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Cyrano4747 posted:It's also politically unpalatable because it raises the specter of small, retail depositors getting wiped out in a bank collapse bad enough to swamp the FDIC. The entire point is to fund the FDIC sufficient to cover a bank collapse, inclusive of all depositors, so this is basically claiming that the FDIC would not collect enough money via the putatively raised insurance rates to cover the worst-case scenario bank run. However, the insurance itself discourages bank runs by reassuring depositors. Actuary science is not perfect, but if the government then backed/guaranteed the FDIC's insurance program, that'd do it. Bail the FDIC out if necessary, then raise the FDIC insurance premiums, and banks in the future pay for the errors of banks of the past. The too big to fail thing is to me a separate issue, one that is still pressing and important. There's also a sort of parallel to the tragedy of the commons going on, where individual banks can offload part of their risk essentially onto all the other banks, so each individual bank has an incentive to collect more profits by taking bigger unhedged risks; but it is against the interest of all the banks collectively to have this happening, because their insurance costs will go up. The insurer therefore must pressure banks, via their insurance premiums, from taking unwarranted risks. Similar to how your auto insurer raises your rates if you buy a fast sports car vs. driving a minivan. The FDIC's rates should not just be a blind fixed amount per dollar deposited; if your balance sheet shows you have a huge unhedged interest rate risk, the FDIC should jack up your loving insurance rates. Leperflesh fucked around with this message at 18:21 on Mar 17, 2023 |
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Mar 17, 2023 18:17
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Mirthless posted:You're overstating what the FDIC did while understating the implications of what you are suggesting. The FDIC has traditionally limited deposit insurance for a reason. We very clearly can't print unlimited money with no consequence and bank failure is supposed to be a thing we want banks to avoid. If the FDIC is willing to be a parachute for every bank every bank is gonna jump off the cliff on responsible decisionmaking. The FDIC insurance program does not involve printing any money at all. Banks pay premiums into an insurance pool which the FDIC manages, and pays out of to make whole depositors at failed banks. Moreover, FDIC insurance is for depositors: the affect it has on banks is that it makes depositors more willing to place their money into the hands of an institution that intends to use that money to seek profits via investments. Essentially, it distributes the risk-taking of an individual bank to all banks via an insurance product, so that depositors do not have to become bank risk evaluators in order to trust them with their cash, and also so that depositors do not become flighty scared rabbits and engage in bank runs at the first sign of trouble. The proposal here is that FDIC insurance be expanded to cover larger deposits and paid for by higher premiums charged to banks. This is in no way a printing of money, it costs taxpayers nothing. quote:At this point regional bank depositors outside of what has already been announced still shouldnt expect insured deposits In the long run, this issue of fairness seems to me to be very important, and I expect that if backstopping deposits at the big, troubled banks works, the insurance program may be extended to cover all depositors. I'm not smart enough to know what all of the consequences of that would be, but at least in theory it again would not be a bailout of the banks themselves, but might encourage more risk-taking if the profits of high risk behavior exceed the additional insurance costs. High-risk behavior by banks is regulated, has been regulated more strictly in the past, was relaxed under Trump, and could be made more restrictive again. quote:Edit: fwiw i dont think the FDIC should insure a single loving dollar over 250k for anyone, we are long overdue for an economic realignment in this country and i don't see the benefit in dragging this out for months and months. I also dont see the benefit on changing the rules or the system to accomodate the banking class. The working and middle class will suffer but we are already suffering. Without drastic failure and drastic reform the system is unlikely to improve. I find this argument uncompelling. My personal view is that no matter how much the poor are suffering, intentionally exploding systems that our entire society is built on increases their suffering greatly, and there is never a guarantee that a new system that replaces the destroyed one is actually better for the poor people who survive. If we allow a cascading failure of all of the banks in America, that would wreak an economic destruction never before seen in the US, including during the civil war. Half of all Americans work for large businesses, many of which are hedged and might be able to make payroll, but essentially all small businesses would fail immediately if all the banks closed, and if the banks are closed, a check from your employer is useless. The Great Recession saw unemployment peaking above 10% in many states, but we would be looking at something approaching 100% unemployment. Without banks, the government would not even be able to send people checks - where would they deposit them? Our entire country runs on systems of credits, there literally isn't enough cash printed to go around, people would be unable to buy food. I am not a big fan of banks. Regulation needs to be radically improved. Too Big to Fail shouldn't be a thing, a bank that isn't allowed to fail shouldn't be allowed to make profits from risk; but the right solution isn't to just let a bank run domino and see every american bank fail one after another in