business also erodes the idea of capitalism.

A great many companies are still doing business just fine. I can name several that are doing better than normal.

The capitalistic approach is to say this is the 3rd major respiratory pandemic of the last 110 years. Get some https://en.wikipedia.org/wiki/Business_interruption_insuranc... if you’re at risk for a prolonged shutdown or accept the risk of failure. Governments trying to hedge business risks are a giant slippery slope that doesn’t end.

If you disagree that’s fine, but perhaps come up with a general idea of how you want the country to operate longer term for the next crisis. Or worse, as what’s considered a crisis changes over time.

No insurers will underwrite against a nationwide shutdown caused by pandemic (or war or other meteor strike or any other similar economy-halting event). They'd literally go bankrupt the second they start paying out because the idea of insurance is that not everyone tries to cash out at the same time. That's why you typically see all these plans, business interruption insurance included, make exceptions for exceptional events.

And before someone links the Wimbledon, they have bargaining power beyond most companies' capabilities, and their insurance was custom written. There's no way standard businesses will ever be able to get insured against pandemics.

Plenty of options where out there ex:

PathogenRX, a product it launched in 2018 to provide financial protection to companies hit by an infectious disease outbreak in the United States and Asia. The product includes a policy underwritten by Munich Re, one of the world's biggest providers of cover to protect insurers against big losses. Sales had been slow, partly because the insurance was viewed as expensive given the risk, Christian Ryan, the head of US hospitality, sports and gaming at Marsh, told CNN Business. But the coronavirus pandemic is rapidly changing that perception, he said. https://www.cnn.com/2020/03/19/business/pandemic-insurance-c...

It was considered expensive specifically because companies where underestimate the risks.

The target industries for this product are Hospitality & Gaming, Travel & Tourism, Aviation, Public Entity, Education, Real Estate, Sports & Events and Retail/Wholesale Food & Beverage. https://www.marsh.com/us/campaigns/pathogenrx.html

Well doesn’t that sound exactly like the industry’s at risk during a shutdown.

I'm 100% in favor of capitalism, but that's not what you're standing up for. Capitalism doesn't mean you never intervene when disaster strikes, it just means that markets are the engine that drive the economy and you mostly let them function unimpeded. When something threatens the proper functioning of the market itself, a functional capitalist system should intervene (in non-market-based ways if necessary) to keep the flywheel spinning when the crisis passes.

Put another way, laissez faire capitalism might be fine when the system is operating in a normal regime, but most capitalists don't take that as a prohibition on taking action when things like wars or natural disasters strike. All of the usual arguments in favor of letting the market just do its thing break down when you're temporarily in an environment that differs hugely from business as usual, and letting the market decide for itself could end up optimizing for the wrong behavior. Specifically, we probably don't want to allow a natural selection event that cuts so deep that anyone without a 12 month cash buffer goes bust, since if every company operated to maintain that it would not be optimal behavior during the steady state.

"Free markets, except when the markets do not work" is not particularly specific - I fail to think of any mainstream party in the West that do not agree with this principle. The disagreement is about 1. when do markets fail and 2. what are the acceptable policies to fix it.

For instance, environmental externalities could justify an endless list of regulations, a massive carbon tax and/or cap-and-trade policies, as well as tariffs for countries not complying with environmental regulations. Because the markets does not work. Yet this is clearly not something everyone agrees with, despite being a market drive the economy but intervene to keep them spinning until the (climate) crisis passes.

I do not mean to enagage in politics and suggest the example I gave is what we should or should not do.

My point is that most people beliefs about the economy are a lot more specific than "markets with some intervention".

Totally agree with pretty much all of this; I'm just arguing that "don't subsidize, ever" is a very extreme vision of capitalism, and doing a one year or less intervention is nowhere close to throwing away the whole system (which GP is implying very clearly elsewhere in the thread, and to be fair I probably should have responded to those specific comments instead of this one).

I agree that when and how we intervene is important to discuss, it's just important to argue the details, not "but muh capitalism" as a way to argue against every government action ever.

1. Cancel rent payments, mortgage payments, and property taxes. People simply stop paying and stay where they are, no enforcement burden and no distribution necessary.

2. For landlords who cannot sustain the loss of cash flow, offer to buy them out at market price and then hire them as property managers for their previously owned properties.

With essentially zero overhead, you've eliminated small business's first or second largest expense (payroll and rent). If they still can't make payroll, it's not a super huge deal since those employees also have their rent frozen.

