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Why do so many of these make it seem like the only option is to accept extreme market volatility in the US, or lose out due to hyperinflation? There are many markets and indexes around the world from countries that did not get infected with COVID-19. (Not investment advice, do your own due diligence.)
Hi, I recently came across a political Movement called Progressivism which was common during Enlightement Era and basically started the Industrial Revolution. I love your videos and think You are doing a great job, I remember in some video I watched you were asking the viewers, what they tought would be a great solution for our world economy to prosper. I think the Progressivism is the way to go... Wish you well
Ok so I have a theory and I'm wondering if it could work. The usd is a Fiat currency ,so it value is not based on a physical object. What if the value of the dollar was changed to Penny's but value of products were changed as well. For example a coke is currently worth 2.00$ now withe the change a coke is worth 0.02. of you have a current dollar its value would be worth 100x more than it currently is worth. If you get paid 10$ an hour you'll now make 0.10 an hour. But any money you've saved will be multiplied by 100. Debts owed will also go through the change. As unrealistic as it sounds I'd like an opinion if you have the time.
"Okay, so lets say you find yourself as the head of state of some country during an impending market crash" Aah yes, I've been prepping for that scenario, Sensei
@@lonestarr1490 Step 4: Use the coercitive machinery of the State to obligate people to be inoffensively stolen to pay for your own greed and incompetence. Cheers to regulating the market and taxing the people!
Economics Explained It’s excellent organisation of the content and clarity in presentation. For some reason, a lot of presenters, and certainly a lot of commenters have difficulty creating hierarchies in their own minds. Small issues are inflated, over-arching principles are overlooked, pendant material is presented without regard to the superstructure. Listening to these videos, I am left with the impression that you have a comprehensive understanding of your subject allowing you to zoom in and out without losing sight of the big picture. This sort of thorough understanding comes from well-designed degree programs and well written books. Sadly, there’s a war on at the moment between the people who value this sort of comprehensive understanding, and those who genuinely believe they have the equivalent by wandering around on the internet picking up bits and pieces here and there. The second group are eagerly spreading disinformation as a means of inflating their own egos, whereas a well-educated professional knows the limits of their own remit and defers to colleagues in areas outside their specialty.
@@pencilfriendpaperscribbler6032 the problem is the demand for content. RUclips rewards you for 3+ videos posted a week. Plus, you'll need native content for other social media that points back to RUclips. You really do have to organize youtube writing into a sort of book to make something consistently good. But yeah this channel is really great. I wish studied economics under them in college.
*When taxpayers can't pay their bills:* Payday lending or bankruptcy. *When big businesses can't pay their bills:* Taxpayer-funded bail outs and a slap on the wrist. *Government:* Sounds fair to me.
Also if big businesses cant pay their bills, mass unemployment. Saving them is cheaper than welfare. I know the working class like yourself wouldn't fully understand
If they bought back all that stock, can't they just sell it now if they need the cash? Why the talk of bailouts when they have options other than going under?
Well, knowing that, you should borrow some money and buy as much of those airlines stocks as possible. Interest rate is *unusually low* and the stocks are *dirt cheap* rn. Instead of panicking, savvy people will see this "disaster" as a wonderful opportunity to make money. Edit: Don't buy airline stocks, borrow money to start new manufacturing business. With all the talk about moving supply chain back, there's unique opportunity for basic industries (plastics, textile, etc).
@@richnormal3902 if you're on the board of directors or an executive officer with an overwhelming majority of your net worth in a stock, would you sell it for less? Of course not. To do so would be to discount yourself.
10:50 share buybacks used to be illegal, classes as price manipulation, until Reagan and Republicans changed that in 1982. It doesn't have to be the way it is currently, there is even Republican support to reverse this boondoggle.
@Joakim von Anka I'm referring to American markets overseen at the top by the US Securities Exchange Commission. Companies are always welcome to structure their public offerings to trade shares on non-US markets to avoid US regulations and liabilities. I think you are confusing tax advantaged placement of company IP in a country like Ireland with the trading of publicly offered shares in regulated US markets like NYSE.
@Joakim von Anka I'm not sure if you are arguing for or against your own point. You are suggesting masses of companies will restructure out of the US and solely to ADRs traded only OTC all in order to perform buybacks without SEC liability issues. I mean... what? The more logical response to regulation would just see companies dumping extra money into other things besides buybacks that improve shareholder wealth.
Banning share buybacks because it's price manipulation is like banning stock markets because they manipulate price; it makes no sense. It would also mean that once a company goes public, it can never go private again (e.g., Dell's reprivatization would've been illegal). There are much better ways to achieve prudent corporate behaviour.
@@tstcikhthyss My singular point is that buybacks were recognized as stock manipulation for 60+ years, and then they were explicitly legalized by a pro-corporate administration. This change in policy was to allow corporations to game their own stock price, mostly for short-term benefit, redirecting excess cash away from reinvestment and into the hands of c-suite and large shareholders. Would love to hear your suggestions to regulate more 'prudent' behavior by the poor, struggling corporate executives of America.
What goes around comes around. What I spend on a friday night goes to the waiter, that waiter might buy a couple of bread from the bakery, the bakery buys more flour, the farmer sells more flour, buys more equipment from me. And the cycle goes on. The problem is when that cycle is disrupted which could mean the flow stops.
