China and Europe have public healthcare and social safety. They've been much worse off than the US so far.
I'm not saying that won't change, but to sit here and shit all over America's approach to limited government is a premature celebration.
Let us not call it "America's approach to limited government". It does not represent the view of majoriry, just an influential minority. A better phrasing would be "America's approach to privatising profits and socialising costs"
PS: It’s also irrelevant as many people identify as independents while actually voting overwhelmingly for a single party. Further, political power has nothing to do with the national popular vote let alone what the non voting public believes. For example Trump won with 46.1% of the popular vote and votes from about 19.5% of the total population. That’s simply how the system works and what shapes politics.
The willingness of both parties to constantly expand government despite it’s huge size suggests otherwise. A few state governments are actually significantly smaller, so there is significant wiggle room. https://en.wikipedia.org/wiki/List_of_U.S._state_budgets
My guess is it’s a difference between stated preferences and actual preferences.
They’ve also had widespread infection for longer. China got a 3 month head start. It’s pointless to say one has an good outcome when it’s only now beginning to grow.
And some countries like Japan have public health care. Despite being one of the first countries with widespread infection, they’re still far below America.
"It’s pointless to say one has an good outcome when it’s only now beginning to grow."
It's also pointless to say that we have a bad outcome when it's only now beginning to grow. We don't know how this is going to turn out, but the US is not in a worse position to deal with this than most other countries.
Japan, Taiwan, Hong Kong, etc. responded well because they already had to deal with SARS. They had infrastructure in place to respond to an outbreak exactly like this one. The US didn't have that experience, but we're catching up.
Moreover, we still don't know if China has actually weathered this storm. It is very possible that this could tick back up once they start going back to work. If that happens then all of this effort could end up as nothing more than a stall on the inevitable.
Ignoring China and Japan as outliers. The US, Germany, France, and Spain have nearly identical growth curves so far. It will be interesting to see if the US will end up. I expect the response will be better than most.
China also has a wider set of options to violate the liberties of her citizens. That does come in handy some times, but we've decided we don't do that here. Japan is very, very different culturally, so it's quite hard to compare; she's also a small archipelago whereas America is a large landmass.
It will also be interesting to see the court cases that come from what American governments have done so far; there's a serious case to be made for violations of our right to freely assemble. Even the time, place, and manner standard (which is still contested but is current precedent) may not cover such drastic curtailment of all public gatherings.
Sadly, these things usually happen and get fought out in court later (see Japanese internment camps) when in some sort of crisis state, so I doubt constitutionality has any bearing on the pencil-pushers latest and greatest idea.
Friendly reminder that, while I don't see any malicious intent in the current actions, these directives specifically sound disturbingly close to those issued by many an authoritarian government:
> You cannot engage in group activities in person with others.
> You cannot have dinner parties. You cannot invite friends over to your home to hang out.
The precedent set today could be abused in the future, particularly precedent that looks like this.
> Friendly reminder that, while I don't see any malicious intent in the current actions, these directives specifically sound disturbingly close to those issued by many an authoritarian government.
And yet, China's number of active cases went from 81K to 9K in a few weeks.
Don't trust Chinese statistics. They are manipulated to say whatever the government wants them to say. This is the same country that starting running empty production facilities so economists couldn't predict GDP impacts.
The WHO agreed with China's assessment, and if you don't believe them, Tim Cook re-opened all Apple stores in China because the situation is effectively under control now -- and shut them everywhere else in the world.
No matter how you feel about China, you can believe Tim.
It's also possible that the communists pressured Cook to re-open to send that message. It wouldn't be the first time Apple has caved to the CCP.
To answer your earlier comment, even if the cases dropped, are you arguing that we implement authoritarianism just because it's more convenient in this case? Classic "trains run on time" argument. Of course it offers some benefits, but the losses are far greater.
You think Tim Cook bowed to China and closed every Apple store in the entire world except in China? That hardly seems likely.
> To answer your earlier comment, even if the cases dropped, are you arguing that we implement authoritarianism just because it's more convenient in this case? Classic "trains run on time" argument. Of course it offers some benefits, but the losses are far greater.
Not making an argument one way or the other just stating some facts. People can make up their own minds.
If we get off easy it will be because warmer temperatures or mutation play a part.
