This was version 2. Version 1 was the "great recession", when several investment banks found themselves insolvent after cluelessly underwriting an overvaluation of American homes. It had been their custom to play a sort of musical chairs with overvalued assets, unloading them on clients and other victims, but eventually they forgot how that game typically ends. After a small amount of public discussion, it was decided that a certain favored subgroup of the investment banks would be bailed out by the public but that their debtors would all lose their homes.
This time around, that modicum of public discussion was avoided but we all gave those who can afford teams of lobbyists and lawyers lots of money anyway. For version 3, we can expect automatic deductions from the checking accounts of the bottom half of the income bracket, with automatic credit card transactions against those without checking accounts, to be transferred directly to entertainment allowances for Bezos, Musk, Gates, Buffett, MbL, and various estranged spouses thereof. "Representative government" seems fine until one looks more closely at who is actually represented.
My employer was minimally directly effected by the housing market crash, but due to the intermingling that comprises the financial industry everybody was seriously hurt indirectly. They were forced to purchase, by the federal government, a major stock brokerage that was in serious trouble for pennies on the dollar and assume all their troubled assets.
> Representative government" seems fine until one looks more closely at who is actually represented.
When looking at current politics I find your statement incredibly strange. I used to think the Republican Party represented the wealthy and special interests (certain business interests as both major parties have their special interest priorities). That was years ago when they were the stronger and more dominant of the two US major parties, back when they had values and weren’t so hypocritical about them. But now they seemed to have strangely thrown away dominance for a failed bet on populism to energize some new core constituents to the disgust of everyone else. I have trouble finding who is actually represented by that, but then I guess a lot of people have that trouble which explains that parties atrophy.
Were you working for the same bank 14 years ago? That would be an impressive sort of consistency. I think maybe not, however, because if you had been there your two-sentence synopsis wouldn't be quite so muddled. Did your bank hold assets the book values of which decreased in response to the events of 2007-8, or did its liabilities increase unexpectedly for the same reason? In that case, your bank was hurt directly. Otherwise, it wasn't hurt. Has anyone ever had to be "forced" to purchase anything for "pennies on the dollar"? Usually we are eager to purchase at 90% discounts. It's almost as if the story your bank tells its new employees is modeled after the story we all got. IME, when bankers don't make sense, they're lying.
Over most of USA history, both parties active at any particular time serve the interests of capital. There are occasional exceptions (e.g. FDR), but now is not such an exception. It's silly to emphasize the difference between parties, but if we must do so the past two decades in which control of Congress and the presidency has passed back and forth are something of an anomaly. Before Bush the Lesser, the last time Republicans were in any sense "dominant" was under Hoover. The Democrats held the House for twenty consecutive Congressional sessions.
If the stories you've been told, about your bank or about the USA political system or about anything else, don't make sense, then consider the possibility that those stories simply aren't true.
Very many of the non developer employees were there 14 years ago, so these stories of what the bank went through are more than vague rumors.
> Has anyone ever had to be "forced" to purchase anything for "pennies on the dollar"?
There is typically not much interest in the purchase of something with a high negative value even if highly discounted. That is why it was mandated by the government, so that a large solvent organization could assume another large groups insolvency before the insolvent group closes and strikes their assets.
> “Representative government" seems fine until one looks more closely at who is actually represented.
Why ruin an otherwise reasonable argument with an out-of-nowhere jab at representative democracy? If anything, without legitimate elected officials in charge, the problem would have been more acute.
Ahhh yes. The old "the-ones-who-caused-the-problems-will-fix-them-honest" routine. Never gets old, and it's been playing out for thousands of years!!! What a sale job.
Not rich here. Wife's company got COVID loans. They were forgiven. Company had to prove money was spent on rent, salaries, benefits. Company didn't make money on it. Employees were able to keep their jobs. No bonuses involved there.
The COVID relief has helped the rich in the same way that the mortgage tax deduction 'mostly' helps the rich[1]: the majority of the dollars go to aid wealthy people, despite the number of non-wealthy beneficiaries being much higher.
That always struck me as an ass-backwards way of looking at taxes. $100 saved by someone near the poverty line is a big deal to them, $100 saved by someone making six figures is not near as much. The recent doubling of the standard deduction is probably one of the biggest (in terms of impact) tax cuts to the lower/middle earners (read: the vast majority of people) in a long time.
I agree that poor-er people have much higher marginal utility for $1, but I think that observation supports this critique!
The 'cost' of spending $1,000,000 on a wealthy person should be measured in terms of how much utility less-wealthy recipients would get out of that money. In the same way, your example with the standard deduction also, I think, supports this critique: either standard deduction is marginal once you reach a high enough level of income, but at lower levels of income it is much, much better (and results in higher tax rebates for poor people). It's an example of a tax policy that does the reverse of the mortgage tax deduction - it becomes less proportionally beneficial at higher levels of income.
P.s. I may have misread your comment, and if we are actually in agreement I apologize!
I'll be honest, the mortgage tax deduction doesn't deduct that much either as a proportion of income if you make a multi six figures income, much like the standard deduction.
For example, if you have a $1mm house, your interest on a $800k mortgage @ %2.7 APR is a ~$30k/yr interest deduction, which is in the same range as the standard deduction, representing around $15k/yr paid in less taxes. For those kinds of people, it's easier to just make $30k/yr more per year too. These people often live in states with an income tax, so they can't deduct their property tax anymore either, since it gets dwarfed by their state tax bill.
On a dollar aggregate, they of course get the most benefit from the deduction, because most middle & lower income americans don't pay a lot of taxes to get much of an aggregated benefit. But as a percentage of their own income, its not actually that much!
The mortgage deduction on it’s own isn’t such a big deal but it suddenly makes a lot of things tax deductible which aren’t if you take the standard deduction.
The tax code is complex largely to enable such seemingly subtle interactions.
What kind of stuff becomes tax deductible once you get beyond the standard deduction, that doesn't involve having a business, which doesn't have that standard deduction limit anyway? Charitable donations? Medical expenses if you have a really bad time and need to spend more than %4 of your income to cover it?
It’s a long list, the major one is state income taxes, also charitable deductions can cover charities you create which can be a big deal if something you’re doing anyway could qualify.
However, some oddities like theft of investments such as gold or artwork and even some fines can be deductible. So sure on it’s own the mortgage tax deduction isn’t always huge, but it’s rarely the only deduction someone could take.
You can't deduct state & property taxes beyond $10k anymore, that deduction has been neutered significantly.
Charitable donations are not a tax dodge scheme for even the people who make $500k/yr, it's way too complicated and expensive to make it a vehicle to direct tax free spending. As an estate tax dodge, yes it is a thing, but again, many high income people don't have $5mm sitting around where that becomes a good idea too.
Theft is also not a reliable tax deduction, and if it was, it would be fraud! And you just lost something!!! I assure you the vast majority are not doing this.
So please, tell me what actual tax deductions you can take as a high income W2 employee that is actually significant
Someone making six figures still pays a lot more tax, in both net numbers and percentage (=tax brackets) than someone poor(er).
If we want to go down your route, 10% of all clothes in ShoppingCentre(TM) is unfair too, because someone buying an Armani suit saves more money than someone buying a $10 5pack of white tshirts.
Yes, and what did those employees who would have otherwise been unemployed spend their money on? Likely rent was the #1 item, thus transferring wealth from tax dollars to asset holders.
With weaker demand rents would have actually fallen a lot more than now. That in turn would have an impact on asset prices in the long term.
Will it be fairer to employees ? I don't know, there will be lot more pain for employees without government intervention.
However with Quantitative Easing or bailouts and COVID loans means the rich are not paying the same price as well, that is why rich are becoming richer, poor suffer either way.
Not necessarily, demand in Bay Area for example is not really connected to homelessness all that much.
While rents have dropped a bit here, it more likely to get 2 months rent free rather than actual drops.
In a tough economy I would expect rents to drop and in turn asset prices as well.
The 6 trillion pumped in has to go somewhere, if it’s not inflation of consumer goods, it is inflation of capital goods. This has made it incredibly harder for mobility and wealth inequality
I have come to realize that many people are haunted by the constant fear that someone somewhere might be making a profit.
I think it's a great thing and a credit to our institutions that millions of citizens of my country weren't evicted last March and April. Who cares if landlords got paid for rent or if a bank received a mortgage payment?
Hmmm...unfortunately, most landlords are people who own a single rental, often the one they lived in previously that they cannot sell. By not bailing out landlords (not speaking of institutional investors here that buy up distressed mortgages in cash by the hundreds), you've hurt average-earning middle income citizens. So yes, with the moratoriums, you've transferred wealth from a chunk of the middle class to a different chunk of the middle and lower class.
Most landlords own a single rental, but most rental properties are owned by large companies (notably REITs like MAA that has over 100.000 properties)...
>...most of the money went to large corporations...
As far as I know, no landlord, large or small got any bailout. Are you saying investor-landlords received some type of direct stimulus? If so, can you elaborate?
But they were paying rent or paying their mortgage before it happened too.
All it says is that it's a good thing that the government backed you up when you were in trouble. And I'd rather see the government back up the poor folk instead of them bailing out the stupidly wealthy. It'd cost less money.