Now the economy can hibernate.

When we're ready to resuscitate it, do a direct stimulus check as you reopen businesses. Let money start flowing without any component going to rent for some amount of time until we're back on solid footing.

So I know a guy that he bought some real estate he owns 3 properties I think. He isn't a millionaire just a software engineer working the 9-5 and the properties exist mostly to help him prepare for retirement. Now he has some money set aside so that if one of his properties goes dormant he can cover it for a while, but if he were to lose all three of them at the same time. That would be bad.

Then you suggest the government can just buy him out at market rates. Who decides what the market rate is? What if the government decides to value the property for $50,000 less than it is worth?

Well suddenly he has just had $150,000 taken from him by the government. When things restabiloxe what do we do then? The government owns tons of housing? Who is going to manage and administer that? If they dump them than all that you've done is transferred the properties from small owners to massive multi-million dollar firms that managed to take the hit. What about people who got laid off and still don't have a job after it is over? Because it was a result of the coronavirus do we just continue to say it's okay don't pay rent? If we do that guarantee a year from now tons of properties won't be paying rent still.

It sounds like an easy and simple fix but it is usually more complicated than that and drastic decisions made will often have downsteam effect for years and decades that we can't see now.

As far as pricing: simply purchase the properties for whatever their value was last declared on tax forms. Can even add 5-10% for good measure. You lowballed the government to decrease tax burden? No problem, that’s the price you get.

This isn’t an anti-millionaire plot, so it doesn’t matter much what he earns. This is a hibernate-then-stimulate plot.

We cannot hibernate if businesses and individuals are getting absolutely gutted at the end of each month.

We cannot stimulate if stimulus checks are going directly into landlords’ pockets.

After this is over, yes, either the government can keep it (as Singapore does) or even sell them back, giving preference to the original owners at the original price (who had been kept employed throughout the hibernation).

The land itself is not charging landlords to hold it, so landlords don’t need to be charging tenants to exist on it (except mortgages/taxes, which would be frozen).

In some states (e.g., California) the taxed value is not equal to the market value. Especially for home purchases made decades ago.

Sounds like a problem that should be fixed by setting the tax value equal to market value.

Prior to 1978, that was indeed the case. Rising property values were kicking seniors on fixed incomes out of their homes, then Prop 13 was passed.

The fairest solution would be for tenants to pay as much as they can instead of the government declaring that all tenants in the nation are incapable of paying the entirety of their rent for the foreseeable future (because this is obviously false, some tenants can pay all or their rent, some of them can pay some of it). You are correct here.

The only caveat is that ownership of financial assets including real estate is inherently risky. A monthly rent to retain the right to use a financial asset is in many ways the opposite, both for the reasons of not being liable for the underlying asset in addition to the variety of tenant rights in this county. Your guy assumed these risks when he purchased his 3 properties.

An abhorrent attitude is emerging in the United States among the ownership class. They feel they are entitled to steady, eternal returns on their financial assets, equity, real estate or otherwise. Concurrently the labor class has no guarantee of a right to steady, eternal income through sale of their time and energy.

In nature, ownership of anything is no guarantee of receiving from it productive benefits. We would be wise as Americans to remember this when we expect anything more from the civil society we inhabit.

Item #1 was to cancel mortgage payments and property taxes. This person would only be paying for things like maintenance contracts, lawn service, and insurance. I would think those would be relatively low and all of them are very likely negotiable right now. I know many are proactively reaching out to accommodate. Much like Japan subsidizing 100% of salaries, there would be a timetable for it to sunset since it's obviously can't happen indefinitely.

Not that I think that idea is 100% feasible (I don't think states and counties can function without property taxes), but losing an investment seems like a better option than losing where you live.

Ideally, "the market" would fix itself. Nobody has leverage here. It's not like there are new tenants waiting to move in and pay rent. So everyone is motivated to renegotiate--unfortunately, the volume of renegotiations often means enforcing silly policies like "evict everyone immediately" might get used. This happened in 2008.

I, too, am worried about consolidation. I know that will happen without any action, and will likely happy if the government does.

This is the problem when people start treating real estate as an investment when it should be a human right.

I think the problem is individuals treating real estate as a risk free asset (it’s not) and our cultural acceptance of retail investors placing highly leveraged bets (via mortgages) on those assets.

If you have a bad portfolio (100% real estate) and you’re highly leveraged, you’re going to have a bad time.