Delayed testing, a disbanded pandemic response team, a president in denial for the first part of the outbreak, people not going to hospitals because they can't afford it... Do you sincerely think these things put the US on equal footing with the rest of the world in terms of responding to this?
Lets start with the things we probably agree on:
- The US healthcare system is wildly inefficient
- The US has certain societal advantages in dealing with this outbreak that China doesn't (i.e., we are more spread out, we are more likely to take individual transportation, etc.)
- China has certain societal advantages in dealing with this outbreak that the US doesn't (i.e., they can order mass quarantines and mobilize people in a way that the US cannot)
Keeping those in mind. Yes, we might get off easy. Yes, it might turn out worse for us. No, the outcome will not be 100% correlated to government effectiveness.
That said, the US healthcare system still leads the world in research, funding, talent, etc. Is it more expensive? Yes. Is it the best system for public health? No, probably not. But we do have our own advantages.
Immuno-suppressant therapies that are being used as a last resort for COVID 19 were developed by Genentech. Roche and Genentech are leading the way on development of a vaccine. The US healthcare system is home to some of the world's foremost experts on drug development and patient care.
We are undoubtedly better off in dealing with this than many other countries. We're probably not the top percentile, but we are most definitely among the top 5-10%.
Those words are doing a lot of work. If we densely-packed city folk don't work extra-hard to contain this, it's going to absolutely raze our health, and other support systems.
It's knowable that the situation in the US will be comparably bad to what we're seeing in other countries. The original comment suggested that it'll be particularly bad in the US, and I think it requires a lot more than deduction to figure that.
I think you misread what the person I was respond to said.
In any case, I also disagree that it takes much to know that the US is going to suffer particularly bad. If people don't have job security, they aren't going to stay home. If people don't have health care, they won't bother trying to access it. This will help spread the disease faster than the health care system can handle it. Furthermore, given poor education levels and (justified) distrust of the government, in most of the country, compliance is going to be low anyway.
Time will tell.
Okay, sure. Lets talk about fiscal. Italy's going go re-enter another sovereign debt crisis because they were already in recession before they shut down their entire economy.
Lets talk about medical. I haven't heard anything about hospital bed shortages in the US yet. Again, not saying we won't get there, but China had to build entire new facilities because they didn't have adequate infrastructure.
Lets talk about essentials. American stores might be temporarily out of toilet paper, but Wuhan is currently dealing with dramatic food shortages.
You seem to be missing both the growth rate curve and the time lag. If anything the US still has its head in the sand and is heading for 5-40 million deaths due to just swamping the hospital capacity for critical care.
I'm not going to sit here and defend the US government's approach to this situation. Not producing test kits, not investing in additional medical supplies earlier, etc. Those were the wrong decision.
That said. Italy basically denied having a problem until they couldn't anymore. China's safety net health system did everything they could to cover up the crisis until it exploded in their face. Other countries haven't been doing much more to prepare than the US.
People like to hate on it, but the US government still functions are a comparatively high level while maintaining a degree of individual freedom that other countries do not.
Norwegian was struggling financially before COVID 19. This isn't surprising. Norway has one of the world's most robust social support systems. I'm confident that they will deploy it well here.
Obama's admin let one of the world's foremost financial institutions fail and caused a mass market panic / giant economic setback. Their reasoning was entirely political and caused millions of people to lose their jobs. I'm independent, but claiming that Republicans cause recessions is pretty ironic considering the economic damage the last Democratic admin did.
Yes, Obama was President from 2000 to 2008 when the Fed let the subprime lending happen with stupid monetary policies. The crash happened in 2008 when Bush was still President.
A few days later, Lehman Brothers began to falter. Treasury Secretary Hank Paulson, who in July had publicly expressed concern that continuous bailouts would lead to moral hazard, decided to let Lehman fail. The fallout from Lehman's failure snowballed into market-wide panic. AIG, an insurance company, had sold credit default swaps insuring against Lehman's failure under the assumption that such a failure was extremely unlikely.
We used to think that rates couldn't go negative for exactly the reason you just described.
Turns out that assumption was wrong for a few reasons a) holding onto money is expensive b) in many cases banks have incentive to hold government securities c) sometimes they are outright required to hold government securities d) this is related to (a), but there is risk in holding onto cash where government debt is in many cases perceived as risk-free.
The thought today is that rates can go only slightly negative for short periods of time, which we will continue to believe until some government tries to push the lower bound again.