the course of a few days or weeks. It's to learn from a big fuckup (allowing banks to take on large risks and reap profits therefrom) and fix things. PoundSand posted:If the solution involves the federal government covering all deposits at all banks and the way to implement that is through bank assessments that ultimately are passed off to everyone that uses banks (so p much everyone) aren’t we just socializing losses so individual banks can gamble for private gains? If FDIC is going to blanket cover everything then shouldn’t we just nationalize the banks directly? That is one option, but I think it's not possible in today's political climate. There is no appetite by any major party to do this. I think a much more viable solution is to use regulation to prevent banks from taking on excessive risk, including (as happened in this case) huge amounts of unhedged interest rate risk. Leperflesh fucked around with this message at 20:39 on Mar 17, 2023 |
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Mar 17, 2023 20:36
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The risk of the bank run is that it causes a bank to fail, and that drops confidence in any other bank that has underlying numbers similar to the failed bank. So if SVB failed because it had huge amounts of unhedged bonds with plummeting values due to rising rates, the market looks at the disclosures from all the other banks and says "hey, this other bank, it had slightly less but still large amounts of unhedged bonds..." and depositors do a run on that bank. Then everyone goes "I guess having slightly less but still large amounts of bonds is bad, who is next?" and whoever is next gets a run, and so on and so on. None of the banks can actually pay out cash for 100% of deposits on a short timeframe. That's just not how banks work. A cascade of failures is a cascade of increasing doubt, with no clear end to it. There is a reason a bunch of big banks are sending money to First Republic, of their own volition: they do not want FR to fail because that increases the pressure on themselves (and also they don't want harsher regulations, and the worse this becomes the more likely it gets that they'll be harshly regulated). Also small banks may not have large unsecured bond positions, so they're not necessarily all at risk solely due to SVB's failure. The point was made in that video of Yellen being yelled at though, that if we provide an unlimited deposit guarantee but only at large banks risking failure, that could pull deposits from small banks regardless of their relative health and that could kill all small banks, maybe.
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Mar 17, 2023 21:21
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pmchem posted:I mean I guess it depends how short you consider "short" to be. I typed that and then started thinking about weirdo nontraditional banks who have like a small amount of deposits and mostly do some other form of banking and could I guess cash out all of their depositors because of huge assets from other business... but I decided to leave it because we're mostly talking about a particular kind of bank right now anyway - the kind that's theoretically vulnerable to bank runs.
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Mar 17, 2023 21:53
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Yeahhhh, a rate lock on a fixed rate loan gives you the freedom to refi when rates drop but keep that rate if they don't go down. An ARM is an actual gamble about future interest rates and I'm not a big fan of that.
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Mar 21, 2023 22:59
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Silicon Valley Bank wasn't just holding loads of bonds, they hadn't hedged them. To the degree we're in a "banking crisis" it's mostly about one bank failure, plus a crypto bank failure, plus one more bank that was weak and has been shored up already. Most of the banks will have properly hedged their bond investments, and furthermore Yellen et. al. have already announced to the market that they'll protect depositors, which should head off any further bank runs even if more banks find themselves struggling due to losses on bond portfolios which, I'll reiterate, most well-run banks have properly hedged. I think if we're still talking about banks failing in a month I'll be shocked.
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Mar 23, 2023 02:15
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I tend to agree with the old adage if you only have a hammer, everything starts looking like a nail, and that's a fair criticism of the fed. But also the fed doesn't have to be the only agency fighting inflation caused by supply side restriction, there's the whole rest of the government too. And if the rest of the government can't act, the fed's actual responsibility is to force the economy into a recession rather than let it run away into hyperinflation and have the actual US, and therefore global, economy, actually Fail with a capital F as in money no longer has value and every sovereign nation is bankrupt. I like to think about shortages during the major world wars. Governments met severe shortages of essential goods with radical action: rationing. After major natural disasters, there are laws that are supposed to stop price gouging. When entire industries essential to the US economy are failing, the government bails them out: see the auto industry, the airline industry, the banking industry, multiple times. The government has tools, if it cares to use them, we don't have to rely on the fed to fix everything. And in the last three years, it has been happy to bail out businesses with massive cash giveaways and loans, and it's even helped individuals by suspending evictions, mailing checks, extending unemployment, poo poo like that. I don't think I "blame" the fed for doing what it's designed to do while the conditions it's supposed to react to continue to prevail.