This sounds most correct to me. A lot of landlords out here see their houses as ATMs and milk them for all its worth. You can't even "take your business elsewhere" because they're all janky and in bad need of a remodel.

The comment you replied to suggested freezing all mortgage and rent. So the guy guy know doesn't have to pay the mortgages on the properties and his tenants don't have to pay rent. No need to sell them at all, everything is just on hold.

Mortgages seem a lot simpler to me. You just keep accruing interested and add payments onto the end of the mortgage. With rent there are a few issues--you just get to live there for free? Do you add rent onto the backend (good luck collecting on that)? If you own a property and are renting it out there are other expenses rent covers; sometimes it pays for utilities, it covers insurance, property tax, and maintenance, sometimes it pays the salaries of a property manager or lawn service.

One would hope that mortgages are the largest cost and other services could be negotiated with.

I think eliminating property tax is infeasible for almost all areas. Depending on the area, that's where a majority of the local government's income comes from and most local governments are not allowed to run a deficit. However, like income taxes, many areas are delaying the due date.

> keep accruing interested

Why? Why does some particular type of business get a free pass to profit from this scenario?

Loan deferments are already a common practice. Even if you came up with a different accommodation, the point is that mortgages are significantly simpler to address compared to rent.

I keep seeing people claim that loans should keep accruing interest when people have had their livelihoods evaporate by government degree.

My point is: why ya’ll keep saying that?

Just freeze the loans. Should be a simple as fuck to implement.

I appreciate what you're trying to say. I believe a deferment balances the interests of the lender and lendee. If loans were frozen, why wouldn't everyone take advantage? You now need an approval process (an application, paperwork, etc) to prove a hardship or the banks are no longer solvent.

I would assume a deferment would be open to anyone and in exchange you would pay an extra few months 15 years from now--or pay it off early if you're able to sooner.

At least in the U.S. I'm not sure if the government could mandate any of this...although they often find creative ways to implement things after they decide they'll act.

> or the banks are no longer solvent.

Why not? If they're not paying interest to the Fed to borrow the money, it doesn't cost them anything to just leave the loans sit and not collect interest.

> it doesn't cost them anything to just leave the loans sit and not collect interest.

The insolvency case would be if everyone stopped paying their mortgage for a few months because there's no penalty or filtering process. They'd borrow money, but there's no "making it back up" because now they're servicing the loan for a longer period of time and have to pay salaries, rent, etc.

If they deferred, they'd still need to float that money for ~15 years until those deferred payments were made. Any extra interest would go towards paying the costs of servicing the loan for longer.

I'm not opposed to freezing, but it does cost the bank something.

If I buy a stock at $100 with the assumption that there is an upside that it could go to $1000 but the lowest it could go to is $95 cause the government will step in, that is practically a risk free investment.

If there is a lesson to be learnt from this crisis and the 2008 housing crash, it is to invest in real estate as a risk free investment. Housing is too big to fail.

do you know how many people lost their houses during the GFC? housing has never been bailed out.

Banks have been bailed out for lending money as mortgages for people who couldn't have ever paid up.

This person has equity in three properties. Are they equally invested elsewhere or did they over leverage their current properties? Because something isn't adding up - either they put all their chips on one number (real estate) or they are playing with a lot more chips than you are suggesting.

> Cancel rent payments, mortgage payments, and property taxes. People simply stop paying and stay where they are, no enforcement burden and no distribution necessary.

This is something I'm confused about. The US government goes through great lengths to support constituents with an array of welfare programs, but goes through equally great lengths to take a lot of that money back from people. It seems awfully inefficient, and supporting those diametric systems seems like an awful waste of time, energy, and money.

It helps increase the income inequality and class gap, so some would say it's very efficient.

Lobbying and corporate interests has hollowed out our government, simple as that. Great for the markets though, which in turn causes those few who make it into the investing class to vote for more of the same, creating a vicious cycle.

It is a means of control and creates white-collar jobs.

Many people think this way. It is intuitive. It is also mistaken.

It is simply not how this incredibly enormous, incredibly complex system has been set up. What is underappreciated is that in contrast to 2008, which was a financial system crisis- what we have now is implicitly a legal system crisis, on top of obviously a medical system crisis.

Why legal?

1. The flows of money are contractual

Every flow is a contract. Rent, mortgage, other kinds of loans, expenses for utilities, internet, the entire food supply chain, Whatever. All contracts. Nearly all are private contracts- person to person, person to business, business to business.

