[trcollinson]

Yes, ordinary citizens are different. What is your point? Are you suggesting companies really should keep 6 months of operating capital in the bank? Can you even imagine what would happen to the economy at that point.

The US GDP last year was $21 Trillion dollars. The gross revenue was about $2.1 Trillion dollars. This is all back of the envelope math but imagine if 50% of the difference between those numbers was the operating cost in the US of 6 months, or about $9.5 Trillion dollars. If we take that money out of the market and put it into a bank for a rain day fund, imagine all of the people not receiving that money. Imagine how many consumers would go down. This is all just an estimation but we are talking huge amounts of money not being put into the economy and frankly, our economy runs on consumption. Consumption doesn't happen without capital.

People should definitely safe. Have a 6 month personal supply. But companies need to spend.

[chroem-]

> Are you suggesting companies really should keep 6 months of operating capital in the bank?

That's exactly what we're suggesting. Rather than going through this whole song and dance at least once a decade where the public has to bail out private business ventures, those private businesses should be able to fend for themselves against regular economic disruptions. This bailout and QE money isn't free and it comes with costs of its own. It would be better for the stability of the whole system if these companies could fund their own operations the next time there is a disruption.

[harryh]

What makes you think that the costs that trcollinson describes would be worth the benefit of "the stability of the whole system if these companies could fund their own operations the next time there is a disruption"?

[economicslol]

You're right, the better solution is use taxpayer to bail out shitty companies that can't survive temporary economic slowdowns.

[trcollinson]

You seem like you are trolling and trolls aren't well loved here but I will attempt to answer your rather flippant and not useful comment with something somewhat useful.

Companies and the economy cannot handle having a 6 month reserve of cash, that is the assumption and there are plenty of economic theories that show that doesn't work.

Bailing out with taxpayer dollars is one solution and it's the easiest dial to turn. It will bail out a lot of companies that aren't "shitty" and are just handling a time that is unprecedented and needs to be handled. As with most things, it will also bail out some "shitty" companies. We don't have a great metric for "shitty" vs "non-shitty". Those taxpayer dollars to companies are not free (though with inflation they basically are free). They have to be paid back with a minor amount of interest over a 2 year period. Will everyone pay it back? Nope. But many will.

The point to remember here is this is unprecedented and we are attempting to solve a future problem. Let's imagine we don't bail anyone out with very cheap loans. A bunch of "shitty" companies go out of business. A WHOLE bunch of "non-shitty" businesses go out of business. When the world opens up again the people who have lost their job have no where to go. There are no "shitty" or "non-shitty" companies to go back to. They went out of business. Unemployment stays at record highs for as long as is necessary for new companies, both "shitty" and "non-shitty" to come back and start hiring. A bailout allows companies to hang on and then bring back employees ASAP after the virus situation stabilizes.

Are there better ways? Probably. Will be find them? Probably. We can learn from this situation and become better. It will require a set of new methods and economic tools to get through in the future.

[chroem-]

Your argument is founded on the idea that this is an extraordinary event, but this is clearly becoming a recurring pattern due to the increasingly risky and fragile way businesses are operated. If this were 2008, I might agree with you, but we are starting to form a trend here. We'll have yet another round of public-private wealth transfers for the "absolutely unprecedented" 2031 US earthquake.

[trcollinson]

I think this is important. You are right this has happened before. 2008/09, 2000, 1987, twice in the 1970's. And history will no doubt repeat itself.

But my point is the way our economy currently works doesn't handle a 6 month reserve well. We don't incentive companies to hold on to cash like that. We need to come up with the incentive to do something different, whether it is save cash or "something else". But right now, the incentive is to spend cash and allow for a bailout.

Additionally, we don't think in the future very much. We think about this quarters earnings. So again, we need to incentive long term thinking and resiliency as you suggest. Unfortunately, I am not sure how to do that.

[mindslight]

> We don't incentive companies to hold on to cash like that. We need to come up with the incentive to do something different

This isn't some novel problem that we don't understand, but rather the direct result of decades of economic policy. The solution is called raising interest rates.

[trcollinson]

First off, I don't disagree. But I unfortunately think a lot of people will disagree, especially right now. If we increase the interest rate we know exactly what will happen. We will see a decrease in economic growth and spending. Stocks will slow down. Obviously at the same time inflation decreases.

The problem is we do know we need to increase the interest rate. But no one wants to do that now. "We're in a bad economic time and we need rapid growth! We'll raise it later." Later comes and we say "We can't do it now! We're growing! That will slow things down. We'll raise it later." No one wants to bite the bullet and do that. Again, we need to think long term and not so short term. I don't know how to solve that.

[mrep]

What companies are getting bailed out besides the airlines and even that was half loans and the other half for payroll so just a roundabout way of keeping people employed? I guess you could call the small business loans a bailout but that was mainly forgivable for payroll also so another way of keeping people employed. Any that I am missing?