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Mar 23, 2023 03:36
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Regardless, in addition to covid deaths there's a far larger number of people who have or had long-term health effects from lingering covid that didn't die and many of them have had to leave the workforce. This does not get much press. And when you remove people from the workforce, unemployment goes down. Fewer workers for the same number of jobs does that. That's how that works. e. people on long-term disability aren't counted as "unemployed" fyi
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Mar 23, 2023 17:10
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yeah it's a country of 332 million people, a million dead and let's pull a number from the rear end and say only half of them were workers and that's not a huge number, if you presume another similar sized or even double or triple size of people who are now part-time workers or had to go on disability that's still not a huge percentage. But while people were out of the workforce we fell behind in production so it kind of makes sense that we'd need a year or two or three of overproduction to fill in the gap in demand, which goes back to what folks have been saying about like the home construction shortfall etc. Like the reality is I don't think anyone has or could directly measure the effect of covid the disease itself on the workforce because of all the confounding factors like the shutdowns and government & corporate response to the pandemic, the international trade situation, and so forth. The point though is that people being sick and leaving the workforce does not mean there's suddenly a surplus of workers and therefore rising unemployment. We had shutdowns and corporate failures and that spiked unemployment in april of 2020, but unemployment returned to prepandemic levels by april 2022.
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Mar 23, 2023 17:50
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Yeah I think the largest forces pushing inflation are more indirectly from pandemic fallout, like the massive spike in the cost of overseas shipping that took place; and also the ukraine war spiking oil prices, as two examples. Inflation hasn't been even across all the goods tracked. https://www.statista.com/statistics/216055/annual-percentage-of-change-in-the-us-cpi-u-by-expenditure-category/ Energy (electricity + oil) and housing are three of the four biggest spiking numbers right now with food being the third. Food is arguable but energy and housing spikes aren't due to people dying of covid. They're due to a systemic housing shortage that was already severe before the pandemic shut down construction for a year+ and is still suffering from supply shortages, and global disruption of oil & gas. Food prices are sensitive to energy, but I wonder if a shortage of immigrant labor is also contributing. To circle back to the point: probably nothing the Fed can do about oil prices, and making borrowing more expensive might have a negative impact on housing construction but there's like a year lag between housing starts and units becoming available so we don't really know yet I bet.
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Mar 23, 2023 22:06
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January is the least-reliable time to evaluate home prices, though. It can be somewhat dependent on the weather.
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Mar 27, 2023 23:53
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Warmachine posted:I'm guessing there's significant seasonality to home sales because people don't want to do all the moving-related chores in sweltering heat or biting cold? Definitely. Families prefer to move during the summer, so they don't have to pull their kids out of classes/change schools mid-semester, college students move before/after semesters, etc. Plus weather, and hours of daylight. But general seasonality can be accounted for, and often is in the stats: but if you're going to compare year over year price changes, it's better to compare with a chart - seasonally adjusted or not - rather than picking prices last january to compare to prices this january. In the latter case, one january with worse weather than the other could make a more significant impact. Here's Redfin's chart for California:  (source) You can see a little dip right above the year on the chart corresponding to the January seasonal low. This chart's last data point is February, and you can see prices have ticked up last month compared to January, but you can also get a better sense of the overall pricing trend... which is correcting back to highs from early 2021 and in particular the April-May 2022 recent peak, which was an all-time high. I like this presentation because it's also showing you other highly relevant information, like that number of sales was down 33%. We've had a very wet and stormy winter across the state, and that could be responsible for the drop in sales too. Inventory is also down:  And this shows how inventory plummets in the winter anyway. Leperflesh fucked around with this message at 00:56 on Mar 28, 2023 |
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Mar 28, 2023 00:54
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drk posted:There is seasonal fluctuation in home sales in the Bay Area but not because we have weather. A cold day is in the 50s and it hasn't snowed here in half a century. I would say not cold weather, but weather totally matters and this January featured the highest single rainfall day in San Francisco's recorded history. Also around here we cocoon ourselves in goretex and hand-knit scarves when it drops below 60.
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Mar 28, 2023 04:59
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The basic thing is that the price of commercial space needs to drop. A lot of building owners still ask "market price" based on 2019 market, because if they lower that price, suddenly the valuation of their property drops below clauses in their loans that force them into bankruptcy or whatever the corporate version of foreclosure is. Once that actually happens, though, whoever buys the building from the bankrupt previous owner can drop the prices a lot. There are businesses that would much rather have office space in downtown SF instead of Tracy or Antioch or whatever, and if they can get a 99 year lease on a space for a price they can afford, they'll do it. It takes time, as in more than a year, for that sort of situation to properly settle out. e. or, maybe everything is actually fine https://www.cnbc.com/2023/04/09/the-coming-commercial-real-estate-crash-that-may-never-happen.html quote:Bank commercial mortgage books Leperflesh fucked around with this message at 21:01 on Apr 13, 2023 |
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Apr 13, 2023 20:54
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Fun food for thought: the majority of american money is not printed at all. It exists only electronically.quote:The Federal Reserve does have a balance sheet of $9 trillion, but it hasn't added $8 trillion anytime recently. And that number isn't close to accurate in terms of physical cash, of which there is about $2 trillion currently in circulation, according to Lydia Washington, a spokesperson for the Department of the Treasury’s Bureau of Engraving and Printing. 95% of notes printed any given day are replacing old notes, not creating new money. Physical notes only last a few years in circulation and are collected from banks all over the country (and the world I guess) for recycling. A lot of headlines and news articles about the money supply are misleading, because they use words like "printed money" when they talk about the FED adding currency to the balance sheet. This can also lead to intentional disinformation, such as when conservative outlets were insisting the Biden admin had "printed" 8 trillion dollars (or whatever) and this was the cause of inflation.