We are talking- hundreds of billions of individual contracts just in the US. At least.

2. Ending a flow means breaking a contract

Many of those contracts have termination conditions and remedies and so forth. Many of those conditions are bespoke. Various kinds of courts have authority to handle contract termination and enforcement. We are about a billion courts short of the number needed to deal with this at scale. And the court system simply does not scale- there are no procedures, no mechanisms to deal with these kinds of systemic consequences.

3. There is no legal authority to break them at scale

There is simply no legal authority by which those contracts can be terminated. Not Mayors, not Governors, not the President, not the Supreme Court, not Congress- can say- "rent is cancelled" at scale.

This is the absolute essence of the American system. It is a system of laws, not of men, our criminal President to the contrary.

That is why individual localities are passing "no eviction" laws and so forth that prevent certain kinds of remedies, without impacting the payment requirement itself.

4. There are almost no "terminal" transactions.

Even if there was some legal way to nullify those billions of contracts, and there was some way by which the entire legal system did not itself become compromised- so then those flows could be stopped- what then?

The reality is that there are no "terminal" transactions.

Most rent payments become mortgage payments. Most mortgage payments become interest payments to investors, around the world. Even money that "stops" to sit in a bank account is used as regulatory collateral by the bank in which it sits to create more money. If flows stop into those accounts, the bank falls out of regulatory compliance, has to stop doing its business.

Money is like oxygen, like blood. It HAS to circulate for this body public to survive. Stopping the flows means death.

The solution to this problem is what Japan is doing- maintain the legal fictions by which society operates using the financial machinery the Bank of Japan knows how to operate. Its balance sheet- which for all intents and purposes is an entity with infinite capacity- can maintain flows indefinitely until the medical system can master this enemy and then everyone can return to their regular business.

It is a leap for everyone to understand this- to appreciate this aspect of money that runs contrary to everything we have been told and experience on a personal level. It is not your money, or my money. It is not even our money.

For societies of humans, the flow of money is an ecological assumption that we created and have to maintain.

We are in need of the Einstein to write the Special Relativity paper that demonstrates that our Newtonian physics understanding of money, as an asset and so forth, while convenient in our ordinary every day lives, is wrong at societal scale.

Statute overrides contract. How else can you not sign yourself into slavery, or make previously legal things in contracts (like making chinese people take the back entrance give a 1950s hoa 'laws' example) get struck out after the fact

Absolutely. It is incorrect for me to say that Congress lacks the authority to write the law the cancels rent. Congress has the authority. They lack the art to create that which would not have its authority challenged.

>> 2. For landlords who cannot sustain the loss of cash flow, offer to buy them out at market price and then hire them as property managers for their previously owned properties.

But who's going to decide on the value? And pay for it? If the goal is to help US population, why not just use that money and give to others with less wealth? Because money given to those without savings will definitely be put back into the economy.

A big chunk of money given to one person will most likely sit in a savings acct or something like it...

Price is set by the declared value of the land on the most recent tax filings. Add 10% for safe measure.

This would cost nowhere close to the trillions of dollars that we’re printing to hand out to large corporations, banks in transaction fees, and then, of the little money that does make its way to consumers, the vast majority of that going straight to landlords.

The wealthy have all their money invested in the economy, not Scrooge McDuck cash vaults.

So how does the local government pay the police, firefighters, sanitation workers, and wastewater treatment plant workers, since property tax revenue is put on hold?

Print the money and give it to local government.

Just cancelling property taxes would fix rent and protect property values. Rent to property value ratios are much lower without property taxes. Also home ownership rates are much higher without property taxes.

That depends on where you live. Where I live (Seattle) my property taxes are <1% of property value, but rents are quite high. My property tax bill is probably around 15% of the market clearing rent for my place. Rent would still be damn high.

1% is still very high, compared to 0 in india, U.K., many other places. Rent in india is like 1-2% of property value / year. In texas with 2.5% property tax, rent is closer to 8%. Even Seattle is probably close to 3% / year. Rent is basically property tax + interest rate + maintenance - inflation in property values.

Coming to the realization that our economic crisis (primarily massive number of newly unemployed) was largely avoidable with a scheme like this vs the PPP loan program and multi-trillion money printing we got instead.

BoJ’s money printer has been going since well before cv19. They pioneered central banks buying ETFs (its even called Japanification..) I don’t believe the crisis would have been avoidable since salaries are only one part of the economy (ex:how does debt work?)