@@therealnoodles7638 no, the problem is fiat currency. An unlimited supply vs a limited supply is always going to be a problem. No on really knows how rich they are, which is why stock markets go up and down like roller coasters.
Is everyone in this comment chain particularly stupid or do you simply not understand that the original comment is talking about the virus and how people are not practicing social distancing?
In India the central bank isn’t reducing interest rates rather Fiscal stimulus or QUANTITATIVE EASING. Dunno if it’s wise considering almost major economies are reducing their interest rates
So is Japan and the US, most of that money is going to temporarily cover business debt while everything is shut down so that tactic can only work in the short term
but, india didn't got hit as hard as other countries. the central and state Govt's are working their best to contain the virus. overly cautioning may cause more problems.
In india inflation was close to double digit in 2,3 months back. Reason was food inflation..but demand is also down for most durable consumption goods... Central Bank of India (rbi) can't slash down interest rate during this time of inflation but did something for the monetary stimulus ...they exempt cash reserve ratio requirements for new loans to specific sectors and launch a long term rapo operations which will give same result as of easing of interest rates.
@@angelobcastro No. Those companies would not exist if the state didn't bail them out. If the company makes profit in the future the state has the right to at least recover what it invested
@@angelobcastro Well, it isn't going to produce any service or product or redistribuite wealth via salaries anymore, so why not? In a capitalistic society a business that doesn't do any of those is socially useless anyway
Thank you for the explanations. As an aerospace engineer, I have learned to consider macroeconomics to be as complex as 3 stage rocket propulsion .... Only with more magic
@@jasonboursaw3258 You do know this isn't an Austrian channel right? EE is a Keynesian, so he'd likely disagree with that assessment. Feel free to go right back to worshiping the Eye of Mises.
@@jasonboursaw3258 if a physicist claimed that tomorrow gravity will flip upside down, everyone will laugh and nothing will happen. If an economist claimed there will be an economic downturn tomorrow, people will panic, liquidate everything and there then will be an economic downturn. That's the difference between a real science and economics
I think the solution to this abusive corporate system of spending recklessly and relying on government bailouts is for the governments to simply nationalise the corporations with their bailouts. Some of the money I've seen go to certain companies, even in regular times, amounts to more than enough to buy out the company outright. A strong example of that is Bombardier in Canada, which receives more than enough subsidies to turn them into a Crown Corporation many times over. This would either create corporations led more responsibly, or incentivise private corporations to run themselves more responsibly. They can be privatised later for profit to the government which can then be reinvested.
I couldn't agree with you more. Us as the citizens want a return on your investment in the companies. It's our money and there is no good reason why we shouldn't get the benefits of using it to save the workers instead of the CEO and shareholders of the company that mismanaged the company in the first place.
That's exactly how a bailout works, government's don't just give money to companies. When a company receives a bailout it essentially means the government buys a majority stake of their shares, allowing the government to have some control and sway, while giving the company much needed revenue.
Absolutely poor solution.. go through indian scenario and see what transpired. A govt held entity attracts bureaucracy and red taping. Divestment is the last resort..
There are two ways of dealing with the problem IMO: 1) welcome to the free market baby, let them fail, new airline companies will be made. If there is a need the market will take care of it and in no time you will have the same service and employment. 2) If you wanna bail them out, buy them in part. Once the crisis is over you sell the shares for a profit.
Well, why not have the bailouts be in the form of a loan? A favorable loan for sure but one when it should pay back more to the system that bailed them out.
Not sure I agree that supply side problems are more difficult to solve. On the monetary policy side, lowering interest rates boosts investment. On the fiscal policy side, states can use instate grants for entrepreneurs and / or guarantee some of their loans with banks.
Real question tho, would a good strategy be telling the corporations, whem in times of prosperity, that you are not gonna bail em out next time the economy goes bad? Like encourage them to save up when times are good? Or is that not as good as it sounds?
That sounds like an empty threat to me. You still need someone providing the services those corps are responsible for. Seems to me that the real sollution is to not permit such large essential corporations from existing in the first place. Basically, you need a massive increase in enforcement of antritrust laws during economic upswings.
Nolan Hartwick yea. Or say a bail out will actually be a buy out. This makes more sense. Then the government can split these companies up during the good times. I don’t know if this would work but it seems good on paper
Telling a rich person that he’ll sink one day will probably get you a laugh, then ignored. Strong entities only really listen or care for advice when they’re going through it.
If I were a head of state and asked for a bailout: "Okay, but you're getting nationalised, your shareholders will get nothing, and anyone in management who leaves in the next ten years will be banned from working in management ever again."
I always figured Moral Hazard had an easy fix: offer bailouts to companies but break them up like a monopoly or trust. Their services remain intact, but the field will be more competitive in the future, in addition to deterring the CEOs and stockholders from just asking for a bailout. I'm not an economist or politician, so what do I know?
In the supply side problem in economy the wise step would be to stimulate demand of investment goods (for creating production capacity in economy )..after some time this demand will trickle down into consumer demand..in the long terms this is step economy should taken... In Indian economy during 2008 crisis government give a huge stimulus via fiscal policy but did not build enough capacity in industries this results into huge inflation afterwards....
I find the videos become much more fun when a bit of personality shines through when you integrate jokes. Videos are great please keep making content thanks!
Highlights the biggest flaw in our current capitalist system, points at a more “Social” means of organization as a possible solution. I love it when the economics themselves show that an inverse of crony capitalism is a soft socialism state. When the people have the power the people will be the focus of the benefit.
