Company BailoutsThe Acquirer's Multiple
In their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Company Bailouts. Here’s an excerpt from the episode:
Jake: I guess, I would prefer the world to look more nature looks like, where systemic problems get cleared more regularly and instead, we sweep them all into a pile and then kick the can down the road. I don’t know if your system actually solves the problem in the long term, and maybe doesn’t create bigger problems down the line.
Bill: Yeah, I agree that if there was a way to have shut down the country, and not had mass defaults, and not have every asset-intensive industry going into bankruptcy court at the same time, and having creditors own all the equity, maybe that would be better. It’s just not going to happen. So, I don’t even understand the point in bitching about it anymore. I guess that it seems to me that I’ve now seen 2009 and 2020 happen. Both times, like Libertarian, Austrian, Ron Paul people, of which I was one not that long ago, had complained that the world is not as they think it should be. But I guess my comment back is, well, then maybe the world isn’t like you think it should be. You either are going to continue to yell into the air or update your [unintelligible [00:15:35], because I don’t think that the world is going to change to what we want it to theoretically be. I think we got to live in the world we have.
Jake: I agree with that. I think it’s something I struggle with, which is, is the world different than how I think it is? Or, have we not looked at a long enough timeline? I go back and forth on those. They kind of give you different answers.
Bill: Yeah. I get the, well, equity should just be wiped out thing. I do understand that argument, but I just don’t think that if you really think that all that’s going to happen is equities going to get wiped out, and the world’s just going to continue, and you don’t think that leads to deflationary bust, if you really think that at the moment that the world has stopped, that it’s okay to send almost every asset-intensive industry into bankruptcy court and do you think we’re going to get through that, then maybe I just don’t understand path dependency like you do. I’m not saying you, I’m just saying the collective you. I just think that you’re introducing a massive, massive deflationary bust risk into a system that didn’t need it and the path we went down has negative consequences. But once there’s a global pandemic, there are going to be negative consequences, so I view government’s job is to mitigate those consequences. I think that to a large extent, they did it and then I think that it became political and people lost their fucking minds.
Jake: I would probably agree with you more if during the good times, we ran surpluses and prepared for the bad times as a collective, but we haven’t done that at all. It’s always been pedal to the metal, at least for the last 12 years.
Jake: I don’t know. It makes it a little bit weaker the argument that we’re doing this for the greater good.
Bill: Well, that’s a separate issue, though. I’m talking about 2020. I bitched a lot about the tax cuts and blowing out the deficit 10 years into freaking recovery, [crosstalk] yeah, like 7 to 10 years. I think that was asinine. The idea that now Republicans are going to complain about deficit spending, like they– [crosstalk] Yeah, they lost the moral high ground on that. We definitely agree that the problem with Keynesian economics as implemented is Keynes always thought that you should pull back when times are good and we just do stimmy, stimmy, stimmy. I don’t think that in 2020 is the time to take the stand. That’s where I just disagree.
Jake: Yeah, but there’s never going to be a convenient time for austerity.
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Article by The Acquirer’s Multiple