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Apr 19, 2023 19:15
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https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) Honestly, 13th in the world is larger than I was expecting. Approximately on par with south korea. Incredible how bad Russia is doing. But by comparison, Australia's GDP is, roughly, a bit less than 7% that of the US. The sheer size of the US economy is one of the key factors keeping the US dollar the world's reserve currency, and while the EU as a total looks at a quick glance to be roughly similar and China is not far behind, the US represents nearly a quarter of the entire world's economy, and the US + EU is roughly half. e. California's GDP is estimated at ~$3.6T. Somewhere between the UK and India. Leperflesh fucked around with this message at 07:23 on Apr 26, 2023 |
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Apr 26, 2023 07:17
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The point about liquidity extends from the point about GDP. The larger a country (or effective, for the EU)'s economy, the more total currency it needs to have in circulation, and that generally approximates liquidity all else being equal (which it definitely is not). The fact the US also runs its government at an enormous deficit and permits anyone in the world to buy US government debt is huge (over $31T). Yes, Americans (including the US government itself) still hold a large majority of American debt, but again, just the sheer size of the economy means there's a highly liquid market for US government securities. Which are denominated in dollars. If your reserve currency is dollars, you can buy US treasuries, and you will receive dollars as your yield, and you'll want to have a liquid market for using those dollars when you need them. The "world" cannot place its reserves in australian dollars in part because they're not attractive enough, but also in part because there simply aren't enough to go around. quote:Australian Government gross debt has increased from $534.4 billion in March 2019 to $894.9 billion as of 28 October 2022. The October 2022–23 Budget forecasts further increases in gross debt to $1.159 trillion (43.1% of GDP) by the end of the 2025–26 financial year This article projects a net increase in Australian borrowing of $AU264B in three years, or about $AU33B annually. Foreign countries hold $7.4T in US debt. They could buy 100% of australian debt for the next three years and it wouldn't make a dent.
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Apr 26, 2023 18:07
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There's also like, money is useful for buying things, and can accumulate in one or another country due to trade imbalances, international purchasing agreements, and probably a whole host of other arcane reasons. You can't always just go to the international currency exchange and swap a few hundred million of your currency for another country's trivially with no costs whenever you suddenly want to procure some military poo poo from them or w/e.
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Apr 26, 2023 19:31
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https://www.reuters.com/world/asia-pacific/sri-lankan-activists-protest-proposal-export-monkeys-china-2023-04-18/ It's gross, but not really relevant. China wants monkeys for quote:"This is not a discussion between the Sri Lankan government and the Chinese government but with a Chinese company," Gunawardana told reporters at a weekly briefing, without naming the company. "The committee will evaluate the proposal."
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Apr 28, 2023 02:13
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A big problem is that the central bank is paying attention to failures of some large banks, because of the systemic risks of more big bank runs they represent if these large uninsured depositors are not bailed out; but they have not been bailing out the small banks that fail nor their large >$250k depositors, over the last couple of decades. If they do this more, they are basically telling all depositors "never bank at small banks" and that will destroy small banks. They need to either just admit that we're guaranteeing large depositors now, across the board, at all banks... or not. Piecemeal poo poo that is just paying attention to the immediate problem this month is bad policymaking. More broadly, I am still seeing unqualified statements like in the above quoted article like "...and First Republic’s assets are mostly loans. Those loans tend to be pretty safe — they are mostly mortgages to rich people — but they are very exposed to interest-rate risk, so they have lost a lot of value. And it can’t use them to borrow from the BTFP." Who could have anticipated that taking on massive amounts of very low interest rate mortgage debt could lead to a problem if mortgage rates rose? Whoever could have anticipated that there was interest rate risk? Surely not... bankers? There is massive negligence here, and it's a failure to hedge against interest rate risk. The FED should not be bailing out the people who made this critically bad decision. So the correct answer, regardless of whether you do something to rescue uninsured depositors, is to let the directors of these banks and the shareholders that invested in them and empowered them, to go pound sand, financially. The SVB example is illustrative. First Republic should be taken over by the FDIC if it's insolvent. If we need to decide to raise the cap on insured deposits, fine, do it for everyone, but in no world should the bank managers who chose to take on large portfolios of unhedged low interest loans and did nothing about their exposure to interest rate risk get to keep their jobs, and if we want markets to function properly, investors are supposed to see the consequences of their risks as the counterbalance to the lucrative rewards they receive for taking on risks.