There is a good deal to be learned by studying how depression triggers aligned in the past. So, to understand why the "Great Depression" occurred in the 1930s, one must look at what occurred during the years building up to the crash. A significant amount of the credit made available during the 1920s went into land speculation. A good primer on what occurred is found in the book "Only Yesterday" by historian Frederick Lewis Allen. Not only did investors become captured by the frenzy of the Florida land boom, this same frenzy occurred in many cities in response to population increases that triggered a significant increase in the demand for both commercial and residential land. An agricultural land boom also occurred during the First World War, during which time farmers borrowed heavily to expand their land holdings and production. A few years was required after the war ended for European farmers to recover, but by the mid-1920s global production exceeded demand, prices fell, farmers defaulted on loans when government guarantees were removed, and rural banks failed by the hundreds. As the land boom crashed, investors shifted heavily into the stock market, driving up prices well beyond what any fundamentals supported. Thus, by the end of 1929 the U.S. economy was stressed across almost all areas of production as well in the financial markets. To be sure, imprudent bank lending deepened the crash and lengthened its duration, but it was a crash in the making because of the failure to utilize tax policy to tame the credit-fueled, speculation-driven land markets. A few economists (e.g., Harry Gunnison Brown, Scott Nearing and John R. Commons) had argued the case made in the late 19th century by Henry George, who showed that cyclical booms and busts would be tamed only if the full or nearly-full public capture of the potential annual rental value of land and of rents from other sources (e.g., the broadcast spectrum) became public policy. Harry Gunnison Brown was joined over the succeeding decades by a small group of economics professors who continued to make Henry George's case. One could argue that recessions that began again following the end of the Second World War would have been even worse if local governments did not capture some land rent via the taxation of real estate. However, as land prices climbed property assessments rarely kept pace. This made speculation in land an even more profitable investment. Relying on out-of-date assessed valuations rather than current market values created a serious analytical problem for government statisticians. They simply did not understand that any increase in the price of land is inflationary and did not include such increases in their calculation of inflation. Another failure has been to accurately calculate the annual aggregate rent that is privately captured as unearned income (whether imputed or actual). Since the administration of Ronald Reagan, the federal government has not monitored land prices. The figures utilized in the econometric models relied upon by the Congressional Budget Office and the Federal Reserve are around 5 percent of the actual potential rent in the economy (see Joseph Stiglitz or Mason Gaffney on this particular problem). I offer here a very rough estimate of the rent attached to just one part of the economy, the residential property market. At mid-2020, the median price of a single-family property was around $295,000. There are about 140 million existing housing units in the United States. If we assume a fairly conservative median land-to-total value ratio of 35%, this means that the aggregate residential land value in the U.S. is $103,250 per property, multiplied by 140 million = $14,455,000,000,000 ($14.455 trillion). Economic theory tells us that this aggregate land price occurs because of the capitalization of the net amount of rent that remains in private hands after taxation. If most or all of the rent were captured via taxation there would be nothing to be capitalized and land prices would fall to very close to zero. What the rent fund might be depends on the discount rate. If we assume that investors will invest in land if they can obtain an annual increase of 5%, the the rent fund would be calculated as follows: 5% of $14.455 trillion = $722.75 billion of rent JUST for the land under existing residential buildings. Add in the number of vacant residential lots around the U.S. and this figure will increase considerably. Tragically, the public capture of land rent never became public policy, allowing the land market cycle to operate from boom to bust. It is on schedule to crash again in 2026. I have prepared a relatively short video in support of this forecast for anyone who reads this and has an interest in more details: ruclips.net/video/fmA6ZPs-wus/видео.html
i think the benefits of infrastructure spending are WAY overstated, especially when it comes to roads... in melbourne they are upgrading the train line to a raised train line, allowing cars to pass under the train line... Cost: $1.6BILLION Benefits: saves cars waiting a few minutes everyday for a train to pass
non-economist non-politician idea: if the govt bails out your company, the govt now owns x dollars worth of newly created stock in your company where x is whatever price the bailout cost
In some cases it was used - and during the last crisis German state become the biggest shareholder of Commerzbank. (in practice bailouts are technically speaking loan or shares purchase, just on very favourable conditions)
bailing out isnt just grants, its generally low interest loans, usually with some requirements. buying stocks is also an option and was used by many countries during 2008.
Hey man, it sounds like the gain on your mic is a little low, cause you're losing some of the end of words in your audio. If you listen closely, you're losing some of the words that end with s, t, f, and others. If you turn up your gain a little bit, it should help fix this. Other than that, another great vid, keep up the good work and stay safe 👍
I don't see any airline as too big to fail. We've lost big players in the past - Pan-Am, TWA et al. Planes go into storage then leased or bought by the next highly leveraged player. It's an industry with many moving parts. Buffett famously avoids them. This may be a cue for Amazon to break into the scene having a sizable cargo fleet already. Great video - amazed you found stock footage of people fighting over a loo roll!
@Economics Explained Hi, I recently came across a political Movement called Progressivism which was common during Enlightement Era and basically started the Industrial Revolution. I love your videos and think You are doing a great job, I remember in some video I watched you were asking the viewers, what they tought would be a great solution for our world economy to prosper. I think the Progressivism is the way to go... Wish you well
Love you videos mate. Would be great to see a video on how exactly interest rates are dropped, and the impact on the nations currency. Either way, looking forward to future videos.
