How Biden and Trump both “pay” for stimulus bills

January 28, 2021 11:02 AM

How Biden and Trump “pay” for stimulus relief bills This is an economic and not political piece about government funding in our country. It’s worth a read.
posted by jl198812 (2 comments total)

Oof! A self link? Bye
posted by NoMich at 11:12 AM on January 28, 2021 [1 favorite]

Good, short read. I'm planning on doing an FP this week on a recent piece from Margins by Ranjan Roy and Can Duruk (of previous pizza arbitrage fame), but I think this article is possibly their best work on the subject, and is essentially an expanded version of the OP: ZIRP explains the world

ZIRP stands for zero-interest-rate policy[...] when a nation's central bank pushes nominal interest rates to 0% using monetary policy. [...]

Money is always swimming towards yield. Millions of investment professionals are taking tens of millions of actions, every day, to help drive capital to its sustenance. The entire global capitalist economy rests on this constant flow.

So what happens when you lower interest rates (especially to zero)? All those millions of little dollar-organisms have to change course. They need to find a new source of life. [...]

The more risk you take, the more yield you should get. [...]

So all these dollar-organisms all start swimming towards riskier waters. Treasury investors shift to corporate debt. Public equity hedge funds shift to late-stage private equity. Late-stage private equity shifts to mid-stage, mid-stage to early stage. Seed rounds become bigger. Angel investors become a thing. Unicorns, unicorns, and more unicorns. Ashton Kutcher.

When that much money finds its way into places not used to that much money, weird things happen.[...] You don't create a ridesharing service, but a service that oddly loses money on every ride with a promise to figure out some future business. [...] if you want to start a scooter rental business, you don't just buy some scooters and rent them out. You take hundreds of millions of dollars in venture and rapidly expand across cities. Money finds its way. [...]

Facebook’s advertising revenue has exploded thanks to heavily-funded companies acquiring customers, allowing the platform to resist any financial pressure which could force them to address fundamental platform issues. Uber made rides seem cheaper so we stopped taking public transportation. All this capital completely distorts things at the micro and macro level.

The article is talking more about the bizarre, often risky, behavior that tech companies benefiting from ZIRP-incentivized investment, and implying externalities contained therein. The OP cuts to the core of how it's directly affecting everyday Americans. Either way, dumb money is eating the world.
posted by Apocryphon at 11:16 AM on January 28, 2021