The V shaped recovery is going to depend on rebounding consumer demand. Not convinced a lot of jobs will come back as soon as things reopen, and even if you have a job will you actually feel confident enough to spend as you did before?

My main point is that the government has done little on the demand side. I think it will be very weak coming out of this.

It all depends on how big that 10% is contributing to the GDP. Let's assume the least profitable employees are effected the most and thus have to absorb the largest unemployment hit. Than the percentage of the economy actually effected has to be a fraction of of the increase in unemployment.

> Let's assume the least profitable employees are effected the most and thus have to absorb the largest unemployment hit.

That assumption is wrong in this context. The employees most affected aren't the ones providing the least value under normal circumstances, they're the ones providing the least value during a quarantine (presumably because they're not working at all), which isn't strongly correlated with providing low value in general. For example, a hotel may have to do layoffs, but that doesn't mean hotels are unproductive/unprofitable in the general case when there isn't a quarantine.

And the likes of hotels may not be the quickest to rebound either. A lot of people are using their vacation time right now, and will have a ton of work to catch up on when they go back and not be in a position to take more time off to travel. Even after people go back to work, they're going to be wary about traveling to hang out in a huge venue with a bunch of strangers for a while.

So what you want is to create a lot of general demand so that former hotel workers can find work doing something else until demand for travel comes back, on top of the workers who had been doing those things already.

The PPP loan program was actually pretty close to this, if executed well and funded sufficiently (obviously, it wasn't). The unemployment benefit extension and hack (unemployment + $600) was the real critical mistake that we'll spend a long time fixing.

The QE / money printing is complicated, but it's worth nothing that Japan has been "printing money" for a long, long time, and QE is a mainstay of Abe-nomics (so the Japan subsidy here is absolutely coupled with aggressive QE). Battling deflation to hit inflation goals is a reasonable goal for a central bank, IMO, but obviously it's not cut and dry.

The federal government issuing funds via the inadequate state UI mechanisms adds unnecessary friction.

The way for the money to have been issued is that each Social Security enrollee be sent funds from the Federal government, irrespective of income or employment status.

Those who have immediate needs would immediately spend. Those that do not would either be forced to invest/deposit the funds or otherwise continue economic consumption by spending.

Either way, the issuing of funds would have been much more efficient and fast than the mishmash of state UI programs and the IRS.

>The unemployment benefit extension and hack (unemployment + $600) was the real critical mistake that we'll spend a long time fixing.

What was the alternative? Existing unemployment benefits are insufficient for households to pay bills and the PP program at best would have saved a small portion of the overall jobs lost.

Ideally, basically what Japan is doing. Don't try to discriminate on company, don't make it complex, just cut a check to keep employees on the payroll. There's no dumb drama over "who gets the loans", if all employers do.

The extra $600 being a flat country-wide amount was the mistake here: https://www.cnbc.com/2020/04/22/she-got-a-paycheck-protectio...

I’m not convinced there’s any adequate oversight with the PPP program though at all. Massive moral hazard problem with owners gaming it long enough to have it forgiven or declare bankruptcy after spending it recklessly and then laying people off after the minimum 8 week period anyway. I’m sure there’s also a massive fraud problem with people just spinning up fake companies and payroll statements to get free money.

Banks have zero incentive to monitor these companies because it’s all guaranteed by the government and they’ve all been overpaid for doing simple paperwork.

10 millions laid off workers in Japan IS an economic crisis regardless.

This is the equivalent of all the workers from the top 20-30+ companies in Japan no longer working.

Except these are mostly part-time or irregular workers.

It’s like all the convenience store and restaurant staff suddenly being halved.

Somewhat. The economic part of the crisis is that people aren't working to create valuable things and experiences. How the support to keep people fed and sheltered is handled is critically important but it is trying to spread the burden of the crisis rather than providing an opportunity to mitigate it.

If people are banned from working the crisis isn't avoidable in any real sense.

Is Bank of Japan not going to print money to finance this?

If you’re going to print money then spend it on the people to shore up demand, rather than prop up companies where the demand will never be there or come back post lockdown.

Without shoring up the demand side I’m not seeing how we get to this rosy V shaped recovery the stock market seems to be predicting.

Giving people money isn't going to restore consumer confidence. People are afraid to leave their homes. Even when the government starts easing restrictions, they'll still be afraid. They will buy groceries, pay for rent and Netflix, and save the rest of their money.

