The idea that lots of companies and banks were over extending themselves seems unsupported, I think that large corporations were sitting on record cash stockpiles when this hit, no? Also there is no talk of a bank bailout, the banks are solvent in spite of this crisis right now.
Seem like the "cheap money is good" argument is actually stronger here, the real wage gains over the cheap money period insulated a lot of people against the slow roll out of support because they were in better financial positions than they would be otherwise.
Airlines are a good example of underlying issues exposed by the crisis, but airlines are a quite small part of the economy and are notoriously poorly run, it certainly has exposed them!
> The idea that lots of companies and banks were over extending themselves seems unsupported, I think that large corporations were sitting on record cash stockpiles when this hit, no? Also there is no talk of a bank bailout, the banks are solvent in spite of this crisis right now.
Have you followed what the federal reserve has been doing in the last few months?
- 1% federal rate cut (the maximum cut during 2008 was 0.5%)
- UNLIMITED QE (this has never happened before)
- Purchasing of fallen angels (companies which recently had bonds downgraded to junk)
- Purchasing junk bond ETFs
Also, have you been following the amount of downgrades on corporate debt? Did you know that the airlines that are now asking for bailouts did leveraged (IIRC) stock buybacks with most their profits over the last decade? Buybacks are similar to dividends, but doing them with borrowed money or without sound cash reserves is fiscally irresponsible.
It is a fact that companies and banks were extending themselves, the proof is in the evaporation of bond yields and the collapse of the credit market, which is what the fed is responding to.
Despite all this, there are banks that are seeing 45%+ profit losses -- JPM is one of the biggest (definitely too-big-to-fail) banks and saw a 69% profit loss.
> Seem like the "cheap money is good" argument is actually stronger here, the real wage gains over the cheap money period insulated a lot of people against the slow roll out of support because they were in better financial positions than they would be otherwise.
What are you talking about? I don't think I understand this argument, are you implying that real wages have grown significantly enough to protect the regular house hold? I can't read this any other way so I'll assume you are, and leave you some numbers on inflation-adjusted hourly wage growth versus productivity growth[1]. Real wage growth has not grown enough to keep families afloat, otherwise we wouldn't need helicopter money[2] except for the most fiscally irresponsible households.
> Airlines are a good example of underlying issues exposed by the crisis, but airlines are a quite small part of the economy and are notoriously poorly run, it certainly has exposed them!
Commercial aviation accounts for 5% of the US's GDP[3]. This is not a small amount.
The proof is in the fact that a once in 100 year event has caused some stress? Of course it has!
"are you implying that real wages have grown significantly enough to protect the regular house hold?"
The alternative appears at this point to have been contraction.. so growth is better than contraction! I agree that it is not enough, but wage stagnation only started to finally reverse course after years of low rates.
Citing "profit loss" is beyond parody, profit loss! Not even citing actual losses! Like, they are still profitable? ROTFL!
5% is a small amount, and it is not as if there is a scenario where air travel is a robust business right now! There are not, at this point, widespread bankruptcies of large companies. I rest my case.
Seem like the "cheap money is good" argument is actually stronger here, the real wage gains over the cheap money period insulated a lot of people against the slow roll out of support because they were in better financial positions than they would be otherwise.
Airlines are a good example of underlying issues exposed by the crisis, but airlines are a quite small part of the economy and are notoriously poorly run, it certainly has exposed them!