This is not what anyone means when they talk about wealth transfers. Yes rent is a huge issue on its own eat the new feudal lords and all that but the problem of people using their wages and salaries funded by taxpayers to pay for things they we're paying for already is something totally different than inflation devaluing dollars, which is the primary asset held by low-middle income people, plus wholesale transfering it via bailouts to the already wealthy.
If the gov't took money from taxpayers to give to companies to pay worker salaries to pay rent and you squint a bit that's just workers paying rent semi-collectively which on a macro scale is like... fine. Not good. But fine.
It's a bit more complex, but even avoiding how much value pleople get from paying their rent, only as much was transferred as there would be empty vacancies from people relocating elsewhere (or losing their homes and having nowhere to go). If elsewhere, they also pay rent to somebody. Plus somebody else would pay the rent when they are gone, just slightly lower (probably). That difference in rent price would be amount being transferred then.
Long story short it's more likely that they were able to buy other necessities and more food than they could without a job.
Your argument would work though if these were high paying jobs - that would likely only result in fewer luxuries being bought.
If money ends up in the hands of employees, then statistically by definition most of them are not the 1% and money equals higher level of living instead of more useless stuff.
I think the idea isn’t that it was a net transfer from individual working-class people to the capital class, but rather a net transfer from city/state/country treasuries to the capital class.
How much of that translates to the rich getting richer, depends on what proportion of those treasuries’ funds originally came from taxes on the rich, vs. taxes on everyone else.
The way I see it, they state money belongs to everyone (bear with me), the transfer between working and capital class happens when it is not distributed evenly, which is what happened at booking.com and is happening quite often because those who work don't have time to research new regulations, don't have experts to analyze them and some yet other people to fill out necessary documents to get money from the state.
That's why I believe many laws like "let's help THOSE people in need" end up on a giant pile that's mostly getting abused by those who have time for it (of course there are exceptions).
Are we saying a rent payment is a “transfer of wealth”? I’m not invested in real estate, but I imagine many people in real estate were just as impacted. Don’t you likely need to pay towards a mortgage and put some aside for capital and day to day maintenance?
Your comment is written as if a rent payment is a transfer from one person to directly to someone else’s savings account. I’m not convinced this is true.
The great recession resulted in the creation of Blackstone's Invitation Homes, which is the largest owner of single-family rental homes in the US.
Homes that used to be owned and rented locally by individuals or small businesses are now rented and managed from elsewhere.
Profits resulting from higher rents and cheaper maintenance flow to stock holders, creating bad incentives. These homes are no longer rotating into the market for sale, reducing inventory.
Even for rental homes rented by local owners, the increased rent due to the commercialization of rented residential housing created conditions for everyone's rent to go up.
Ah, I moved into one of invitation homes a few years ago. Looked nice when we drove up, didn’t think about why all the windows were open when we signed paperwork.
Their negligence nearly killed my family, and left us with life long injuries.
The gas line was leaking natural gas, improper installation? the furnace and stove were emoting lethal levels of carbon monoxide. Detector was defective.
A portion of the AC fell into the kids room. One wall got so hot it burned my wife.
Only reason we didn’t die is smell was so bad we nearly always had all windows open.
At every stage they lied and did what they could to cover up problems.
I still recall spending an hour each morning trying to wake kids, not realizing we were all being poisoned.
Just last week they tried to settle the matter by paying back my deposit if I agreed to Silence, and gave up all legal claims.
This sounds like an issue with that specific home. I’ve never heard of a home with this nanny life threatening issues not be condemned by fire or county authorities.
All homes are always on the market for sale, regardless of whether they are listed on the MLS or not. If you see one you like there's nothing stopping you from making an unsolicited offer to Blackstone's Invitation Homes.
Invitation Homes raises rents as much as possible.
It seems unlikely a typical landlord would need to raise rent at the same rate because they maintain their own operations and have no duty to shareholders.
An offer to buy from IH would need to beat IH’s own model for returns in such a substantial way that it would be overpriced and affect comparable home pricing in the area.
Thus, it is not similar to making an unsolicited offer to some regular home owner.
I hear people say this, but it's definitely not been my personal experience. I've rented at places where the rates were incredibly reasonable and did not increase. One guy let me rent month-to-month for over a year without ever increasing rent. Is there evidence to suggest that private landlords are mustache twirling villains?
In my limited experience with renting, self-managed properties often don’t hike rents annually. Feels to me like this is because the landlords aren’t tracking market movements and so don’t understand they can increase their gross revenue by 5-30% in some years because demand significantly outstrips supply in many metros.
Managed properties the agent generally does have a lot of datapoints about the market and will raise the rents accordingly,. They can see what similar properties are fetching, they can see the result of hikes in terms of people who move out, and their incentive is the management fee is quite often a % of gross revenue.
I’d go as far as saying charging significantly under the market rate for rents is financial mismanagement. You’ve got an asset delivering you income and you aren’t managing the return on the asset to be broadly what equivalent assets are returning to others.
I don’t think charging the market rate makes you a mustache twirling villain.
I think he's saying that at a certain level of wealth, you don't need mortgages anymore. And especially with super low interest rates - bonus points if the interest rate is fixed - mortgages are more of an investment than a liability.
So people with a ton of money can just buy a lot of property which they then rent out. Renovation work can be delayed and property values have only went up in the past 30 years or so (minus the financial crisis, which in the greater scheme of things turned out to be just a blip). So they have an ever appreciating asset that's a constant stream of revenue. Double-win.
Which makes this whole multiple-bankruptcy thing for the former US president even the more baffling :-))
If you have a high salary and no ability to save for a deposit then property can be unaffordable and you're stuck paying someone else's mortgage.
If you have a 5% deposit saved and a high salary, you still can't afford a home because lots of people are in your position and have driven up house prices and rates and leverage available sucks.
If you have 20-25% down and a high income you can afford a home to live in and it's probably cheaper than renting long term.
If you have 100% in cash then you can buy one to live and buy 3 more as buy-to-lets as a side business.
> If you have a 5% deposit saved and a high salary, you still can't afford a home because lots of people are in your position and have driven up house prices and rates and leverage available sucks.
I keep hearing this trope and reading about it. Not positive why it gets repeated. It doesn't take long to do a realtor.com or trulia search to find a shit-ton of affordable homes. It seems to me that, there's a certain class of people, many of which I gather hang out on HN, that don't have either a long enough lifetime behind them to possess an acute perspective or just outright completely have false expectations. My home value in the midwest hasn't risen in 15 years. My value actually decreased by 10K two years ago. Within 6 blocks of my house in SE WI, I can find about 80, 3bdr, single family houses for sale, many if not most under 120K. I'm looking at a 3bdr, 1bath now for 60K that I would love to fix up and turn into a rental. If you feel like 120-130K is not 'affordable' to someone with a 5% deposit saved and a "high salary", let me blow your mind. Nobody, and I mean, not a single person on my block makes more than 48K/year. Me and my wife bought our house for 124K, while making 28K/year jointly!
Right now all I hear near Seattle is properties that are relatively unexceptional, that people bought 2-4 years ago for $800k, and are now being listed at $1.2M.
They’ll list on a Friday, get 35 viewings over the weekend, and the seller has 10+ offers by Wednesday and accepts $300k over asking with all contingencies waived.
I’ve personally heard over a dozen such examples in the last 90 days. I’m sure someone’s looked at MLS data and done a better analysis.
Lenders continue to appraise nearer the initial asking, availability of capital is tightening up because of risk and underwriting has become more conservative since Summer 2020, typically meaning buyers need >740 credit and good debt-to-income ratios to do 5% down, and then they also need the $300k cash to bridge the gap between appraisers valuations and what it actually takes to do a deal in this market.
Despite COVID purporting to offer more work location flexibility, what we seem to be experiencing in WA is downtown renters looking to buy within 30 miles of work, perhaps for a “Hybrid” future, rather than packing their bags and moving to WI.
I'm in the UK. House price inflation nationwide has been running at 7-8% a year for 20 years and price:income ratios are at all-time highs.
The mortgage rates on 5% down are like 3.5% and the mortgage rates on 20-25% down are like 1.5%, so effectively your monthly mortgage payment could get 50% higher with a 5% deposit.
Not at all. Their equity remains the same, and chances are you can stay solvent for a couple years if you own a second property. It just means they get to earn 1/30 less rent (in its original meaning) over the whole mortgage.
Just a data point here. My company got a five million loan that got written off. The company claimed that around 120 jobs were at risk. However the truth is that since we are a consulting firm and our clients continued our services, the jobs were never really at risk and the owners made off with 5 million. For a company that has yearly profits in the low one million range, the owners did hit a lottery while cutting our salaries at the same time .
Two things: One, this was the supposed goal of such a loan (keep jobs, and not sign multi-million bonuses to CEOs). Two, you could give this to a small business and keep as many jobs (on total) if not more. However, bigger companies have better means to navigate complex governmental schemes. This means people who have substantially more wealth (owners of big companies) get an easy ride during such a crisis while the smaller guys get screwed.
Or, you know, don't give money to anybody. You'll have some people bailed out through deflation, and some other screwed because they are over-leveraged. Whatever happened to being responsible and putting some money aside for a crisis?
the company basically got free labor for 2 months. instead of needing to pay employees, the company got to keep its cash (and pay them out to the owners).