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May 1, 2023 18:41
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GhostofJohnMuir posted:but the fed doesn't want banks to fully hedge interest rate risk I don't believe it's necessary to "fully" hedge interest rate risk, as in, get the risk entirely off the books. Rather, banks need to "reasonably" hedge interest rate risk, by spending enough of their profits on hedging options to lower the risk to a point where a reasonable future projection of rising interest rates doesn't result in insolvency and bank failure. We can see this is already the case with the many banks that are not, presently, struggling to stay open. SVB and now First Republic represent the tail of a bell curve of banks that have over hedged, reasonably hedged, or under hedged their interest rate risk. But one or two big bank failures represents a systemic risk because of panic resulting in irrational withdrawals, not because all the other banks failed to hedge. So the Fed has to restore confidence, and they're contemplating doing it by bailing out the bank managers who took on unreasonably large amounts of interest rate risk. One of the ways I think you can hedge against interest rate risk on long-term loans you are holding is by having cash that you can lend at higher long-term rates when rates rise. But banks, of course, hate holding cash (or more broadly, assets, e.g, things that can always be sold for cash, e.g. not debts), which is why regulators have to force them to hold a minimum. And every time regulators relax the minimum securitization requirements a bunch of rear end in a top hat bankers go hog wild and a decade or two later it backfires. "Oh noes our mortgage portfolios are suddenly not worth what we thought, but we have no way of coping with losses on these portfolios" is not a new problem and it doesn't really demand novel solutions.
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May 2, 2023 01:33
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Hadlock posted:Good news everybody, housing is back, for the handful of distressed sales still happening anyways that article is paywalled; are these seasonally-adjusted numbers? Because if not, well, price rises in May as compared to the winter don't necessarily translate to a recovery in prices "this year".
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May 4, 2023 19:43
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ok yup not seasonally adjusted, but the numbers are still significant and the article compares vs. peak 2022 prices which is about as useful as seasonally-adjusted anyway:quote:Among the 100 largest markets tracked by Black Knight, 53 housing markets ended March at a price that remains below their 2022 peak price. Meanwhile 47 markets are back—or above—their 2022 peak. However, even that metric marks an improvement from February, when 75 major housing markets were below their 2022 peak price and just 25 markets were back—or above—their 2022 peak.
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May 4, 2023 21:12
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also it is not actually good news that wages continue to not rise as fast as prices, and a booming economy in which that continues can't last, right, because at some point people can't afford to buy things any more
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May 5, 2023 16:38
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Oh, for sure, and I think most of us agree that the inflation was and perhaps still is being driven by supply shortages, not (or not only) by demand, which is why rising rates is predicted to have less of an impact. But wage growth lagging price growth probably will, IMO, in that at some point there will be a new equilibrium between supply and demand that fixes prices in place. No?
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May 5, 2023 17:04
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I'd be interested in seeing if that's also the case right now, vs. the great recession. My understanding is that the rising prices as reflected in the CPI over the last three years are heavily weighted towards energy (a special category because its weight on transportation costs which in turn affects basically everything), and food. And these are currently moving in opposite directions, at least as of March:  In november 2021 this article showed where the inflation was worst at the time: https://www.visualcapitalist.com/u-s-inflation-which-categories-have-been-hit-the-hardest/  "New vehicles" is the only category that is both up significantly, and is probably weighted heavier towards the higher quintiles than the lower. Energy absolutely dominates, and things like apparel and shelter are up but far less severely. Although again this is nov 2021 looking back at nov 2020, when the pandemic was perhaps at its worst in terms of economic impact. The longer-term trend is interesting to understand too: https://www.visualcapitalist.com/inflation-chart-tracks-price-changes-us-goods-services/  From 2000 to 2022, some categories that luxuries fit into like big TVs, new cars, toys, are flat or down; stuff that the lowest quintile has to pay for like child care, housing, and medical care are up... and college tuition skyrocketed, which I think probably is a higher-income impact given the kids of the wealthy are the most likely to pay for ivy league sized college bills. Although student costs and loan debt hits the lower quintiles especially hard: quote:As usual, low income students are disproportionally impacted by rising tuition. Pell Grants now cover a much smaller portion of tuition than they used to, and the majority of states have cut funding to higher education in recent years. I'm actually not sure if any of this is relevant now, but it's worth diving into rather than taking "CPI" as a reasonable and complete summary of what inflation is doing to people whose wagers are or are not rising to keep up. Leperflesh fucked around with this message at 17:47 on May 5, 2023 |
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May 5, 2023 17:41
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pseudanonymous posted:Because CEOs were openly admitting it during earnings calls is “the reason” and because those self same companies are then posting record profits. What CEOs are openly admitting is that they are able to raise prices due to scarcity and that their costs have not actually risen to match, so they're generating profits. This is not the same thing as CEOs suddenly realizing in 2020+ that they could raise prices and generate profits, like that that's a thing. No. It's that in an environment with a supply restriction not based on rising cost of supply provides a new equilibrium of supply & demand, e.g, a higher price that the market will bear, that the companies can sell into, and that generates more profit. Perhaps the most obvious and clearcut example is oil. Exxon's costs to extract oil did not go up, but the global price of oil went up as supply became restricted. Exxon sold just as much oil, at a higher price, with not particularly higher costs, and therefore loads of money in profits. This is not "causing inflation", it's participating in inflation caused by the loss of russia's oil on most of the world's market, plus the loss of a huge amount of shipping capacity during lockdowns, among other factors.