2 things on this otherwise great contribution: - A CEO's job is to act in the interest of his company. If bonusses stand in the way of that, because that makes the CEO only care about short term gains, then the solution is to forbid - at least - short term bonusses. - bailing out big corporations should be done in a way that the government buys shares from the shareholders (or receives new shares from the company it concerns). The company can then be saved and, after the crisis is over and the company is profitable again, the shares can be sold, hopefully at a profit. This hopefully helps in preventing taxpayer's money just going up in the air...
a CEOs job isn't to act in the interest of the company, it's to act in the interest of the shareholders. this is because it's the shareholders (read: the board of directors) who hires and fires the CEO. sounds like the same thing but it's not, especially when dealing with public companies. if the shareholders (that is, the board of directors) want short term gains, which they typically do because it increases their personal net worth in the short term at a relatively low risk level, then the CEO is going to be conpensated based on short term gains. look at the way a venture capital fund will incent founder CEOs... they generally won't do much, maybe pay a salary in the low 6 figures, and the CEOs of (even highly valuable) startups don't have very high salaries. some will take salaries as low as $1 and not take any form of cash payment, forgoing all liquidity for a greater return in the future, sometimes the far future. the reason this is, is because shareholders in a startup are not looking for short term gain. they want 1000%+ in 5 years or 2000%+ in 10 years, not 5% in 3 months like shareholders in public companies. what's more is that in a startup, the CEO will often be either the primary shareholder or one of the biggest shareholders in the company, so his incentives are much different than the hired CEO of a public company. both want big paydays, but the way they get them is different due to their alignments with the shareholder's goals. the shareholders invest in the two types of companies for different reasons and that all has to do with their appetite for risk. the more short-term and guaranteed an investment is, the less risky it is. this explains the difference in shareholder attitudes, shareholder behaviors, CEO behaviors, and incentive structure.
@@justinthen7631 "a CEO's job isn't to act in the interest of the company, it's to act in the interest of the shareholders". That's not true. It probably depends on the jurisdiction you're in, but in my country the law explicitly states that members of the board of directs of the company need to act in accordance with the interest of the company. However, a CEO that only cared about the shareholders and not about other interests (minority shareholders, employees, costumers, etc.) will probably not be a good, effective leader and will be forced out of the company reasonbly quickly. Also, why are you confusing the board of directors with the shareholders? Members of the board of directors are, in general, named and fired either by the shareholders or, when it comes to big companies, the supervicory board of the company. As the CEO is also a member of the board of directors, CEOs are hired and fired by the supervicory board or the shareholders, not by the (other) board members. The rest of your comment is interesting, but I don't feel like it goes against anything I typed in my first comment (which I did type in a bit of a hury to be honest, so maybe that comment isn't so clear). I fully understand why CEOs who should act in the interest of the company can stop doing so when a big amount of their salary depends on short term successes. That's why I stated that this problem can be solved by forbidding such bonusses. In that way, CEOs will be forced to actually do a good job and make sure their company does well in the long instead of just doing crazy things hoping it'll get them their bonus in the short term.
FYI, *there's a way* to punish reckless companies and their investors: as a condition for a bailout ask that they raise part of the money on financial markets by selling new shares. It's a reasonable thing to ask since it's often done by companies at times when they need money anyway and it lowers the value of existing shares, balancing the effects of buybacks in previous years.
“ you might find yourselves without a major service line airlines or grocery stores, or banks” .......... no I don’t think this is what it would do........ it’s like you said, the entire system revolves around people just playing the system and choosing the “sensable” choice or stock buy backs over saving ............. making a company shut down, is not a bad thing. It opens oppertunity for new companies to step in....... Making companies accountable is what we NEED to start doing
@@ferencgazdag1406 yes! Big companies suck! They can't be efficient. People talk about economies of scale, but huge corporations are so bloated and inefficient that they just pool their money together to buy other companies to stave off redundancy. The business model of gigantic corporations is to lie enough so that investors will keep propping them up with that free money. As long as the investors are fooled, then the bonuses keep coming in for the CEOs. Corporations are the problem. Companies need to be lean, competitive, and not monopolies, so that if one goes down, there are others to pick up the slack.
@@ferencgazdag1406 yes! Big companies suck! They can't be efficient. People talk about economies of scale, but huge corporations are so bloated and inefficient that they just pool their money together to buy other companies to stave off redundancy. The business model of gigantic corporations is to lie enough so that investors will keep propping them up with that free money. As long as the investors are fooled, then the bonuses keep coming in for the CEOs. Corporations are the problem. Companies need to be lean, competitive, and not monopolies, so that if one goes down, there are others to pick up the slack.
"It opens oppertunity for new companies to step in......." - starting a new company in a sector with as high upfront costs and barriers to entry as airlines, shipping, banking, etc. is no easy task. It isn't a simple job to replace those kinds of things. Especially if that industry is already teetering. Not that means it shouldn't be tried, but don't count on it as if it's nothing.
This is a great analysis if you are from a stable economy and developed country, but, what about developing countries? What are our tools? A video on that could be cool.
Watching 14 minutes of stock footage many times completely unrelated can be distracting sometimes. My suggestion is to try a whiteboard, or real, related footage of the thing you are talking about, or a vlog kind of style. Your voice is really captivating, but the footage man.