Sort of. $ can go to payroll, but net revenue is still up by PPP amount. So owners can get a performance bonus, and it just happens to be the PPP amount. But if there was no PPP, there wouldn't have been that extra cash, so less $ for bonuses.
This only works if the company was breakeven, or had $ reserves (eg, VC funded w expectation of ever-growing losses)
Paid it out as to owners/execs as dividends/bonuses, this is what happened in my industry to the companies that took PPP loans but had plenty of work and receivables to pay the bills. Plenty of PPP money was ‘used for payroll’ when there was already money for payroll, then the company is free to do as it wants with it (cash out to owners)
You’re asking what booking.com (a travel booking agency that lives on fees earned when people are traveling and using them to buy it) did with all that money they were earning from their normal business operations given the collapse of travel volumes from March of 2020 to now?
>Wife's company got COVID loans. They were forgiven.
those relatively useful (at least in the cases where it wasn't abused/cheated) programs is a minor part and basically a window dressing of that multi trillion transfer of wealth to the rich. It is just a bone thrown to the populace to detract the attention and to derail the public discourse they way you just did.
Inflation on its own isn't helpful, but when you print money just to pour it into the stock market, you help wealthy people disproportionately. You raise stocks while devaluing currency. Poorer people have a higher proportion of their wealth in cash, and are often paid in static amounts.
When I reached the entry level wealth and cap gains started to dominate in my income, I realized one thing: there are two types of money, one for the poor (dollars) and one for the rich (stocks, assets). The gov keeps deflating dollars and thanks to complicated behind the scenes mechanics, that wealth gets transferred to assets that magically appreciate in value. When a recession hits, the gov evacuates the assets and leaves the dollars to their own devices. The poor can't get off the dollars because they have to spend everything they earn - another intentional arrangement in our economy. Moreover, cap gains aren't taxed. Only when you sell a small bit of them (or better: take a low interest loan), that small bit is taxed at laughable 20%. That's welfare for the rich. There's really no reason why cap gains (all gains, not just realized ones) can't be taxed at a progressive rate, as if it was income.
> There's really no reason why cap gains (all gains, not just realized ones) can't be taxed at a progressive rate, as if it was income.
How would the mechanics of this work? Suppose I had 1 share of publicly traded stock A. Others sell and buy stock A at $x at end of day on Jan 1, 2021, and $x+$10 at end of day on Dec 31, 2021.
Am I now potentially forced to sell some of my stock A to pay taxes on unrealized gains? Is this basically property tax, except applied to all securities?
Exactly. A middle class person doesn't cry wolf that he needs to sell a portion of his house to pay the property tax, while the rich do. For example, Bezos owns 10% of Amazon voting shares would pay 0.1% per year in the form of a lien (or a loan) that lets him retain voting rights, but takes the tax when he sells or transfers his wealth (e.g. to heirs). If capital taxes existed, the rich wouldn't be able to lazily sit in the sp500 index, they would have to chase good investments (they'd have to, God forbid, take risks and do some work).
The rich own assets like real estate/stocks that will hold their value through inflation. People with savings or no assets/savings are hurt most by inflation.
Yep. Basically whoever gets the free money first get to buy / invest before anyone else even realizes the money supply has been diluted.
The way money is printed and given directly to the rich via the financial industry needs to stop. If the money supply needs to be increased every year it should be done by giving it directly to the masses via UBI or similar.
I'm starting to have the opinion we've been getting scammed with hidden inflation since the 80s.
The rich have assets and large debts secured on them, the poor have wages and small debts. Both assets and large debts are an advantage if inflation arrives.
If everyone's bank account balance goes up by 50% uniformly, lets say one person has 100,000 and another has 10,000. After the increase they now have 150,000 and 15,000 respectively. But the low end item costs also go up due to inflation, so food now costs 50% more lets say. The thinking is that this eats into the lower bracket much more than the higher one. So inflation would increase the divide between rich and poor. I think this makes sense, interested if I am wrong here please let me know your thoughts!
I don't think so. Both still have the same percentage of the money, so it should be even.
If a rich person thinks inflation is coming they can buy fixed assets, invest in resource companies, invest in companies that provide critical services (food supply, communications, etc.).
The problem for the poor is that it's hard to invest in things that benefit from inflation, especially if you don't have any money to invest. It's unlikely the paycheck-to-paycheck wages of poor people are going to go up enough to cover any kind of increase in (ex:) housing prices.
Or you have people like my parents whose (defined benefit) pensions aren't going to do well against inflation. They'll get to watch the value of their retirement income drop like a rock at the same time they've seen millionaires with "small" businesses pocket hundreds of thousands of "bailout" dollars they didn't really need.
Those millionaires will be the ones creating inflation by buying up fixed assets with their free government money. My parents will at least benefit from increased value in their house. Me and the generations after me that can't afford houses and don't have many fixed assets will get screwed really badly.
I can see it coming and there's not much I can do for myself :-(
Inflation on necessities like food/transportation will cause social issues and destabilize society. If you mass printing money, then such money needs to find a place to park themselves, most likely target would be the assets.
Wages are not as liquid as assets. You generally get a raise once every 6 months to a year, and it's time consuming to find a new job to get competing offers to get leverage for market-level wages. In contrast assets change prices every day, and as COVID as shown, adapt very quickly to the printing of money.
At the low end wages are also capped by the minimum wage, which doesn't go up with the important inflation metrics (healthcare, housing, assets, education) but instead with regulation or CPI.
Companies can raise prices and avoid the effects of inflation so equities will continue to rise, while cash deflates in value. Real estate values keep pace with inflation, generally speaking. Any borrowed money can be paid back cheaper (debt devalues with inflation) which helps anyone who is leveraged on their investments crank up the ROI even more. I’m sure I could come up with more but those are the main three that came to mind.
FWIW, 98% of my net worth is in stocks, the other 2% is cash
yes, most rich people can get good loans with low rate during this time, as inflation goes up, the value of asset that they bought with loan goes up and debt value goes down, so the get richer twice again
that is why for example bill gates became biggest land owner during covid, I guess he bought lots of land with cheap loans
Bill Gates has a team of people in a ‘family office’ managing his money the reality he probably had a windfall last year and needed to do something with it. Usually when you have a windfall you buy treasuries because they can be liquidated easily when new opportunities are available. Buying treasuries is a bad idea at the moment, they have negative yields when you factor in inflation. He probably had no good stock opportunities and there may have been more opportunities in farm land. Would he have used a loan… maybe I don’t know the details but also maybe not his investment funds don’t need the loans. My point is he has a good team managing his wealth and it will most certainly grow as a result and this team will also find good opportunities for him to grow his wealth. This should not be surprising.
Depending what it is invested in. Money printing lifts asset prices up: stocks, houses. That's typically the sort of assets owned by the upper middle class, you don't keep a $1m balance in a savings account, particularly when rates are at zero or negative.
It's not going to help directly. But if the inflation was a) produced by printing money that b) disproportionately ended up in the pockets of a subset of the population, one way or another, then it amounts to a wealth transfer.
> Also rich people can sometimes take loans with interest lower than inflation, this is basically free money.
In Canada you can borrow well below 2% and housing prices in hot markets have been going up well over 10% YoY with a lot of predictions of 20%+ this year.
Free money indeed. You just need $1 million+ to play the game.
Inflation is regressive. The rich don’t literally hoard cash, and their investments are likely to appreciate, or at least not suffer as badly as real inflation.
Have you seen how much the stock market went up in the last year?
It helps people who are in debt (there's the student loan reduction Biden's been asking for). In theory, it's a wash for assets like stocks and real estate. It hurts bondholders, so especially retirees.
Does it really though? It definitely helps people who used low, fixed rate debt to buy assets that will appreciate with inflation, but does it really help the average person with $100k in student loans that isn't going to see a wage increase that comes anywhere close to the increased cost of living?
It depends on where the new money is injected into the economy to start with. The _flow_ of newly created money tends to benefit the rich, as the initial injection of new cash is pumped into their assets / companies. That money becomes old and trickles through the economy devaluing the currency after the rich have already spent/used/invested/gained from it.
The combined indirect result of the housing crisis and the COVID crisis is that the upper class doesn't fear recessions anymore. They now have the bail out machine very well tested and oiled. At any sign of recessions they will force governments to bail out their bad investments and let the population die of starvation if necessary.
I remember it was mentioned in the gervais principle book: when an organization approaches its final stage, the top brass collects anything of value and jumps the ship, leaving the clueless staff. These recessions are a lot like this value extraction phase.
Taking egregious sums of state aid is crony capitalism and is market manipulation. And wherever you find egregious market manipulation, you'll almost always find government doing the steering.
Captain Government may be at the helm, but they’re serving is at the pleasure of those contributing to their next campaign fund. If the Yacht owners want to go to Tahiti where do you think a Yacht captain is most likely to steer the ship?
It’s a cause and a symptom of “crony capitalism” — a feedback loop that perpetuates and exacerbates existing inequality.
That under capitalism those who accumulate massive amounts of wealth can use that wealth to “buy” the state institutions to do their bidding, is precisely (one of the) problems in capitalism.
