President Trump: The NEW one and only politics thread

So. ... Now the administration is going to push for a bailout of the airline industry.

Here is my problem. ... and unlike other people who are now about to discover this, I honestly was saying it WHILE the seeds of stupidity being laid. I'll use Delta Airlines as an example. Over the last several years, they put themselves billions of dollars in debt. They weren't buying airplanes, investing in their business or doing anything economically productive with that money. They were doing share repurchases with that money and paying their owners dividends. Financially engineering a higher stock price to give that borrowed money to its shareholders .Interest rates were so low, so why not borrow up the wazoo and bury the debt on a balance sheet nobody was looking at while everyone got rich, right?

This is from just about a year, ago: Delta sees 'opportunistic' time to speed up $1.3 billion in stock repurchases

It was an "opportunistic" time to borrow money and speed up $1.3 billion in stock repurchases, just in the last year alone.

So what happens when we bail them out now is that the owners of the company were made rich, the money they pocketed was left as a liability to the company, and now politicians are going to tell us that EVERYONE needs to susbidize that behavior because heaven forbid the airlines go out of business. It's a redux of 2008. And it is economically destructive.

This is moral hazard in a nutshell. The Federal Reserve created that kind of behavior on a massive scale by destroying all the price signals in the debt markets because they were giving us economic prosperity (I am being sarcastic -- they were creating a phony economy and giving us a debt bomb). Businesses responded to the skewed incentives and behaved in ways that in hindsight we all see were reckless -- but people only choose to understand the reckelessness AFTER the inevitable happens. And then the government steps in and tells us we have to socialize the costs of that reckless behavior.

And we ALL suffer from this game.

 

OK, but just understand that the government doesn't "work like crazy" to pay all of those people 80 percent of what they used to earn. The government doesn't produce anything.

Even before this, our government wasn't taking in enough tax revenue to cover its expenses from taxable entities that do produce things. And the amount of our government spending was going higher and higher, so we managed to run up trillions of dollars of debt in just the last two decades, which is now proving to be a stressor making the economic fallout of what is going on much worse than it would have been.

The only reason that borrowing spigot wasn't turned off before now was that we came up with this brilliant way to borrow ourselves into prosperity. . ... Increase the money supply by between 6 and 10 percent a year over a relatively short period time, and use that "bank liquidity" you are creating out of thin air to suppress interest rates (by buying up government debt as fast as our government can spend), and then because rates are so low and you aren't drowning in interest payments, use that engineered good fortune to just keep spending more and more like that kind of scheme would never bite you in the ass.

That is where we are at today. Cue someone telling me, "But it's a fucking emergency now!" The problems is, we treated everything like it was a fucking emergency, so we have used up most of the slack we had to do things like that in an actual emergency. Even then, it should only have been done knowing there would be a future price to pay for the emergency measure. Now the response is going to be to destroy the dollar entirely (which has BIG consequences) to try to do more of what got us into a mess in the first place. And at the debt levels we are already at, it takes exponentially more debt just to service the debt we already blew through.

So yeah, we should give everyone unemployment benefits or we should mail people$1,000 checks. But does anyone anymore ask, HOW that is possible at this point (it's not as feasible as it was even 10 years ago) and what the CONSEQUENCE of that is going to be?