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May 5, 2023 21:52
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Commercial flights also pack the baggage compartment with paid freight including especially mail, and state capitals tend to handle a lot of extra mail. I bet that direct flight would be profitable even if only half the seats are full.
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May 9, 2023 16:59
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immigration/emigration from a state is probably more important than its birth rate? https://www.brookings.edu/research/new-census-estimates-show-a-tepid-rise-in-u-s-population-growth-buoyed-by-immigration/ This article is about net immigration vs. birth rate for the US as a whole, but this chart is illustrative:  In many modern/"developed" countries, population growth would be negative without immigration. Countries that have not historically welcomed lots of immigrants, like Japan, face a serious demographic problem due to net population loss concentrated in the younger generations.
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May 17, 2023 17:56
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Terry Pratchett put that in his Discworld books as "million to one chances crop up nine times out of ten" and it's very wise. It is, of course, why we buy insurance. It is very unlikely I will ever smash into a ferrarri and total it or take out a minivan full of people and they all need expensive surgery, but if I did and I was underinsured, I might lose my life savings. So I pay a bit extra for a lot more coverage. However, we are very very bad at understanding the differences between very small or very large numbers, and numbers that are orders of magnitude smaller or larger. The odds that a person will be in an expensive car crash are vastly higher than the odds that they will win the jackpot in the lottery, and yet a lot of underinsured people buy lottery tickets, and specifically do so only when the jackpot is huge. I think the debt ceiling thing is like that. We have all seen that the odds the government will gently caress something up randomly are high; and the odds that they'll gently caress up badly enough that we plunge into a recession are high enough that it seems to happen a handful of times per lifetime. But that makes us overestimate the odds that the government will choose to willingly go bankrupt rather than borrow more money, especially when we're doing it with gutfeels. The debt ceiling was raised 74 times from March 1962 to May 2011, including 18 times under Ronald Reagan, eight times under Bill Clinton, and seven times under George W. Bush. https://en.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling That doesn't mean we won't see congress gently caress things up and create serious consequences, though! quote:In 2011, Republicans in Congress used the debt ceiling as leverage for deficit reduction because of the lack of Congressional normal order for fiscal year budget votes on the chamber floors and subsequent conference reconciliations between the House and the Senate for final budgets. The credit downgrade and debt ceiling debacle contributed to the Dow Jones Industrial Average falling 2,000 points in late July and August. Following the downgrade itself, the DJIA had one of its worst days in history and fell 635 points on August 8.[17] The GAO estimated that the delay in raising the debt ceiling raised borrowing costs for the government by $1.3 billion in 2011 and noted that the delay would also raise costs in later years. The Bipartisan Policy Center extended the GAO's estimates and found that the delay raised borrowing costs by $18.9 billion over ten year In 2013, quote:Members of the Republican Party in Congress opposed raising the debt ceiling, which had been routinely raised previously on a bipartisan basis without conditions, without additional spending cuts. They refused to raise the debt ceiling unless President Obama would have defunded the Affordable Care Act (Obamacare), his signature legislative achievement. The US Treasury began taking extraordinary measures to enable payments, and stated that it would delay payments if funds could not be raised through extraordinary measures, and the debt ceiling was not raised. During the crisis, approval ratings for the Republican Party declined. The crisis ended on October 17, 2013 with the passing of the Continuing Appropriations Act, 2014. We could still see lots of loving around and finding out, but there's not much call for trying to find an effective hedge for the apocalypse scenario in which, despite government branches shutting down, employees furloughed, social security and medicare payments suspended, etc. congress still refuses to raise the debt ceiling or the president refuses to sign a bill that does so with some cuts or whatever.