Dysfunctional states aren't exactly thriving oases of enterprise and mutual aid, are they now? In practice they're dominated by warlords and rich people buy security and contract enforcement is a function of economic leverage, so poor people have very little economic mobility or opportunity.
disaster capitalism is a term coined by Amy Goodman to describe the efforts of the most politically influential to steer the economy towards regular crises, and then take advantage of those crises via crony capitalism
Can you point to an example of "capitalism" that is not also an example of "crony capitalism"?
I feel that we should seek something more like "free markets" and "free enterprise". C[rony, if you insist, c]apitalists hate both of those things, and undermine them at every opportunity.
Fajne imię! I agree, most of the 99% don't seem to be too disturbed by the hyperinflation. Actually, we've spent a record on durable goods last year with the handouts! Keep the machine printing! Brrrrr....
I saw people buying firearms with stimulus checks more than anything else. I saw a couple buy 2 identical $1300 handguns at once. They were joking about the stim checks. And annoyed they'd have to wait a week to pick up their purchases.
Perhaps they were hedging on what direction everything was going to go. I stocked up on everything but firearms thinking water and food would probably get me first.
The problem is the deeply seeded psychology of fear driven by the media. Americans are the most fearful people I think I've come across. The concept of resiliency of all kinds seems to be largely foreign here, except out in the 'sticks'.
The poor tend to be net borrowers. The rich tend to be net lenders. Inflation makes the poor less in debt by lowering the real value of payback. Inflation helps borrowers.
Not sure this is true. A wealthy person might have a mortgage on a $1M home while the poor are more likely to be renting.
To whit, US mortgage debt in 2020 was at $10T while the debt that the poor are more likely to have (Credit Card / Personal Loan / Auto Loan) is a combined $2.5T[1].
The wealthy are often highly leveraged in a variety of ways. Just look at some of the world's richest people – they generally fund themselves through loans taken out against their equity holdings (stocks in the case of Bezos / Musk / etc).
So the ultra-wealthy like Musk are actually winning twice: once when everyone rushes to buy stocks like Tesla because they're worried about inflation and such, increasing the value of his holdings substantially. Then again when the inflation actually hits, because he is funding himself with loans, which are now easier to repay.
The vast majority of investment capital is from rich person lending. Do you think the poor are lending all the money in the world? Or is it lent from those with the capability?
Wages for the poor won't go up because they don't have any leverage in terms of negotiating. With no fixed assets and no negotiating power to demand higher wages, the value of the real payback won't change for them, but the cost of living will go up.
It'll help a few people who got lucky and bought houses within the last couple of years, but the truly poor (no assets) are about to get much poorer in terms of purchasing power.
It wasn't covid. It was the policies imposed in the name of covid. Including the absolutely unnecessary lockdowns and other restrictions that very rapidly exempted the elites and those making the decisions.
The title is almost underwhelming in severity (which is a refreshing break from sensationalistic headlines),
“[€28m in bonuses] even after taking three billion euros in loans last year, and 100 million euros in State aid including 65 million from the Netherlands. The company also let go of thousands of people during the coronavirus pandemic.”
Booking.com isn't alone engaging in these practices. Many corporations seem to defend these payouts, by suggesting that these executives have gracefully managed the organisation during the pandemic distress. Such statements aren't very reassuring, because they feel more like sound bites of opinion, rather than arguments that can be debated and examined.
How many jobs could they have saved with 28 million euros?
I think people make the mistake of thinking that the people who get bonuses are easily replaceable.
The executive market of people who have experience at these kinds of levels is extremely thin. Your company needs to be attractive to this high echelon of talent.
That means keeping a good record of treatment to executives.
I think the thought of: “just pay them less or they can leave” is pretty common. But it’s just not easy to recruit at this level and the responsibility is huge.
There is a slight PR angle to avoid looking greedy, but its moreso just the nature of the talent market at this level.
IMHO the aid should have been loans only and executive bonuses should have gone to the government as collateral. If the company pays back the loan, the executives get their bonus.
I have no horse in this race but intrigued by one sided comments here.
Wouldn't people just be laid off of if govt did not give 65 mil to booking as benifits.(I assume this benifit is similar to short term work which is present in Germany). At the same time 25m is stock grants. So I feel both cannot be compared.
If the government says you get no aid, Wouldn't company just lay them off? From what little I understand, In EU, govt pays a part of salary for employees to prevent them from getting laid off
Covid has got me thinking about the government’s role in social welfare.
Providing social welfare through money allows for people to misallocate the money or skim off the top of the money. For the vast majority of people their covid stimulation money did not go into their pockets, it went to their landlord or their mortgage holder resulting in a massive wealth transfer from public funds to banks and those who own land.
I think the government should directly supply the basic needs of its citizens instead of using money as an intermediary for supplying social welfare. Money is only a means to an end for obtaining the basic necessities to live: you cannot eat a dollar bill for nutrition or sleep under a dollar bill for shelter. Government provided housing and food should be available to any citizen — no questions asked. At that point you can get rid of all welfare programs since the government is directly supplying the basic necessities for those in need.
People would still be incentivized to work in order to obtain luxuries which are not supplied by the government: a private house, travelling, a car, etc.
Stories like this further affirm that handing out money is not a good way for the government to provide welfare.
This… has been tried, many times, and been found to not work too well. First off, unless you socialize the whole economy (well, that has been tried as well), government-provided food is still bought from somebody, by the government, and typically this is seen as a superfluous and inefficient extra step.
Second, people very much like going to a supermarket and being able to pick their groceries and other necessities, and having the government distribute some sort of standardized alimentary packages to those in need does not work too well. You could have whole government-run supermarkets with their government-run logistics chains, but again, historically that hasn't worked too well (and I'm saying this as a European liberal leftist!) That said, there are some specific goods and services where a single-payer system works fairly well, such as medicine.
Third, government-supplied housing has, of course been tried as well [1], and housing projects like that often have a tendency to turn into slums sooner or later. It can be done right (first rule: you cannot isolate poor people into their own neighborhoods! [2]) but it's highly nontrivial because of, among other things, NIMBYism.
I lived in Vienna and there the city ownes a good punch of social housing since the 50s. Only thing: these houses are built at a good standard and still cheaper to live in than other comparable offers. They also cleverly mixed them in theoughout the whole city. This means the money they invested here not only reduces rents overall, it also provides housing to people in need while at the same time counterbalancing the otherwise naturally evolving contrast between rich/poor districts. ll of this benefits the social climate of the city overall because people are not segregated into their own districts as much.
Vinnea was repeatedly voted to be the city most worth living in in world.
So:
- built social houses to a higher standard not a lower one
- Don't build blocks of social houses in one area but mix them in throughout the city (e.g. mandate this by law whenever new buildings are built)
- the rent should be lower than average and the same independent of the neighbourhood
- the waiting lists for this flats should priorize people in need who are poor, minorities, ill, students, single mothers, but occasionaly mix in people from wealthier background to avoid social stigma. In vienna even wealthy people see it as an achievement to get into one of these flats.
> Government-provided food is still bought from somebody, by the government, and typically this is seen as a superfluous and inefficient extra step.
Why is this seen as superfluous? We all have to eat; so why not bulk buy food for the population, this could even replace subsidies for farmers; just buy from your own farmers in preference to importing. After all, one of the reasons for providing subsidies to farmers is to ensure that you can grow food for your population in a time of need; perhaps we should do that all of the time.
During the second world war, many were bombed out of their homes and couldn't prepare food. The British government set up British Restaurants [1] to provide nutritious meals; we could do that now, without all of the overhead of fighting a world war. This would also help to feed those children who are going hungry, as many now are [2].
Has it been tried without means testing in a capitalist system though? Where only the most basic necessities are provided to anykne who wants them, and you can buy whatever else you want beyond that?
Who is going to classify all zillions of goods offered by a modern market economy into “basic” vs “non-basic” necessities? Is triple-ply toilet paper basic? What about bananas? Beef? Coffee? A cellphone? A smartphone? After all, modern life is increasingly difficult without a Web terminal of some sort. Some luxuries become necessities over the years. It’s just utterly impossible to draw a line.
Hmm. In Finland all foodstuffs (apart from alcohol) have the same reduced VAT rate, which is somewhat easy to arrange but of course doesn’t exactly match the essential/luxury division very well. Everything from noodles to caviar has the same reduced VAT rate.
Anyway, whether something costs 1.06x or 1.23x is not a vast difference, so VAT brackets can be a useful tool, crude as they are. It’s quite a different story when it’s about something being literally free or not. You also have the problem of deciding how to ration all of those free goods, given that market forces aren’t there to control demand.
I was thinking stronger measures, e.g. you get free housing and basic utilities (with caps) if you want, and UBI for food and other basic necessities. Beyond that is up to you.
How much food and what quality? Do I get to ask for tomahawk steaks every meal and an extra one to bring home to my dog? Is everyone entitled to an avocado or just those that live close to an avocado farm? There is no easy answer to this and you bet a government mandated system would be heavily lobbied to include/exclude certain things. For housing, do you get to decide where you live? Or does the government set up a massive new settlement of block housing in the cheapest part of the country? Do I get to ask for an apartment close to my family or do they just add me to the next unit available?