I know people who have not left their homes for weeks. Consumer confidence is at absolute historic lows with no clear path to restoring it. This means there is likewise no clear path to a restoration of the parts of the economy which are currently disappearing.

The tools of economic policymakers are mostly ineffective in the current situation. The only way a recovery of any kind will happen, and it will likely be slow, is if people start venturing out of their houses again and looking for places to spend money. The government's role has to start with literally encouraging people to step outside of their front doors and walk around.

> The government's role has to start with literally encouraging people to step outside of their front doors and walk around.

Some governments may (involuntarily) do the exact opposite and scare people even more.

In Italy there are countless of rumors amplified by the media that there will be strict and onerous requirements for most activities to be done (such as, clothing shops having to disinfect every single piece that has been tried on, no air conditioning at all costs, use of plexiglas visors in addition to masks for many close-to-face activities...) that will likely a. not restart businesses (because they're on top of all other regulations) and b. scare people so much that they will not like going out of their house (would you even go to buy clothes knowing you can be contaminated by the "plague"?).

I am looking at the breakdown here of the 2 Trillion billion. Note that this excludes the phase 3.5 which was passed yesterday which includes another $484 billion for small businesses:


The 2 trillion bill included:

$425 for large corporations = 25% of the money $377 for small businesses = 20% of the money (originally excluding the another $484 billion)

$377 + $484 from yesterday = $861 billion for small businesses which is more than double the money for large corporations. Also the large corporations includes $58 billion for airline industry.

I don't see how this is a bad thing at all? Also considering the large corporation includes companies which operate cruise industry, airline industry, travel etc which employs millions of people, should they not be given help?

$861 billion for small businesses and $425 for large is very fair.

The reasons that the cruise and airline companies should not be bailed out are:

1. Cruise companies are registered off shore, do not pay US taxes and do not employ US taxpayers. Their "industry" is exploitative, polluting, and dangerous to public health.

2. Airlines have spent the last 10 years using excess cash to do share buybacks, thus "juicing" their share price and providing tax effective "dividends" to their shareholders while literally not saving for a rainy day.

3. These bailouts have not been tied to the government receiving equity or to any sacrifices/haircuts by existing equity or debt holders. This is unconscionable expenditure of taxpayer funds, socializing losses while privatizing gains.

4. Large corporations already have sufficient lines of credit and other sources of funds. Small businesses are both the primary employers of the majority of the workforce and also the primary location of both supply and demand of consumption in the economy.

The PPP loan program is ripe for moral hazard. Zero accountability. Banks have no incentive to spend time to underwrite because it’s all guaranteed by the government (e.g. fraud, gaming the forgiveness period, extracting assets and bankrupting company). Would be surprised if there were more business using the money in earnest to save jobs than not.

Given that the BoJ literally can't seem to generate inflation no matter how hard it tries, this seems like a no-brainer. As close to helicopter money as they've yet come.

Technological advancement really is a curse.

Given that Japanese quality of life has barely moved in decades despite the economic hardships perhaps it's time for regulators to stop focusing on the arbitrary 2-3% inflation metric which causes so much distortion in monetary policy?

Why exactly can the inflation range targeted by Central Banks never change?

This is actually false. Japan’s per capita GDP is still slowly going up. What’s happening is that slow down of population cancels it out in total GDP

I always suspected governments desperately seek 2% inflation because they are long term borrowers.

There's a bit of truth there, not that my opinion means much, but Japan's biggest issue is that they haven't invested enough in the people, and by extension supporting domestic growth/consumption.

And when I say Japan here, that's Japan, the government, and more importantly what is called "Japan, Inc." Corporate Japan has amassed an absolutely staggering amount of money over the past 10/20 years, they haven't done enough with it, and Abenomics (though I think they honestly know it's an issue, and have tried to address it) hasn't managed to crack that nut.

Now, as to the second point concerning inflation, I maybe naively think that's easier to talk to. I think the first idea isn't that you want inflation, it's that you don't want deflation. Prices have to do something, and deflation tends be be very unfun, and has proven tricky to get along with. It's just that societies have found it easier to fight excessive inflation than any amount deflation, so you end up with 'price stability' being interpreted as 'inflation, but not that much'. Ideally imo you're running above 0 with some headroom.