Since when was seizing the means of production a bad thing? nationalise the industries, that both punishes the ceos and the shareholders while maintaining the essential services
@GamingRanger 1) it wasn’t government interference, it was non-interference 2) what i’m talking about goes beyond the government, I’m talking about the people directly being able to have what they need
My country is doing all of the policy, they lowered interest rates, there is no income tax and cooperation tax/sales tax is lowered with rent exemptions, there are huge infrastructure taking place across the country from bridges to metros to highways. Lastly there are large subsidies for many companies that offer supplies for food, medicine and other essentials.
Question, Could declaring a reckless war to a random country, say, a country in the middle east, or maybe a giant red country in asia help fix an economic crisis?
Question: how come the Quantitative Easing that the USA did after the GFC didnt cause significant inflation in the USA? can we assume that will happen here in australia the same way - as in not much inflation caused by the money printing?
The answer could be that QE caused asset price inflation as opposed to consumer price inflation. I.e. inflation showed up in asset prices (stocks, bonds etc)
As to the *moral hazard:* Nationalise the company. Make the stocks worthless. Replace the management. Forbid bonuses to all management. Move the HQ out of some expensive skyscraper back to where their manufacturing is. But guys like Trump and Johnson are never going to do that, as it attacks "their" kind of people.
You do know that every company’s goal is to make more money, while the skyscraper costs a lot it’s in a central location and acts as a means of advertisement too
Shareholders of companies are concerned with two things when considering investments in corporations 1. Dividends 2. The cash flows from the sale of the shares With this in mind consider the determining factors of these forms of future cash flows moat notably the future share price. The price of shares is generally determined by the expectations of future cash flows from the company which is calculated either with a perpetuity equation using the cash flows from dividends, or a future expected sale price plus the annuity of the cash flows from dividends. Given this we can determine algebraically that the the price at t0 now is dependant o the future expected price of the shares in the corporation. Given this the shareholders of the company even if they are short term investors, should be concerned with the long term health of the corporation. Now like you always say stability is the foundation of an economy and similarly stability and a more sure expectation of future cash flows will improve the prospects for an investor in a specific security. Now while certainly an expectation of bailout can effect the management decisions of a corporation the uncertainty of the companies future cash flows due to risk of either a lack of a bailout similar to perhaps Lehman or measures that governments impose on the corporation as conditions for bailout. At the very least perhaps the shareholders at least are not specifically interested a bailout. I can definitely perhaps see the incentive for management to take shortcuts given the limited careers of their executives. But all the while they should be concerned with the share price and so they should be concerned with the long term share price. Anyways this is more or less the explanation that I was taught by my finance professor concerning the objectives of short term investors. Would love to hear feedback and I live the videos!
I wasn't really able to parse most of that, but I will put my take on Share prices. I see Corporations as a Ponzi Scheme, or Pyramid. People buy in with the dream that the price will go up, allowing them to sell at a later date for more money. Everyone who ever buys a stock does so for this reason. But nothing can go up forever. So it all comes down to PR and image. Do investors see the stock as likely to go up in value? CEOs get their multi-billion dollar bonuses for raising stock prices. So the CEO is incentivized to do only things that will make the stock look good and go up, even if that isn't true or wise. A lot of times, the things that will raise the stock price in the short term will have negative long term effects. And things that will help the business in the long term might hurt the stock price in the short term. So corporations are reduced to short sighted, greedy ogres. They sit on a pile of gold, but don't know how to use it wisely. I have nothing but contempt for these bloated mega corps, that pretend to offer value. They are inherently inefficient and wasteful, solely concerned with looking good to investors in the short term, without a long term plan aside from buying out other companies and growing so large that they are a monopoly, and therefore worthy of bailouts. Basically, every corporation dreams of fooling investors long enough so they can get too big to fail. There is no brain power at the top of these corps, at least, not concerned with operating as an actual business.
Shorewall but see this isn’t what stock prices represent, a stock price is a representation of what investors believe future cash flows from company to be this can be represented in a basic perpetuity formula of d/r d being the dividend payments and r being the discount rate now if the value of a stock is based upon future cash flows forever then we can determine that investors will be concerned with the cash flows and therefore the company’s health forever. Moreover if the executive team cares about raising stock prices of a given security then they will invest their resources in a firm in a way that maximizes cash flows forever we can also represent the value of a stock with the equation of p(0)=((d/r)-((d/r)/(1+r)^t)p(t)/1+r^t) This is the equation for an investor who plans on selling a security at time t Here p is price of security at (t) which is time d is dividends r is the discount rate. This represents the annuity of the cash flows gained from a given security for an amount of time plus the sale price of the security at time t now if we apply this same formula to price at time (t) we can understand how even to a short term investor who plans to sell the security in the near future that the value of the security is in fact based upon the the cash flows to infinity. Therefore, it is not in fact in the interest of either investor or management to take short term action plans that will bury a company’s future cash flows and therefore price
"Crazy commie out there to seize the means of production" That sounds like a good idea. Maybe only necessary temporarily. But I'd prefer that by far compared to bailouts or the feeding frenzy of bankruptcy.