We can argue about how many funds should be directed to certain programs, but SNAP and no taxes on food essentially is what you are suggesting while allowing for individual choice. Same for housing. The US basically gives your first house away for free which is part of the reason housing is so expensive.
This type of discourse seem to be more focused on affirming how this can't possibly work than on genuine interest in discussing the issue.
Imagine I propose that everyone should get access to free universal healthcare or education. You can make all these kinds of questions to defend how these things can't possible work and yet they do. Are these "perfect" in all instances? Of course not, but they are a net positive and much better than nothing.
The same can be implemented for the basic necessities. The best way to figure out what the really important questions are, is to implement a system and iterate on it.
Food stamps are degrading and paternalistic, though, by design. Their whole point is "we won't give you real money because we don't trust you to not misuse it."
Eh, there is a reason for this mistrust along with the limits on what you can buy with them in US. My wife used to work in Jewel and she has no end of stories about people and snap cards. Maybe they are paternalistic, because, well, you can't take care of yourself and your family. Little help is needed.
> Their whole point is "we won't give you real money because we don't trust you to not misuse it."
Their whole point is to ensure the money gets used on what it was intended for.
People don't want the "money for the poor" food stamps being used to give the wealthiest citizens a small discount on their Ferrari - which means you then have to start means-testing. In OP's original point, you might be able to give everyone food stamps to basic rice for example without means-testing (because the rich aren't going to worry about going out of their way to pick up a packet of cheap rice).
I mean we could just give money to people instead of bailing out corporations, that would be good enough by me. Or place strict conditions on corporate recipients of welfare. I'm just tired of news like this.
How much money to spend on a decent diet is much easier to ask than how many apples and, if the person wants to substitute apples, how many pears is that?
> How much food and what quality? Do I get to ask for tomahawk steaks every meal and an extra one to bring home to my dog?
You would get rice, lentils, beans, vegetables, grains, etc. The raw food ingredients to live a healthy lifestyle.
Nobody on this type of welfare would be entitled to “luxury food”.
> For housing, do you get to decide where you live?
This would be the toughest part of implementing this system, I think. Managing the demand for welfare housing on the regional level. Ideally you would just move to one of the several social housing complexes in your city, but managing capacity would be tough since it can take years to build new accommodations.
> For the vast majority of people their covid stimulation money did not go into their pockets, it went to their landlord or their mortgage holder
At a strong risk of over-simplifying, this is a problem solved by regulation. The problem is that you're suggesting we regulate the average citizen by replacing their money with rationed supplies.
You've got it all wrong, the average citizen is entitled to freedom within the bounds of the law. The institutions and the corporate abstractions are entitled to regulation and more restricted bounds of law, they are not entitled to more freedom than a human being.
Our current situation with corporate power is evidence of a total failure of Western capitalist ideals. We've fucked up worse than communism because communism (at least with the USSR) ended, but we fund and support the same atrocities ourselves nonetheless, with our supposedly superior ideals.
> The problem is that you're suggesting we regulate the average citizen by replacing their money with rationed supplies.
I’m not sure how my suggestion inhibits liberty on the individual. My suggestion is to simply change the way welfare is executed: instead of giving people welfare money you give them the actual goods they need to live a civilized life.
The economic system would still be capitalistic, just the welfare is handled differently.
> For the vast majority of people their covid stimulation money did not go into their pockets, it went to their landlord or their mortgage holder
And then the money that _would_ have gone to pay those bills went into their pocket; and then to presumably pay some other bills (food, etc). Paying for a place to live is an expected expense that most people have. Helping people pay that expense helps those people. To pretend the only ones helped by it are the landlords/banks is ridiculous.
> Government provided housing and food should be available to any citizen — no questions asked. At that point you can get rid of all welfare programs since the government is directly supplying the basic necessities for those in need.
No, you can't. As an example, what about someone that is paying off a house and is in a downturn. Your solution is to have them stop paying for the house (lose it to the bank) and move into government housing. So, in exchange for a couple months of help with their bills, they get to discard their ownership in their house.
> Your solution is to have them stop paying for the house (lose it to the bank) and move into government housing. So, in exchange for a couple months of help with their bills, they get to discard their ownership in their house.
Yes, precisely. Part of the problem with skyrocketing housing prices is that the market is no longer rational. Bailing out home owners further entrenches the class divide between land owners and non land owners and limits upward mobility of those in lower classes.
To add another wrinkle to your "proposal", the cost of moving is also very real. If a money helps you remain in your current home for a couple of months that allows you re-establish your income stream without having to both spend money on moving and disrupt your life entirely (imagine having kids switch schools along the way too).
If you are going to help people in need, the best way to do it is with money. Sure, some will misuse it, but we should never optimise for the worst case scenario, but for the most common one.
As others have mentioned, you are quickly going to end up with government paying $5 per banana. And you'd have to add more administration to take care of allergies, religious requirements and similar.
With money, you decentralise all that and let people save on their own, and spend on the most needed items (maybe they just need fuel to drop off by their parents having a farm?).
> I think the government should directly supply the basic needs of its citizens
Suppose you give people $100 worth of food stamps rather than $100 cash. Let's assume people make good use of those food stamps, and let's also assume they have at least $100 to their name to start with. They still end up $100 better off. The landlords can still ramp up the rent by $100, no?
"For the vast majority of people their covid stimulation money did not go into their pockets, it went to their landlord or their mortgage holder " you have evidence for that, other than people catching up on late rent/mortgage payments?
Governments miss-allocate things all the time, and its a lack of trust of citizens to do what is in their own best interest. It is a position that really limits the utility of government as a source of stimulus by a desire for control, a desire that a free people do not want to give in to.
A lot of PPP loans in my industry were passed through to the owners as dividends/profit taking, as they didn’t actually need the loans since we were all busy. Small/medium business owners in slightly affected industries got RICH last year.
Small/medium business owners in slightly affected industries got RICH last year.
Not to be that guy, but what if that was the real idea behind giving the loans? I have to confess that living in Wisconsin has left me jaded with respect to our leadership. The whole Foxconn experience still informs the way i look at new proposals from our leadership. It's become very difficult for me to believe that some of these politicians aren't fully aware of what they are doing and who they will be benefiting prior to taking the actions they champion.
They hold the poor hostage to their greed and the greed of their cronies. "Let me and my cronies take XX dollars or we won't give out a dime to those families that just got laid off." It's sickening.
I believe it was a side-effect rather than a cause. The PPP loan program did end up helping a lot of businesses, and to be fair, there wasn’t really time to pick and choose who gets what.
that creates its own perverse incentives. instead, we as citizens should do one thing keenly and singularly, and that is to make representatives regulate markets toward fairness and competitiveness, and against consolidation and regulatory capture. markets work best when there are dozens of mostly mid-sized competitors, not monopolized. capitalism is predicated on such competitive and fair markets, otherwise the capital allocation function doesn’t work (as we’ve seen for the past 50+ years). do not be distracted even a single bit on culture war topics (including covid).
The key word there is "perpetually". In the US welfare payments and other social support programs are usually time limited for recipients who aren't disabled.
I have no problem with government supports for people who actually work but still can't afford basic necessities. Just don't ask me to pay for non-disabled people to sit around all day.
You are always doing that through all sorts of both minor ("she's my uncle's friend") and major corruption ("they donated to our campaign, let's give them a contract where they simply take a cut on the deal with the provider"): a lot of people are "employed" but only "sit around all day".
If you want to fix that, you should be going into politics or law and law enforcement.
it depended. large corporation like Apple don't need the money but mom and pop shop that is forced to close during the peak should receive money. the sad thing is corporation that clearly can make it thur covid is receiving the largest amount like https://www.npr.org/sections/coronavirus-live-updates/2020/0...
>mom and pop shop that is forced to close during the peak should receive money.
No, they shouldn't. Don't give any money to any corporations, give all the money exclusively to people.
If Mom and Pop run a business, they can get cash as humans to float their business, just like any human could. They could temporarily lay off all their staff (which is OK, because their staff are humans, and are also getting cash)
There was never any valid reason to give a single cent to any company.
I want to convince you this isn’t a good idea. If all the businesses shut down in my town or city, what happens after? Where do I find work? Especially if I don’t have sufficient capital to start a new business (never mind the skills or training), what will I do then? How does society go back to normal?
Do we stop all output and just have the government mail checks to every individual forever? That’s not going to work. Who is going to produce the things we need to function as a society?
So you pay people's salaries while they're furloughed. Together with moratoria (don't know if this is the word) on loans this means companies get “paused” while lockdowns are ongoing and don't shut down.
Temporarily in the context of covid has meant more than 12 months for a variety of local shops and businesses in my area. They can't come swinging back signing leases and buying inventory after going bankrupt.
I saw 2 kinds of "small" businesses in Canada. One kind was hit so hard the bailout money they got wasn't even close to enough to keep their business running. The other kind wasn't impacted or even benefited from increased revenue.
I know of at least one company in the latter category where the owner pocketed around $500k and I don't think it had much impact on how they ran their business. All they had to do was not layoff people they wouldn't have anyway and the government picked up the tab on their labor costs for a year. Free money!
Or, instead of funding either corporation, just give mom and pop money. Instead of business bailouts, we should've done regular, recurring stimulus checks that would help business owners cover bills while they're businesses were closed, and help employees cover bills while they're unable to work.