I also think inflation is sort of is Darwinian-ly helpful (though it may be very uncomfortable/destructive) in that it kind of naturally gives a mechanism where everything is being constantly re-evaluated over time. In a world where everything gets more expensive over time, if you can't get more efficient, or maintain your pricing power, you're being compressed. And again, that's not very fun in the context of wage growth, it's people's lives and livelyhood. Debts also become nominally cheaper to service over time. A lot of stuff works out cleaner when you have inflation vs deflation, but there's still unfun aspects.

One thought experiment I have is a little about investment/consumption, and debt. If you want to go buy something you need, and tomorrow the price will be higher (inflation ad infinitum), when is the best time to buy it? Now.

If you want to go buy something you need, and tomorrow the price will be lower (deflation ad infinitum), when is the best time to buy it? Never? How long do you wait?

They could just print some money and pass then to people (like UBI) to maintain healthy inflation. Guess there are no laws to enable that.

UBI is not happening, but printing money to pass along to people and businesses still seems to be happening anyway.

The government is making the right move.

Japan has in its economy a large number of small family business in sector like retail, crafting, Ryokan (hotels) or restaurants. Some of them are two centuries old and still surviving from generations to generations.

They are part of soul of Japan and its cultural identity. Loosing them would be such a waste, not only socially but also culturally.

Many of them have seen their income going to close to Zero due to COVID19. Without government help, many of them would die and never recover.

UK was early out of the doors with 80% wages furlough.

It gives both employees and businesses the ability to survive the period and come out of the other end able to get straight back into work.

But who knows how long that lasts whilst there is a likely recession on the cards next.

And so the government takes on 100 years of debt by giving future taxes to lenders.

Every time I read news like this, I wonder where all that money is coming from? As far as I know, Japan is one of the most indebted countries out there. Look at the USA too, they've printed like 2 trillion dollars during this crisis, my own country has a dept of around 50% of its GDP.

I feel like most countries have not intention of paying their debt ever, the politicians are just kicking the can down the road until one day all this explodes and all this debt is forgotten, maybe?

There's probably something I'm missing since I am not an economist.

The debt of a country is completely different from the debt of a person or a company. Basically the difference is that countries can print money, but what it means is that large amounts of debt are okay and even desirable. The U.S. in particular is in an even safer spot because the dollar is the world reserve currency.

The debt of the worlds countries will explode if and only if money goes to hell.

I'm not an expert, so I'd encourage you to do some your own research.

being in debt as a country is very different to being in debt as an individual as a country's expenditure directly correlate to its earnings. in this sense, it's unwise for a country to 'save' in the same way individuals do -- since, for example in this case if small businesses collapse causing their workers to spend less (or nothing at all) the decrease in economic activity will lower tax income to the country itself.

when it comes to the US injecting 2 trillion dollars, that's from quantitative easing which is not 'borrowed', it's just generated by the central bank of the country directly to increase liquidity. it's similar to a stock split, but for a country. The total 'value' in the economy stays the same, but the additional liquidity creates an increase in economic activity for some time which may allow investors to switch investments from short to longer term. I've seen a lot of people online who think the US had $2T lying around somewhere but it's quite the opposite.

slightly unrelated to your comment particularly but -- I wish the analysis of governments being able to spend like this from the average person wasn't either 'governments are going more into debt than they should' or 'governments have money but don't use it on their people', but 'governments have access to spending powers that individuals do not, which can massively benefit an economy in the way no other entity's spending can'.

> There's probably something I'm missing since I am not an economist.

What you are missing is that these countries are leveraging their positions as reserve currencies both for global corporations and also other countries.

This crisis strongly benefited the USD, EUR and JPY. The demand for these currencies (especially the USD) is in the trillions. In the unfortunate event that the European Union is dissolved and countries like Italy/Spain decides to switch to their own, most people/companies holding EUR will decide to switch to ... probably USD/JPY as they don't really trust their home currencies much.

That's why the U.S. has an (or multiple) air carrier around the world to project power.

Germany/Austria/Switzerland have similar programs (called Kurzarbeit) which are for situations like these (where companies don't have enough work at the moment but are believed to recover), https://en.wikipedia.org/wiki/Short-time_working - what was done for the covid crisis here (Switzerland) was to simplify the application process for it.

Same in France and currently most European Union countries.

Can confirm Czech Republic is also doing it.

Our trickle down economics philosophy in the US does not let the government do this. The onus will be on propping up businesses, when all they need to do was support employees. Instead we bail out whole companies and that usually means paying a lot more than just employee salaries.

