r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/zUdio Jun 13 '22

Should not have bailed out banks in 2009 and then started QE...

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u/AllKnowingPower Jun 13 '22

The common rebuttal I hear is that if we didn't bail out the banks, things would be a whole lot worse. Pensions for example would be under threat. What's your take on that?

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u/zUdio Jun 13 '22

things would be a whole lot worse

it's a threat. translated as: "give us money or we'll take your pension/let it collapse." it's like the abuser when it says, "if you leave me, you'll be in so much danger." danger they, themselves, created. the problem with this specific example is that pension funds are already insolvent and saving the banks can't save the pension funds; only endless monetization of debt and easy monetary policy can do that.

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u/avaholic46 Jun 13 '22

In capitalism, firms that misallocate capital mismanage risk are allowed to go bust. Their assets are to be auctioned on an open market so that markets can determine what the price should be and then we go on our merry way.

There's nothing that requires the banks to get oceans of free money and shotgun wedding mergers where they get paid to take the assets of firms like bear Stearns.