Arguably, it would've been a much better system if the Netherlands just... paid people directly regardless of who they worked for at the time, so employers didn't need to worry about paying employees while they couldn't do normal business.
I think it was similar in Canada. Everyone here that got laid off was eligible for government money though, so I think it would have been better to forgo the wage subsidies for businesses. A lot of them pocketed that money.
Instead they should have let businesses lay off staff without feeling guilty because there was a safety net for those people and once a business laid off X% of their staff they could have been eligible for extra government help.
That way the government wouldn't have ended up paying the wages of people that were needed to meet demand (and make profit for) the businesses that weren't really impacted.
For example, local restaurants got crushed and could easily justify laying off 50%+ of their staff. Give them more money IMO. However, the delivery business down the street with +50% demand shouldn't be getting a nickel.
That's exactly what it is. Reasoning being two-fold, first is that it's easy to implement as the government knows the exact payroll of every company anyways (they file taxes quarterly), second is to keep people on the payroll in case restrictions can be loosened. They're still working, so can go back to productivity immediately.
Yeah the systems are far from perfect. They're inefficient, in some cases unfair, and with regards to abuse perhaps rely a little too much on good faith.
Nevertheless the systems do exist. Financial aid was and even still is there for you or your business if you need it.
I have to agree, if I want to start a competing reservation platform I would take this "opportunity" to launch it, but because big corps (almost a monopoly for booking.com) are helped in difficult times this makes it almost impossible to have competition or new small players that would have been advantaged by not having the weight of the big players.
Tell that to plentyoffish who took on the dating market and consistently ranked higher than big companies like match.
If bookings.com suddenly disappeared you would have hundreds of players ready to jump in with their own angle. What would you offer? Is bookings.com really holding you back?
if you gather a group of people with financial independence, and try to bootstrap and never sell a new reservation platform, you can make it happen in about a decade. The trick is to never bloat budgets and staff, and to stay away from KPI - your goal is to take over regions by dumping prices and providing near-zero commissions on bookings from your platform for as many hotels as you can handle. You can handle this strategy among a team of financially independent members who are interested in the field rather than quick buck. It's hardly possible if you're seeking VC money.
That's interesting because I feel like a lot of tech is in the kind of spot. If enthusiastic people come in and start building really good core products while charging fair value there are going to be a lot of bloated, wasteful tech companies that could end up in a world of hurt. At least that's my opinion.
Imho, the main error is that they gave away the money unconditionally. The fact that the particular government didn't foresee this outcome is quite astonishing.
The reasonable short notice caused the government to decide the lesser of evils: allow some abuse to help most, (un)fortunately this exposes the excesses. Booking.com "decided" to not take part in the second round three months later mainly due to the legal work being well enough established and in place to force the company to forgo any firing of people and any bonuses to executives.
True, but there were way to to help very quickly while mitigating some risks, and some of this is probably philosophical, really.
If I give your company a 10mm check, or 10mm in payroll tax relief, it's the same to your bottom line. The latter goes a long way to making sure it's applied to keeping people employed if that's your actual goal (which may or may not be your stated goal).
Computationally, company is an order higher than humans in that it contains "structures" designed to generate revenue, and these "structures" consists of physical things (ranging from items in a physical store to an office space to entire factory, etc) as well as none-physical things (e.g. productivity optimisation across a 'team' of people who had worked together for a long peroid of time, trust in the supply chain, etc). When a company dissolves, many of these "structures" will be gone. In general there are many costs to reconstruct these "structures" after they are gone.
It will be amazing if
- it's cheaper to construct these structures designed to generate revenue (and we already see this in tech-driven stuff, which was how the notion of start-up emerged from the 70s)
- people are motiviated and are willing to overcome the hardship (as well as, in many cases, unconfortable feelings) to learn to construct these structures or to learn things that will help (e.g. programming, etc)
Unfortunately, most of these structures are currently still expensive (thanks to this, start-ups and techs are in general over-hyped [1]). And most people prefer consuming stuff mindlessly than learning things. Mindfulness is the key.
Therefore I'm extremely grateful that we as a civilisation are finlly entering the first phrase of the psychedelic renaissance. Psychedelic would always have a net positive impact to society at large as they force people to come to terms with reality as well as their very own phsyical existence, and be more mindful about the qualia of this world.
[1]: not necessarily a bad thing as they can eventually flatten all these cost structures
And intriguingly, one can also say that the phenomena of start-up is perhaps a branching-out of 60s' hippie movement (partially inspired by books such as The Whole Earth Catalog which is not only spiritual-ish but leans more towards pragmatism) where instead of going all anti-capitalism and trying to be self-sustainable from the ground-up and detach itself from the economy (which eventually always ran into problems cuz then it became a micro-economy itself, which was the very thing it tried to transcend), start-ups aims to be self-sustainable in the existing econcomy while detaching itself from the cooperate cultures.
Not sure about "let them break" for a government-imposed lockdown, but I agree that giving support directly to employees to stay home from work would have been a better strategy since you cut out the middleman. (Use whatever method works. Via the unemployment infrastructure for example)
There are all sorts of random shortages right now--truckers, lumber, cars, rental cars, computer chips. They're mostly annoying, but it would be a lot worse if companies didn't get help.
Government has been sold on the "Hobbes" vision of society and believes an assertion of authority is necessary in order to prevent civil chaos. They will never give money directly to people until this changes. https://issuepedia.org/Hobbes_vs._Rousseau
Best yet is to fund measures to minimize disruptions and to help manage the economic meltdown caused by pandemics. And plan accordingly. The world was utterly unprepared to deal with a pandemic. Once we were somewhat better equiped with knowledge (ie. aerosols in closed spaces), procedures (widespread testing, ventilation, etc) and equipment (masks, ICU beds) the economy could function much closer to (a new) normal. But even today, if it weren't for vaccines, we would not be remotely close to where we are now, at least in some countries. A lot of the measures implemented were useless, including tech (ie phones), which failed to be of real service tracking contacts and infections.
Once enacted, countries or regions that don't abide to my wishful set of international rules on pandemic measures will be isolated or excluded by the community. Money otherwise would flow to implement measures everywhere and keep the world economy going at a good pace.
Here's a review on what I consider a great investment for these financial aids, making air filtering/ventilation and CO2 control ubiquitous:
Also the economy would had suffered a lot less if there was a predictable schedule on how restrictions and, even stricter, lockdowns were applied according to some economists.
It's actually quite shocking how, when the primary idea is "dump money into the economy," giving the money to people instead of banks or firms is so controversial. It's more socialist and more capitalist, if you believe in that sort of thing.
I'm not saying you're wrong when I say consider the following: if every individual had a bunch of free money and decided to not work, then the next day they drive to the store and there is no one working... what do they do? Didn't you just cause a ton of inflation?
At the end of the day, money doesn't solve problems. Work being done solves problems.
How that should affect policy... I have no idea but I can see both sides of the problem.
The problem isn't really people quitting actually because like you said, that could be good. It's more like the business can't pay to stay open because there aren't enough customers to cover the variable costs. So now the business is closed and you have no where to spend your money... This realistically only affects small businesses like your local grocery store or whatever. Once the pandemic lifts, all that cheap property gets bought up by the Walmarts of the world and the concentration of power to the top 1% continues.
It's weird how the 'infallible invisible hand of the market' folks don't believe in it in practice. All the 'isms' seem like convenient excuses to justify selfish behavior in whatever way suits the argument and not these well thought out concrete theorems like we were lead to believe.
The context of this discussions is the government giving free money to people.... I don't understand how you equate that to people not believing in market forces.
I don't believe giving money to poor people will make them lazier, nor do I believe we should give free money to rich people.
Ultimately, they want to give money to people that need it and will put it to good use (for whose definition of good, I don't know... also, we HOPE that is the case but obviously people are biased, politicians included). Sometimes it's individuals who need money, sometimes it's businesses (which is why they did both).
I will tell you that I personally did not need any of the individual stimulus money, but I got the full amount because I don't make a ton; however, there are others who need the money because they have expenses much higher than mine, e.g. they have debt of some kind.
Not trying to muddy the waters. I am trying to say it's not always clear who needs money and who doesn't.
Oh I totally agree in this particular instance nothing good came from this "bailout". I'm merely trying to say I understand why small businesses need bailouts in addition to their employees.
Isn't this mainly a game theory problem? If you don't force a minimum wage, then competitors will undercut each other.
As much as we like to believe WE would go to the "more ethical place", unless the average person did then ultimately the undercutter will win. Now real life is not that black and white obviously. Costco pays a pretty decent wage allegedly but they make up for it in creative ways (like having the warehouse also be the storefront).
In the article, it's mentioned that they took €100m in state aid — even more egregious than the mere €65m they took from the Netherlands alone. And that, while Booking.com gets discounted tax rates and strong-arms the Dutch government to pay even less through an "innovation box" [0]. Not good at all.
> In 2018 alone, the company received a tax discount of $435 million in the Netherlands, or about €385 million. Thanks to this bait from the state, not only will Booking’s headquarters remain in the Netherlands, but all income generated worldwide by the company will immediately flow to the Netherlands before being taxed elsewhere.