This might be the right thing to do at the moment. In the long term though I'd prefer a system where stimulus package is not based on one's employment. This has the same problems as employer-tied health insurance.

> The employment adjustment subsidy has not proved popular so far, partly owing to its complicated paperwork and the roughly one-month wait for processing applications. In the current crisis, just 985 companies had applied in the two months leading up to April 17

The wait time on this seems very long. I wonder why? Lack of staff? I guess its good that they already had a program going, instead of having to build one from scratch or do what the US has done and partner with banks (Which seems to have also been plagued with hurtles)

Ask anyone here trying to access unemployment benefits. Bureaucracy is universal, and sometimes an intentional design pattern to discourage people from applying in the first place.

> Bureaucracy is universal

No, it is not.

In Canada the application process takes 2.5 minutes and the money is deposited 2 days later. Many people have already had $4000 deposited in their account (two payments), and will get another $2000 deposit in the 9th of May.

Just because something is terribly broken in one country, don't make the mistake of assuming it's universal

I mean half the benefit of unemployment benefits is the employment you generate via bureaucracy.

It's something I find a lot of UBI proponents miss. Sure you "save money" by cutting bureaucracy, but that bureaucracy is employed people. The savings probably aren't as considerable when you have to lay off a ton of people in order to put them on UBI.

And sure, for the private sector, bureaucracy is generally something they try to quash (with varying effectiveness), but in the public sector it's almost a desired outcome because it means more jobs, more metrics, more budget.

Sure, but better (less wasteful) to just give people money than employ them in busywork.

No, because giving people a job means giving them a structured and social life, as well as a place in society and the feeling they contribute to it. This is very different from just giving people unemployment money, that then fuels a particular lifestyle that is hard to get out of (I have few friends that get trapped into this at some point).

almost nothing is truly only busywork (besides, that’s belittling), so it’s better to employ people than give away money. employment has many beneficial side effects, like esteem, that free money doesn’t have.

In an extremely simplified way, from an economic standpoint, I see two ways this crisis can be handled:

1) Shovel money into businesses essentially free of charge, taking over responsibility for their payroll, giving generous low percentage loans or even free grants, and anything else that can simply be considered "free money" for company owners.


2) See this for what it is, which is an extremely high-risk investment that no-one else is willing to make. If a company was able to find a better deal on the market, they would take it. If companies are forced to apply for help from the state to survive, the state should get a (minority) share of the company and reap any potential future benefits until the owners have the money to buy their shares back.

The way I see it, in #1 we do our best to halt the crisis, but we essentially do it by giving away free money to corporations and small companies. In #2, we still do the same thing (because there's in most cases not much difference between a high-risk investment and a gift), but at least in this case the tax payer may get something for it in the future.

If public money goes to bailing out private companies, the public deserves a share of future profits, until those companies can buy the shares back at market value. I don't see a loser in this scenario, and in fact, it would be refreshing to see and end to this constant policy of "privatize profit, socialize loss".

Japan has a good bottom-up focus by addressing employee payroll and by proxy employee/employer job security during a negative economic outlook.

Grassroots money instead of helicopter money.

The government directly intervening to support employees sounds like a better effort to influence widespread impact than propping up employers to trickle down the money with vague guidelines and questionable oversight.

Businesses, in particular SMBs still need financial help, but that help should be separate from the public support help for PTEs and FTEs.

The US still clings on to the top-down approach to solve these problems, counter to Japan (not that Japan is perfect either).

Australia has a similar program, but universally applicable (not just small companies) to any company which can show negative effects from COVID-19.

They subsidise salaries at a flat rate of $1500/fortnight.

I’ve been saying this for weeks now: just have the treasury pay employees so that people stay in their jobs and can keep buying.

After the announce of 100k yens per people (~$1000), they might finally become more serious...

Perhaps what we need to consider is some scheme to automatically fund a salary floor or salary continuation in emergency times, even if UBI is not on the immediate horizon. Presumably the currency dilution that results is no worse than what we are taking up anyways with the current piecemeal stimulus packages.

Basically it sounds good but the application process is a nightmare

The Danish approach to closing down the economy in the face of a pandemic made more sense to me than that used by Trump and the US Administration. https://www.theatlantic.com/ideas/archive/2020/03/denmark-fr...

Makes a lot more sense then bailing out companies.

This will prove ineffective in a few months. Not all 100% Of jobs lost are coming back.

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