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May 24, 2023 22:53
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The primary goal was and still is and always will be, throwing around weight to show who is boss, so they can later make big claims about how strong and powerfully they owned the enemy. I'm just glad that we seem to be nearly past the point where people will keep asking what happens when the US "defaults" on its debts. Until the impending federal budget fights, which are going to be a revisiting of the same poo poo, just with "we fail to pass a budget" as the threat.
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May 31, 2023 19:52
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would thousands of CRE loan defaults put an upward, or downward, pressure on interest rates for CRE loans? I feel like the answer is downward but I'm not confident.
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Jun 8, 2023 21:03
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I think retail's been under a harsh headwind for 25 years now, and amazon's share of the entire retail market is sobering. I think industrial's been under a harsh headwind for 50+ years now, and the global shipping crisis is a small tailwind that will right itself; but rising costs of oil could gradually improve things for shifting manufacturing back to domestic, maybe, depending on just how expensive it winds up being to get containers from asia in a world where we actually try to do something about climate change vs. one where we don't. But the long-term trend is still one of modest population growth, and as the whole economy grows, I think the demand for all three types of commercial real estate will eventually catch up with supply. So my long-term take is that cities will continue to grow, and that means we'll need both more housing and more CRE, highly market-dependently. We could see another Detroit style collapse at the same time that we see another silicon valley style boom.
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Jun 8, 2023 22:58
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SF has extremely visible poverty problems, but those get translated to "crime" and "quality of life" by the media
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Jun 13, 2023 22:25
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like how do you resolve poverty? oh, that's hard, you have to do a lot of stuff, complicated how do you resolve crime? more cops obviously, get tough, crack down and how do you fix quality of life? make the homeless go away, probably one neat trick
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Jun 13, 2023 22:27
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I took geology classes at SF state and I lived for years in the outer sunset (that's the neighborhood you see there). I can tell you that everything you see in foreground and middle ground of that picture is composed of "holocene sand dunes" everything yellow in this pic    e.g. it's compacted beach sand from the last ten thousand of years that in a million years might become sandstone but right now, isn't. To build a skyscraper they'll have to slam piers deep down to find bedrock. Additionally, that area was built out mostly in the 1930s and 40s, it's serviced by a lot of 1940s infrastructure and in particular the water and sewer systems would need significant upgrades. It is not a trivial thing to do. That said, probably the area could support a lot of six to eight story apartments, which would probably be a lot more feasible to build and less likely to require the city to tear up the entire neighborhood in order to massively upgrade the infrastructure.
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Jun 14, 2023 05:05
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big shtick energy posted:No one knows how high the crime rate is because there are no stats. Things like: Those things happen in every city in the world every day (OK maybe not singapore) and if there are no statistics it's impossible to know if the problem in SF is particularly worse than whatever position the hysterical media commentator is starting from or not. I would also guess that car breakins and catalytic converter thefts are typically reported, because that's what you need to do to make an insurance claim, but I won't dispute the first three. The important point here is that "crime is bad" is the universal eternal justification for "getting tough on crime" via increased police budget, power, and harshness and it's always backed up with the most visible elements that can be put on camera. It's also the case that the police obviously are not doing anything about the types of crime you mention if you are correct that they're not reported, more or less by definition. How could police reduce crime that they don't see or aren't told about? And yet, anecdata about unreported crime still seems to lead to police as the answer. Whereas crime rates and recessions, unemployment, and poverty clearly have positive statistical correlations, but "crime seems to be down because there's a bit less poverty now" is not a story that can be handwrung about on the news so it tends not to happen and perceptions are more important than facts. Property crime in SF, based on reported statistics, is higher than the average US city (violent crime is lower), and that is attributable to a lot of factors including the enormous wealth disparity, the fact that it's a major tourist destination, less off-street parking, the city size/density (large sprawling cities have more "safe" suburbs within their city borders), and the fact that city census data on residents doesn't include the comparatively huge number of commuters who enter and leave the city daily (e.g. a "crime rate per 100,000" that ignores the city's daytime population and only uses residential data may calculate a misleadingly large ratio). There is also, as always, racism baked into the statistics. A lot of statistics finding that, for example, black people commit disproportionately more crime, is based on black people being subject to higher arrest rates, because of course many reported crimes do not result in an arrest and therefore no racial info is available for them. And yet, hmm, what other reasons besides "they do more crimes, even when accounting for poverty" might factor into increased arrest rates? SF has become a sort of whipping boy for the US political right in an attempt to causally connect two parallel myths: that SF is "the most liberal city" and that it is "drowning in a crime epidemic", the former causing the latter. Those are both claims that are simplified and twisted to a point of uselessness.