Here in the US we've spent several trillion dollars on Covid relief so far, and there's more to come. When you're dealing with a torrent of printed cash of this magnitude, there's of course going to be a lot of it that ends up in the wrong hands for the wrong reasons.
The most surprising thing here is how egregious it is. Like everyone in these positions or studies this area knows there is no accountability on these, but they don't usually do it.
Outside of these circles I've definitely heard people assume there were greater stipulations on state funding or even bond issuances in the fixed-income market, and want to argue that with me mostly given the lack of evidence of executives taking advantage of it for personal gain.
"As a result, the total remuneration for the three-member U.S. board of parent company Booking Holdings last year converted to more than 28 million euros. Some 5.8 million euros in shares and cash went to CEO Glenn Fogel, and 2.8 million euros went to Peter Millones, the vice president. Nearly 20 million euros, mostly in shares, went to CFO David Goulden, according to company documents reviewed by NRC. The company was concerned they could otherwise lose the three top executives."
Also, LMAO at "concerned they could otherwise lose the three top executives." They always use that excuse to plunder.
Meanwhile "Fixed salaries of the management in Amsterdam headquarters were however cut by 20 percent"
The difference between European and American corruption is that the former has an ally in a population that purposefully ignores evidence of the existence of any corruption because it would hurt the sense of national pride.
Is it? European/Dutch & US rhetoric can be quite different... but the actual policies are not, at least not in a sense relevant to this issue. In fact, the US cut people a bigger piece of the covid relief money than did most european countries.
The US has even sent like $3k straight into the accounts of every citizen over the course of the pandemic! As far as I'm aware no other major country has done helicopter money like thia
Here that would take care of your health insurance for 2+ years (basically covering your health care for that time regardless of any misfortune that comes your way), or more than half a year of (University) tuition. In US? Probably not so much. Taking into account other welfare benefits, minimum wages, etc would also be interesting.
All I'm saying is to me it doesn't make sense to just look at that 3k and compare it to all other major countries without context.
The topic at hand is "we are dumping money into the economy, how to do it." The curious point is that "give it to people" is an exceedingly rare solution. The primary recipients are banks (2009), large firms... occasionally public works and small businesses.
This was the case in europe and the US, but this time, unusually, a portion of the whole did go to people. In the EU, none did. It wasn't even considered.
The way health or education work is another matter, and it is not a decision Dutch parliamentarians of the current generation made.
The US money only went to households making below a certain threshold. Most other countries dumped heavily into their unemployment programs, sometimes funding full salaries for up to a fourth of the country over what is now looking like a 24 month period of time (see France).
??? How do you figure? There’s an infrastructure investment bill in the works which hopefully doesn’t pass if the Democrats get to write it. I certainly haven’t heard of any more COVID relief bills in the works though.
I know at least one French consulting company did the same (Amaris). They basically gave the benefits they made from state aid straight to their shareholders. And at the same time they laid people off.
My guess is: most companies who could do this did. No conspiracy, just plain greed.
It seems that most of that €28M was "mostly" paid out in "shares": iow, minimal cash was transferred. That may make it both better or worse for everyone else at Booking.com (if shares go back in value as travel gets reinstated, it will effectively be more than that), but the aid itself was not used to cover these bonuses. Basically, Booking.com shareholders have redistributed their shares to a couple of employees.
If, otoh, Booking.com goes bust, the value of these bonuses would plummet. If they attempted to cash in, it's likely value would go down too.
Not going into the moral background of this, but the title and comments here were misleading to me.
Buybacks are not mentioned in this article, and you quote a number from 2019, which is, to the best of my knowledge, pre-pandemic.
If you are saying that they foresaw the pandemic and government grants, well...
Now, I wouldn't be surprised that they were doing that even in 2020, considering they were also taking out $3B in loans (in addition to $100M of subsidies) to maintain the share value or reinvesting in themselves when others had lower trust in them, but when all of these numbers are stacked together, this article title is obviously click-baiting ("Top execs receive €25M of stocks while company borrows €3B and gets €100M in grants" is not something too much fuss will be raised about).
The bigger problem IMO is the regular subsidies they receive for "innovating" (somebody here brought up a figure of >$400M of tax subsidies a year).
I do agree that top executive remuneration is commonly out of hand, but I think that applies even to "regular folk": I find it unfair that my programming salary is like 7x the average salary (10x the median) in my "developing world" country. Both of those problems equally need to be fixed. While I may be providing suitably more economic benefit to my employer, I am not "worth" that much more: the incentives and values are messed up somewhere.
You have entirely missed the point. Which subsidies are bigger is irrelevant to what I said. The financial quarter the stockbuybacks happened under is irrelevant to what I said.
When a company has used so much of their recent cash in stock buybacks, it is disingenuous to call stock bonuses ethically different than cash bonuses.
To say the same thing another way. If the company was willing to issue those stocks to pay bonuses, why didn't they issue those stocks and sell them instead of taking bailout money.
What's to suggest bonuses would not have been paid out in stocks even without the bailout money?
To me it reads as if grants reduced the loans they'd be taking, but they've rewarded their top execs with stock (meaning they need to have a lot of trust in company to they just arranged 3B worth of loans for).
To clarify my point: I just do not see a connection between bailout money and bonuses (mostly paid in stock), which the OP emphasizes. Your point stands regardless of subsidies.
Your economic worth is well defined by supply and demand. It is incoherent to say you are not "worth" the salary you are paid; if that were in fact the case, your salary would be lower, or you would eventually not have your job.
Is this fair? I would argue yes. Economic worth is a transparent situation, and it is rather clear that by positioning a career towards high demand work, anyone can improve their station in life. This is much more fair compared to some alternate systems where winners and losers are arbitrary, and opaquely determined by politics.
It's not as simple: someone doing a mundane job in a rural town in USA south is likely still making more than a University professor here. So one has to optimize for the locality and/or have an opportunity to change it.
I think it is unfair, since you have to control for many things not directly in your hands.
Perhaps it feels worse because I've been hacking at computers since before it was clear it's the job of the future/present, so I did no optimization, but rather just doing what I love.
If you would like companies to just keep billions on hand for totally unpredictable events that shut down the global economy, why don't you start by writing to your congressman asking him to create legislation repealing the Accumulated Earnings Tax, which punishes businesses for holding too much money.
Seems obvious that the CFO was the main driver of the raid against the states, also in a position to easily blow up everything, so he takes the majority stake of the pillaging.
For the most part, C level comp of this type is defined ahead of time with the board, and based on formulas/targets that are often tied pretty closely to job function. Given that; it's not a big stretch to see how income like this ("for nothing") might factor into CFO far more than the others.
My view is that a system of government, where material advantages are based on quality of legal representation -- is doomed to become non-representative.
The case in article is just an example of it.
That means, in short, wealthy (corporations or individuals) can afford good legal representation --therefore they will necessarily bias the case law. And case law, will necessary, bias the subsequent judicial decisions.
So a judicial system biased towards judging in favor of more expensive legal representation, is really the main reason why corporations become larger, why they create their own system of rules, that 'floats' on top of the system of rules for the mere mortal.
---
We often have a dialog and an argument about size of government, vs size of corporations, vs individual freedoms and so on.
But really what we first must recognize is that manipulation, disinformation and biases in the judicial systems must be eliminated.
Basically we have to remove information manipulation and judicial selectivity out of the society.
Then argue about other stuff.
A step in the right direction -- would be to assign legal representation to all sides involved in a dispute (or in a criminal case) -- from some sort of a pool (based on say some standardize algorithm).
This way in a dispute between Alphabet and a Joe Shmo would have equal legal representation.
Overtime, this will slowly change case law, and outcomes of legal disputes -- towards fairness.
Some might ask: would you do the same with Financial advisors, Doctors, University professors ?
I would say no, because they do not impact the fairness of judicial system.
Having said that, I do think that Job applications must hide (not include) what University an applicant had attended... but that's discussion for another post...
Stop using marketplaces and book directly, these companies have no risks and take 16% to 30% commissions. If consumers start booking directly, recovery from the pandemic will be much faster.
Some perspective from someone who has worked in hospitality: Some brands have fought back in creative ways.
An essential part of being listed on Booking or Expedia is to agree to never advertise lower prices anywhere else, including your own website. That means you can share a $100/night rate on your own brand's site (with no commission) and you can't tell Booking or Expedia to show rates over $100. Thus, users have no advantage in going to a hotel's own site, which only shows their own brand's hotels. Expedia/Booking on the other hand show you all the hotels in the area and you can be confident in price-shopping (the one exception is loyalty points, but if you're a price-conscious, non brand-loyal customer, that won't matter to you). Worse, competing hotels can get better visibility by sharing even lower rates and promotions on these aggregators, and it becomes a race to the bottom, really hurting hotels long-term just for visibility.
Choice Hotels had an interesting response a couple years ago: they show a "member-only rate" on their website. In the above scenario, technically, their public rate is $100 so Booking would take around $20 leaving $80 for the hotel. But Choice might also show $93 as an option on their website only for members (which is free to join, only takes an email/password). This way, technically their members-only rate isn't being advertised for just anyone so they don't run afoul of their Booking/Expedia agreements while only losing $7 as opposed to $20.