So people are willing to accept small negative rates if it would be less than the operational costs of shipping enormous truckloads of bills around, storing them, securing them, and insuring them against theft / fire? Is that's what's going on here?
That's kind of the thought, yes. Negative rates should not be sustainable for any significant period of time and most interest rate models are built on that assumption.
Sorry, I want to clarify quickly that appleiigs is right that it isn't cost of insuring cash so much as depository risk. When I say cash, I mean currency as opposed to debt/equity, not physical bills.
Can you even get a significant amount of money in truckloads of bills? If you would try it, you'd be surprised how much the banks would push against it.
The feds mandate is to maximize employment, stabilize prices, and moderate long-term interest rates.
A big part of that is trying to avoid the 'bust' part of a boom-bust cycle.
As evidenced by your post, the fed should not be accountable to the public because the public cannot be expected to spend anytime trying to understand what they do and their methods of action.
Any body holding significant power is at some level accountable to the public, regardless of laws or regulations or how little the public may understand. If the Fed can’t make the case to most citizens that it should exist and retain its power, then it is doomed, and no philosophical arguments could change that.
Too late for what? This was going to happen no matter what the fed did. If the mkt blew up because of inflation then your argument would make sense. That's not what happened.
Well if the quantative easing was phased out and interest rates started increasing in 2011, the stock market wouldn't be at all times high, billionaires wouldn't be so rich, but the economy would be better off.
You're just making things up. We couldn't have increased interest rates if we wanted to because Europe had to hold their rates low to deal with their debt crisis. If we moved ours out of step then it would have caused appreciation in the dollar and likely would have damaged US manufacturing. The US lower middle class likely would have been hurt if we did what you just suggested.
Yes, inequality is a massive economic problem. Yes, we need to find a way to fix it. Spouting poorly formed conspiracy theories about financial markets is not the way to do it. We weren't holding rates low to inflate equity markets. The fed doesn't care about equity markets more than any other economic gauge. We were holding rates low because we were trying to minimize unemployment and there were no signs of inflation.
When we started getting nervous about inflation, we started increasing rates, and selling off the balance sheet. That didn't go terribly well which is we stopped.
The fed is a completely apolitical institution that works very hard to monitor and assist the economy. They are academics, not billionaires. Their sole purpose is to make sure that you have a job and don't have to worry about the price of milk increasing 200% in a week.
Both of those things have been called into question this week, neither is because the fed didn't increase interest rates quickly enough.
I'm not going to assume anything about your political leanings, but I do want to address this. I have heard a lot of Bernie supporters spouting the theory that you just told me. The irony of that is that he wants to put labor reps on the fed. You know what labor reps would push for? Super low interest rates to weaken the dollar and increase manufacturing activity. Their position is completely contradictory.
The issue is that the vast majority of people don't want to be educated in economics. They publish the minutes of every signal one of their meetings. You are free to sit down and read absolutely everything they do and the reasoning behind it.
The problem is that fed action isn't enough. We need policy changes to keep SMEs above water. The White House and Congress have not taken appropriate action. Trump acted like he was going to take action on Friday, the markets ripped higher, and everything he announced was worthless, but that wasn't clear until markets closed.
- The fed became a huge driver of liquidity from from 2016-2018
- There was a noticeable increase in market toxicity when they started letting assets roll of their balance sheet in 2018
I'm more optimistic about the impacts of their role as a liquidity provider than I am about their role holding down the effective overnight borrowing rate.
Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s. This has caused material demand and supply side shocks that we haven't seen in my lifetime or my parents' lifetime.
I'm likely on the younger side of the hacker news demographic and I still believe that this is the right action to take at this moment.
We might be stuck paying it off for awhile, but I would rather deal with an inflated fed balance sheet than an entire generation of Americans coming of age during a giant economic pullback.
It's foolish because it's literally impossible to avoid a heavy recession or depression when people are told to stay inside and do nothing.
The odds of this action working out well now are slim to none. Then when it's actually needed they will have to do it again. You'll end up with the same non recovery recovery where people are barely getting by but certain asset classes are inflated to the moon.
No, it's not foolish. We need to keep markets liquid to avoid a lending crisis. That's why the fed announced asset purchases. They don't do them all at once. They buy steadily over a period of time to help keep prices stable. That's very important.