@@richardflynn4112 I guess you missed the "only neccessary temporarily part". Governments have put companies nationalized insolvent but vital private institutions before, cleaned up their books and sold them for profit many times in the past. This has the benefit of not allowing moral hazard by signaling that the institution might be saved but those who own or run it won't without having to deal with the mess of having a vital institution liquidate. This isn't really Communist because it is temporary but it often gets portrayed as such. If you think the other two alternatives are better or you have a way of solving the problem without a vital institution collapsing or bailing out people who committed wrongdoing then I'd like to know.
Can you do a video explaining how the U.S. student loan debt has gotten so out of control? I’m terribly ignorant on the issue, as well as what other nations experience this, but it seems like a vastly complex issue that greatly affects our economy.
@@RUHappyATM Realistically though, there's a lot less people earning 100k+ in Australia than those earning 100k wouldn't really need it as they have a higher percentage of their money in savings compared to those earning less money. Also, those earning less, if given extra money from the government would most likely spend that money straightaway rather than save it as they would just see it as extra money that they can now spend (plus a lot of them haven't completed any form of higher education). People earning >100k would see this as an insignificant amount that wouldn't be worth spending straightaway which isn't good for the economy and defeats the purpose of giving money out to the taxpayers in the first place. Wayne Swan really thought this through, huh?
@@oddcoyote2598 wtf! Who is arguing the morality of mean-testing the Handouts? Just pointing out the inaccuracy. It's only add a few secs to say "the majority...got the Handouts". When he didn't say that he would imply that millionaires also got the Handouts.
hay EE. what would your opinion be on aiming for 0% inflation/deflation and encourage spending by having very high income taxes but allow people to write off almost anything from their personal taxes. essentially encouraging spending by forcing people to either spend their money or give it to the government, I'm sure most people would take the former.
What are your thoughts on "bail-outs" in the form of a government provided loan (no or low interest) or shares so that private companies become part public owned. E.G. if the Aus Gov bailed out QANTAS by buying a heap of shares thus turning QANTAS into part public part private and can generate revenue for the government when it almost inevitably returns to profits?
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Why do so many of these make it seem like the only option is to accept extreme market volatility in the US, or lose out due to hyperinflation? There are many markets and indexes around the world from countries that did not get infected with COVID-19.
(Not investment advice, do your own due diligence.)
Hi, I recently came across a political Movement called Progressivism which was common during Enlightement Era and basically started the Industrial Revolution. I love your videos and think You are doing a great job, I remember in some video I watched you were asking the viewers, what they tought would be a great solution for our world economy to prosper. I think the Progressivism is the way to go... Wish you well
Ok so I have a theory and I'm wondering if it could work.
The usd is a Fiat currency ,so it value is not based on a physical object.
What if the value of the dollar was changed to Penny's but value of products were changed as well.
For example a coke is currently worth 2.00$ now withe the change a coke is worth 0.02. of you have a current dollar its value would be worth 100x more than it currently is worth. If you get paid 10$ an hour you'll now make 0.10 an hour. But any money you've saved will be multiplied by 100. Debts owed will also go through the change. As unrealistic as it sounds I'd like an opinion if you have the time.
Q q
"Okay, so lets say you find yourself as the head of state of some country during an impending market crash"
Aah yes, I've been prepping for that scenario, Sensei
I mean Donald trump wishes he had.
You’re better than our current president
@@tylerhackner9731 Bolsonaro?
I have.
@@tylerhackner9731 not a high bar. Pretty sure anything more intelligent than a protozoa is better than Mr. Pumpkin Hitler.
Last time I was this early the S&P500 was still over 3000 points.
Lemme see the video then I will comment
Last time I was this early some people were still alive
Last time I was this early I could still buy toilet paper!
What are your thoughts on nationalizing the corporations begging for a bailout? Or at least taking ownership of 50%+ of the shares/stocks?
The Dow dropped a whole S&P500 lol
*Profits are privatised, and losses are socialised*
So true, never thought of it that way.
Step 1: be rich. Step 2: get richer.
@@axelnils Step 3: get riched out by an even richer guy and die in poverty, loneliness, and despair.
@@lonestarr1490 Step 4: Use the coercitive machinery of the State to obligate people to be inoffensively stolen to pay for your own greed and incompetence. Cheers to regulating the market and taxing the people!
If your doing well, dont change it.
If you are doing bad. Somethings got to change.
I don't know why but weirdly I find your videos relaxing to watch compared to other covering economics even when these are about an economic crisis
It's the silky smooth Australian Bogan accent.
Economics Explained I’m not sure if u did this, but u should do a video on a country’s economy during a war
@@danielsokolov4821 It would be interesting for sure. It will let us have a better picture of the war times economies and the impact in the consumers.
Economics Explained It’s excellent organisation of the content and clarity in presentation. For some reason, a lot of presenters, and certainly a lot of commenters have difficulty creating hierarchies in their own minds. Small issues are inflated, over-arching principles are overlooked, pendant material is presented without regard to the superstructure.
Listening to these videos, I am left with the impression that you have a comprehensive understanding of your subject allowing you to zoom in and out without losing sight of the big picture. This sort of thorough understanding comes from well-designed degree programs and well written books.
Sadly, there’s a war on at the moment between the people who value this sort of comprehensive understanding, and those who genuinely believe they have the equivalent by wandering around on the internet picking up bits and pieces here and there. The second group are eagerly spreading disinformation as a means of inflating their own egos, whereas a well-educated professional knows the limits of their own remit and defers to colleagues in areas outside their specialty.