Last I checked, Booking and Expedia didn't like this and they docked Choice Hotel visibility in their searches because even if it didn't run afoul of the agreement, they still have discretion over their search ranking.
These aggregators don't need to disappear. They just need to lose some of their leverage over hotels. If all hotel brands banded together to offer their own "members-only" rate and customers became aware of what's happening, I'm sure it would really help out hotels long term.
What is shocking to me, is why aggregators got bailouts. This is not sustainable for the market. 16% to 30% commission, taxes, costs, almost hotels are subsidizing tourist stays. There is a path outside the marketplaces, we offer plenty of perks for direct guests and it works.
Any “solution” to the problem of excessive power of platforms that is based on the “individually do the harder thing” is bound to miserably fail.
I think this kind of fallacy should have a name by now.
This doesn't work anymore, the platform is also used for discovering places.
I have seen this both as a traveller and working in the industry for a little while. If you are not on Booking.com you might as well close, 95% of our reservations came through Booking.com, the rest were other platforms, direct bookings and people walking in.
As a traveller its extremely convenient. I have a single place to do everything, I don't need to sign up anywhere else, I don't have to call, I don't have to worry about payments, in general everything just works without ever speaking to a human, I don't lose time calling around to check availability, I can see fotos and opinions. Consumers are not going to give that up.
On the hospitality side we never cared much about their fees, it has massive benefits as well (lower fraud rate, lower no show rate, integration with front desk software). The only problem is that they generally tend to give the customer the benefit of the doubt when there are any problems so good luck getting rid of bad reviews.
This is the real lesson. I've learned this the hard way several times and I won't book through any 3rd party service anymore.
If there is a problem, like your flight gets cancelled, the book service will tell you they can't do anything and you have to talk to the airline. The airline will tell you they can't do anything because you booked through a booking service. Eventually, things get resolved but is 10x more stressful than they need to be.
If you're due a refund, like for a cancelled flight, the booking service will try to keep part of it to cover their fee. It took initiating a chargeback to get my money back in one instance.
Don't mess around with these services. I know airlines are not necessarily paragons of customer service either, but it's better to deal with one entity that is actually in charge of providing the service.
Maybe they should fix their websites and refund / cancellation policies. No one would mind booking directly from a hotel website if they offered the same price, convenience and guarantees that booking does.
Booking.com does nothing special, it is the hotels that charge your card, and pay a commission to Booking.com. The only thing is that they enforce some common policies. Hotels give power to the marketplaces and then Stockholm syndrome kicks in.
Easier said than done if you want to pay with anything else than cash. Or if you want at least a somewhat functioning website where you can see if the venue is actually available and do booking.
I know it is hard, but I have done it and I am a Revenue Manager in hospitality and a tours company. You have to be strong, it is a long process where you get repeat customers and friends of customers. A small loyalty program, best protection if your customers deals directly. one on one relationship but it works.
Part of me wonders if that's one way to give bonuses to employees while avoiding a tax penalty. Most companies give employees stock via various mechanisms so you end up throwing money away by avoiding it.
I stopped using them around two years ago when I was finally fed up with the increasing amount of dark patterns and gaslighting they did on their site. The reviews also became more and more inflated, I stayed at places with a 8.9 rating that were really shabby and subpar. The straw that broke the camel's back was when I booked a room at a hotel that had great reviews and lovely photographs, only to come to a place that was in the middle of being remodeled, with torn down walls and entry through a construction site. Also, most hotels will actually allow you to book rooms at lower prices and with less severe cancellation policies when calling them directly.
If we're really going to insist on bailing out private companies (rather than letting them fail and using the money to help those left without work) - then surely these bailouts should come with rules that prevent the money from basically being embezzled by top management?
It was a deal where companies wouldn't discard the workforce in exchange for money.
It didn't come with a ban on bonuses, but it did come with a bunch of middle-aged white men frowning at different middle-aged white men for not pausing the bonus culture.
If you replace "middle-aged white man" with "soulless corporate stooge" nearly anywhere this phrase is used, the replacement term will fit. The term "middle-aged white man" is a caricature of the extremely wealthy and powerful, even though (I believe) it is a misleading and inaccurate portrayal.
I say misleading because there are soulless corporate stooges of exactly this kind in every race, gender perhaps less so. If you want to see a more egregious display of government/corporate corruption, you can find that in places like Southeast Asia, Africa (Angola, for example), some countries in South America, etc.
But more to the point — in this case specifically — it's just not a very helpful or distinctive description. "Middle-aged white men" own many companies and occupy many government positions in Europe, yes. But using that as a unique descriptor is pointless. Many "middle-aged white men" mine coal for a living or work hard mechanical labor jobs and are destitute. I'm sure that many "middle-aged white men" were the employees cheated out of jobs or higher wages by Booking.com.
Say you went to China and observed government corruption. If you said "middle-aged Asian men completed the unsavory deal" in an article on the topic as if it were some shocking revelation, I'm sure most would be confused as to why you thought that descriptor/qualifier was necessary or relevant.
Critical Race Theory or - in other words - anti-white racism is seeping into western culture everywhere. People need to wake up to this.
It offer no solutions only deconstruction.
Lately, every time I read something like this, I think: if you build/maintain a system where such behavior is possible or even incentivized, you will get more of the same behavior.
If you want this to change, at the very minimum, crooks in leadership positions need to be socially outcast, given a harsh prison sentence, their wealth confiscated and their legacies dismantled. Essentially, there need to be consequences. They need to lose what they care most about: their status, freedom and wealth.
From there, give them a clean slate to work on earning our trust again, to rehabilitate, the hard way. You know, like every convicted criminal should have the chance to.
If it didn't come with string attached why are people mad at the companies? Shouldn't they either be mad with their representatives who allowed such things?
The base position taken in some countries of not providing bailouts, or bailouts above a certain limit, to companies who carried out stock buybacks or issued dividends was fantastic in my opinion, because it makes situations like this extremely bad for the company.
Of cause a company would want to give huge bonuses to execs who manage to pull in a huge amount of money from the state, that's great for the company. Why should a company care if executives are being rewarded or are being selfish if it also benefits the company and owners overall?
But with the exception to the aid, that would only be possible if the same execs brutally punished the stock owners, which would obviously put them in bad light for being selfish and not just doing good for the company.
Likely bonus criteria were set up in advance, but governments handing companies money certainly didn't hurt. Nor did having the people who run the company choose to award themselves bonuses. But look... end of the day here, if you give money to businesses don't expect the people running those businesses to do anything that isn't selfish with the money.
If you give a bum on the street $5, he's going to spend that money on himself. If you give a CEO $5M, he's going to spend that money on himself too. I don't see why any sane person would expect anything different. Moral of the store is don't give money to people... not bums on the street, or CEOs. Just don't do it. You'll be let down every time.
It's going to be interesting to see analysis of various "covid response" policies in terms of their intended vs. actual consequence.
I'm guessing that countries that tied corporate money to payroll somehow are going to see better impacts than those that didn't.
There's also a lot of weird incentives and corner cases. Especially in countries where states/provinces/whatever have a lot of autonomy, there is a ton of variation too.
You look at the data here.
Figure out which EU countries can't find enough validly looking projects to get the funds.
Go to that country with some initial funding and start legitimate looking business that will be funded by EU (mostly).
Create legitimate expenses, even though the business will never be profitable and leech the EU funds through your personal accounts at some non-suspicious rate.
Involving more players makes everything look more legitimate and when things fail, it's just how capitalism works. You can spend decades leeching on the money.
On several occasions I met some fairly competent looking aliens and eventually realized this was the pattern that they wanted to exploit.
These things are also done on a personal level (for example, a psychologist wants to open a practice that will work with groups of children and the project is well-written, costs are well defined and EU gives most of the money and the person just does what they described at a lower cost - spending the money on services that will indirectly make the individual richer).
Another example is non-profits in EU. Small and large, they just suck out so much money, do the things they say will do, but the costs trickle down to the executives through various channels (for example, you can hire individuals to educate your employees but they charge you for fictional stuff and you collect the spent funds through some other way).
It's not like we're proud of booking. Dark patterns in their product, horrible tech stack. As a software engineer there you'll get paid 30% over market value to work on Perl in a dysfunctional org.
This bonus round is just another stain on an already bad reputation. Their CMO tried to start some nice PR recently, must be pretty mad now :)
There needs to be done something about situations where companies pay minimum wage and at the same time register millions or billions in profits (and then making artificial loss while moving money offshore).
It's controversial, but I think minimum wage should be directly tied to a given company revenue.
Same thing is happening here in the US. For example, Trump's law firm Kasowitz Benson Torres took a $10m forgivable government loan for COVID relief [1] despite earning a profit of over $2m per partner in the preceding years [2].
These "state aids" are coming from the mandatory unemployment insurance scheme that both employees and employers (in this case, Booking) are forced to pay in.
It is silly to now blame companies and employees now making use of the insurance that they paid in for years. Imagine crashing your car and the insurance is refusing to pay you, arguing "but you just bought a second car! you don't really need the insurance money!". You can claim it is morally wrong, ultimately the government set the conditions for these programs.
Also one thing to keep in mind: we don't know the exact conditions of these bonuses, they might be simply legally required to pay out the bonuses.