They had to do rate cuts now because it takes a long, long time for them to work (measured in years rather than months). That was a preventative measure, not a band-aid.
Look, guys, I promise you the fed knows wtf they're doing. These guys live and breath to be ready to respond to these type of emergencies.
We should be far more worried about (the lack of) policy responses from DC. DC has no idea wtf they're doing, and it shows.
Given the guy that I just responded to called liquidity injections foolish, you should want to take your chances with the fed.
If the fed hadn't announced that action last night then the hell that would have rained down on Monday would have gone down in history with Lehman and Black Monday.
Why not 1921? In 1920-1921 there was a major worldwide crash on the relative scale of 1929 but nobody ever talks about it because the fed did very little and we bounced back (the government actually did a few things that probably hurt). In 1929, the fed did all sorts of policy gyrations and we got a depression.
No, the world is much more interconnected than in the 30s. This can get a lot more ugly if it lasts multiple months. People were also a lot more used to rough conditions in the 30s and the general population is totally unprepared today. This will either pass in 1-2 months at most or we are looking at revolution or military dictatorship.
But at the same time, what percent of the population was in food distress prior to the crash of 1929, what percent had no access to medical facilities whatsoever, or could wind up in a situation where nobody was checking in on them and they couldn't put out an ask for help?
So a lot of things have changed, at least in the US, that make the infrastructure of resilience possible in a way that was specifically impossible in 1930.
> No, the world is much more interconnected than in the 30s.
More, yes, but not much more. Agriculture, commodities, finished manufactured goods and finance were all global markets before WWI. The re-integration of markets only overtook that period in the 90s, after the fall of the Soviet Union and before that the demise of Bretton Woods and managed trade.
> Look, I don't want to be alarmist, but the worst outcome here is not '08. It's the 1930s.
This seems unlikely. The Fed does not seem to be on track to contract the money supply by 30% causing a wave of bank collapses, and leading to a trade war that means international trade collapses this time. They may not pursue optimal policy but every macroeconomist knows that that would be a bad idea. The joys of limited data are a better appreciation of history than microeconomics.
- Many other rates in existing contracts are tied to the fed funds rate so things like existing mortgage and student loan payments may get smaller as a result of this action
- This will only work for new contracts insofar as credit risk does not materially increase (which it will in an economic downturn); banks will increase consumer spreads against the fed funds rate on a go-forward basis
- It takes two years for monetary supply changes to fully propagate through the economy
- Cutting rates to 0% has not been effective in Japan or Europe
The fed does have a role to play here
- They can provide liquidity to the market
- They can serve as a backstop in a time of crisis
DC needs to get their shit together
- Eliminating Trump's tariffs would do more to increase long-term investment than cutting rates to 0%
- They should have created targeted lending program to help businesses that need short-term cash flow assistance yesterday; the next best time to do it is right f*ing now
As someone said before, I think this is more about sending a message, as in "we're going to do whatever it takes". To be honest I don't know what the future will hold from a financial/economics point of view, but imho this is an once-in-a-century crisis.
You're right, and they made a lot of changes that are necessary to keep the global economy functioning over the next few months. I did not mean to imply that they shouldn't be taking action.
I am very skeptical about cutting rates again. There are much more effective actions that could be taken at the policy level. The fed is doing what it can, but it doesn't have the right tools to lead the charge on this.
I don't agree. There are three things that normal investors should be doing right now:
1 - Assess how you feel. Are you upset by the loss of value? Then you make be more risk averse than you thought. It might be wise to reconsider your asset allocation after this emergency is over. However, it's not wise to redo your allocation while the VIX is above 20ish.
2 - Check in with a financial adviser. This is a good reminder that your financial portfolio matters, and it is smart to use this as a prompt to check in on your financial health.
3 - This is the most important one, but you can't do it if you're not good on #1 and #2. REBALANCE YOUR PORTFOLIO. If you are allocated to risky and riskless assets then it is time to make sure that your allocation is still where you want it to be. It probably isn't. If your allocation to riskless assets is higher than you normally would like then you should sell riskless and buy risky.
Why is #3 so important? Because it allows you to collect a liquidity provider premium. Purchasing risky assets in volatile markets a) stabilizes the markets b) takes the advantaged side of the transaction. A lot of research stands behind this idea. Rebalancing in volatile environments is an easy and reliable way to outperform your peers over the long run.