@@pencilfriendpaperscribbler6032 the problem is the demand for content. RUclips rewards you for 3+ videos posted a week. Plus, you'll need native content for other social media that points back to RUclips. You really do have to organize youtube writing into a sort of book to make something consistently good. But yeah this channel is really great. I wish studied economics under them in college.
*When taxpayers can't pay their bills:*
Payday lending or bankruptcy.
*When big businesses can't pay their bills:*
Taxpayer-funded bail outs and a slap on the wrist.
*Government:*
Sounds fair to me.
If big business will not be able to pay, Chinese will acquire it or it will disappear.
Also if big businesses cant pay their bills, mass unemployment. Saving them is cheaper than welfare. I know the working class like yourself wouldn't fully understand
When a business is too big to fail, it's too big to exist.
@@shorewall nice idea.
@@yourbettingassistant7985 Watch out bois, we got an aristocrat over here!
Those airliners and rest of the us companies spending the last 10 years on stock buybacks deserve to be bankrupt
Sadly, what is morally right is often not what is practically prudent.
If they bought back all that stock, can't they just sell it now if they need the cash? Why the talk of bailouts when they have options other than going under?
Well, knowing that, you should borrow some money and buy as much of those airlines stocks as possible. Interest rate is *unusually low* and the stocks are *dirt cheap* rn.
Instead of panicking, savvy people will see this "disaster" as a wonderful opportunity to make money.
Edit: Don't buy airline stocks, borrow money to start new manufacturing business. With all the talk about moving supply chain back, there's unique opportunity for basic industries (plastics, textile, etc).
@@richnormal3902 Who would buy shares of a company that's about to go bankrupt?
@@richnormal3902 if you're on the board of directors or an executive officer with an overwhelming majority of your net worth in a stock, would you sell it for less? Of course not. To do so would be to discount yourself.
I have a feeling I didn't hear Norway mentioned even once. Someone must've hijacked this channel.
A true fan, you watch every video. Good for you
Do you think Norway will go on recession? Its the lowest kroner evee recorded now.
10:50 share buybacks used to be illegal, classes as price manipulation, until Reagan and Republicans changed that in 1982. It doesn't have to be the way it is currently, there is even Republican support to reverse this boondoggle.
@Joakim von Anka I'm referring to American markets overseen at the top by the US Securities Exchange Commission. Companies are always welcome to structure their public offerings to trade shares on non-US markets to avoid US regulations and liabilities. I think you are confusing tax advantaged placement of company IP in a country like Ireland with the trading of publicly offered shares in regulated US markets like NYSE.
@Joakim von Anka I'm not sure if you are arguing for or against your own point. You are suggesting masses of companies will restructure out of the US and solely to ADRs traded only OTC all in order to perform buybacks without SEC liability issues. I mean... what? The more logical response to regulation would just see companies dumping extra money into other things besides buybacks that improve shareholder wealth.
@Joakim von Anka Ok,...
Banning share buybacks because it's price manipulation is like banning stock markets because they manipulate price; it makes no sense. It would also mean that once a company goes public, it can never go private again (e.g., Dell's reprivatization would've been illegal). There are much better ways to achieve prudent corporate behaviour.
@@tstcikhthyss My singular point is that buybacks were recognized as stock manipulation for 60+ years, and then they were explicitly legalized by a pro-corporate administration. This change in policy was to allow corporations to game their own stock price, mostly for short-term benefit, redirecting excess cash away from reinvestment and into the hands of c-suite and large shareholders. Would love to hear your suggestions to regulate more 'prudent' behavior by the poor, struggling corporate executives of America.
Is there REALLY stock footage of people fighting over toilet paper?! :O
HallowedArcher was wondering the same thing lol
HallowedArcher Yes
That's not stock footage.
that was the lamest stock footage Ive seen
"They're going to go out and spend that extra cash on a friday night"
And herein lies the major issue with this particular crisis :/
What goes around comes around. What I spend on a friday night goes to the waiter, that waiter might buy a couple of bread from the bakery, the bakery buys more flour, the farmer sells more flour, buys more equipment from me. And the cycle goes on. The problem is when that cycle is disrupted which could mean the flow stops.
ReasonableRadio even if they don’t spending on staple items is necessary and unlikely to slow down despite what happens
@@therealnoodles7638 no, the problem is fiat currency. An unlimited supply vs a limited supply is always going to be a problem. No on really knows how rich they are, which is why stock markets go up and down like roller coasters.
Is everyone in this comment chain particularly stupid or do you simply not understand that the original comment is talking about the virus and how people are not practicing social distancing?
@@GameFuMaster its about the current pandemic but nice lecture
This is literally the PERFECT time for this video
Good job 👍
In India the central bank isn’t reducing interest rates rather Fiscal stimulus or QUANTITATIVE EASING. Dunno if it’s wise considering almost major economies are reducing their interest rates
I'd say its wise because inflation might increase
So is Japan and the US, most of that money is going to temporarily cover business debt while everything is shut down so that tactic can only work in the short term
but, india didn't got hit as hard as other countries. the central and state Govt's are working their best to contain the virus. overly cautioning may cause more problems.
In india inflation was close to double digit in 2,3 months back. Reason was food inflation..but demand is also down for most durable consumption goods... Central Bank of India (rbi) can't slash down interest rate during this time of inflation but did something for the monetary stimulus ...they exempt cash reserve ratio requirements for new loans to specific sectors and launch a long term rapo operations which will give same result as of easing of interest rates.