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Jun 16, 2023 22:02
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The real issue is that there hasn't been a significant capital ship vs. capital ship naval engagement in decades (WWII I believe was the last time a battleship fired its main guns on another vessel) and probably won't be ever again. Carriers are useful, destroyers are useful, I believe there are cruisers whose main purpose is to launch missiles; nobody needs or uses battleships any more because you destroy enemy ships from the air or with subs (or with drones, lol russia), not by sailing near enough to them to fire guns at them. So talking about how nobody's bothered to invent a hugely better 16" gun is sort of irrelevant to modern warfare. It's also irrelevant to the thread. If we're talking about europe spending more on defense, they're not spending that on battleships. Leperflesh fucked around with this message at 19:03 on Jun 20, 2023 |
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Jun 20, 2023 18:59
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The thing is though that repossessing cars is net profitable, so much so that loan shark outfits like Santander basically build their business around usurious rates for the lowest-credit buyers on the assumption they'll be repossessing and reselling a huge percentage of those cars within the first year. This contrasts with mortgages, where banks usually lose money (or they have to get their own insurance) if they have to foreclose on a mortgage. Foreclosure is very costly and the big foreclosure crisis was a crisis in part because losses per foreclosure accelerated as prices plunged due to more and more foreclosures. The collateralization of loans was also problematic in that the actual risk of those loans was underreported. So-called "liar loans", sub-sub-prime loans, etc. I do not know off the top of my head to what degree auto loans are collateralized, but my guess is that it's much less. A little googling shows that subprime lenders were in trouble in 2017: https://www.yahoo.com/news/meet-companies-most-exposed-subprime-112001134.html quote:Groshans mentions the following companies as particularly at risk from the decline: My takeaway is that these companies all carry very large subprime auto loan portfolios directly on their books, and their risk in 2017 was due to declining used car prices (that reduces or eliminates profit from repossession). In today's climate of very high used car prices, I have to think that even if defaults go up, these banks will make money on the resale side.
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Jul 6, 2023 18:22
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The primary problem with the ratings agencies is that they are paid by the banks, to rate products the banks offer, and that is a basic and unresolvable conflict of interest. There are several ratings agencies and they're perfectly well aware that if one consistently rates banks' products lower than the others, they'll simply stop getting business. That many smart people within ratings agencies actually try to do their job is more or less irrelevant because of this basic issue. Imagine if the three credit agencies that rate personal credit all only got paid by us, the public, and not by the people who want to look at our credit reports and decide if we get a loan or can rent an apartment, and also imagine that you could simply choose not to do business with any of them if you felt they were rating you too low. You could literally pick which of the big three (or some new up and comers, sure!) gave you the highest score and tell the others to gently caress off. Do you think your credit score would be the same as it is today? Keep in mind that while many aspects of the credit scoring process are obvious (a recent bankruptcy will tank your credit with any agency of course), the actual algorithms are proprietary and secret and obscure, which is why you can have identical information going to all three agencies and still get (moderately) different scores from each one. Doctor Malaver posted:I just watched The Big Short again and I have some questions... I hope it's OK to post them here. Others have addressed your questions well but I wanted to circle back to this one. Getting a 48.9% return on your investment is a huge return. Massive. Most of us are happy to average 7-8% a year over inflation on our long-term investments. It is increasingly difficult to get a large return the more money you are investing, too, because of how larger purchases can individually push up the price of the thing you're buying. E.g. if I'm investing $1000 I can gamble on a $1/share stock of a company with a $100M market valuation that sees a daily trading volume of 100,000 shares on average, but if I'm investing $100M that stock isn't worth bothering with: if I put in a market order for just 10,000 shares that'd instantly push the price up (a bid of 10% of the daily volume) significantly, so some of those shares I'd get at $1, then some at $1.10, then some at $1.50, the market sees this action occurring and the price goes up some more, and if I think that stock was "really" worth $1.25 (so buying at $1 was a great bargain) I'd be done buying it after only a few thousand dollars and I still have almost all of my $100M to invest. That's an extreme example to illustrate the point, but the point is that outfits with billions of dollars under management have to work very hard to find good value for all of that money. There's intense pressure on the overall financial markets to create new investments that can absorb billions of dollars and still return 5%+ annually. In an environment where interest rates are low (and so for example government bonds, which can absorb billions in purchases, are only returning like 1%) that money seeks risk. One of the actual attractions of the mortgage-backed securities market is that it was making new, higher risk (and therefore higher return) investments available to the broader investor market which had previously been held by banks. Lehman had all that cash because lots of people with huge amounts of cash wanted outfits like Lehman to tell them that they could find places for a billion dollars that could potentially return a hundred million, or more. I forget for how long Burry had his billion invested, so I don't actually know if that $489 was over one year or what time frame, but even if it was five years that's a decent return and if it was less than that it's a great return.
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Jul 10, 2023 17:29
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