@@IxoraNera India still got hit by economic effects.
If it fails, it gets nationalised. Simple as that.
It is stolen by the state, you mean?
@@angelobcastro No. Those companies would not exist if the state didn't bail them out. If the company makes profit in the future the state has the right to at least recover what it invested
@@angelobcastro Well, it isn't going to produce any service or product or redistribuite wealth via salaries anymore, so why not? In a capitalistic society a business that doesn't do any of those is socially useless anyway
Have you heard the tale of FannieMae and FreddyMac?
Too big to fail clearly just means to big. Break them up and put them under new management.
Thank you for the explanations. As an aerospace engineer, I have learned to consider macroeconomics to be as complex as 3 stage rocket propulsion .... Only with more magic
Rocketry is a science, economics is just black magic
@@gabrielyamada6122 economics is a science also. Theres a reason the Austrian economists are always right in the long term with their predictions
@@jasonboursaw3258 You do know this isn't an Austrian channel right? EE is a Keynesian, so he'd likely disagree with that assessment. Feel free to go right back to worshiping the Eye of Mises.
@@jasonboursaw3258 if a physicist claimed that tomorrow gravity will flip upside down, everyone will laugh and nothing will happen.
If an economist claimed there will be an economic downturn tomorrow, people will panic, liquidate everything and there then will be an economic downturn.
That's the difference between a real science and economics
@@ArawnOfAnnwn I'm well aware. The fallacies of economics are always easily seen with Keynesian economics.
I think the solution to this abusive corporate system of spending recklessly and relying on government bailouts is for the governments to simply nationalise the corporations with their bailouts. Some of the money I've seen go to certain companies, even in regular times, amounts to more than enough to buy out the company outright. A strong example of that is Bombardier in Canada, which receives more than enough subsidies to turn them into a Crown Corporation many times over. This would either create corporations led more responsibly, or incentivise private corporations to run themselves more responsibly. They can be privatised later for profit to the government which can then be reinvested.
I couldn't agree with you more. Us as the citizens want a return on your investment in the companies. It's our money and there is no good reason why we shouldn't get the benefits of using it to save the workers instead of the CEO and shareholders of the company that mismanaged the company in the first place.
That's exactly how a bailout works, government's don't just give money to companies. When a company receives a bailout it essentially means the government buys a majority stake of their shares, allowing the government to have some control and sway, while giving the company much needed revenue.
Absolutely poor solution.. go through indian scenario and see what transpired. A govt held entity attracts bureaucracy and red taping. Divestment is the last resort..
There are two ways of dealing with the problem IMO:
1) welcome to the free market baby, let them fail, new airline companies will be made. If there is a need the market will take care of it and in no time you will have the same service and employment.
2) If you wanna bail them out, buy them in part. Once the crisis is over you sell the shares for a profit.
The biggest problem with the first one is mass unemployment leading to runoff deflation wich builds on its self making it less advantages too spend
Love how every stock scene is literaly more about words that you using, than about topic itself xD
I was just wondering if anyone else found the stock images on this one especially good
I personally find it distracting so I try to close my eyes and listen to it.
Well, why not have the bailouts be in the form of a loan? A favorable loan for sure but one when it should pay back more to the system that bailed them out.
Not sure I agree that supply side problems are more difficult to solve. On the monetary policy side, lowering interest rates boosts investment. On the fiscal policy side, states can use instate grants for entrepreneurs and / or guarantee some of their loans with banks.
Real question tho, would a good strategy be telling the corporations, whem in times of prosperity, that you are not gonna bail em out next time the economy goes bad? Like encourage them to save up when times are good? Or is that not as good as it sounds?
That sounds like an empty threat to me. You still need someone providing the services those corps are responsible for.
Seems to me that the real sollution is to not permit such large essential corporations from existing in the first place. Basically, you need a massive increase in enforcement of antritrust laws during economic upswings.
Nolan Hartwick yea. Or say a bail out will actually be a buy out. This makes more sense. Then the government can split these companies up during the good times. I don’t know if this would work but it seems good on paper
It also doesn't help that everytime the Government bails out a corporation, they spend it on stock buy backs.
How old are you? Even 12yos will see right through it.
Telling a rich person that he’ll sink one day will probably get you a laugh, then ignored. Strong entities only really listen or care for advice when they’re going through it.
If I were a head of state and asked for a bailout: "Okay, but you're getting nationalised, your shareholders will get nothing, and anyone in management who leaves in the next ten years will be banned from working in management ever again."
I always figured Moral Hazard had an easy fix: offer bailouts to companies but break them up like a monopoly or trust. Their services remain intact, but the field will be more competitive in the future, in addition to deterring the CEOs and stockholders from just asking for a bailout. I'm not an economist or politician, so what do I know?
I remember how you said this was "just a bad flu" a few weeks ago.
Source?
@@realsemig It's bad, but it's definitely not an influenza virus.
@@realsemig And that is why we must change our behaviour and adapt, as we did in WW2, for example.
@@realsemig Yeah, just you wait until a person close to you is in the ICU, fighting for dear life.
Old rich elite have their own private doctor and medical equipment. The middle class and bellow will be buried
"lets write swear words into the script BUT lets bleep them to annoy everyone" - genius
He likes to be paid for the work he does
It's so edgy, yet so monetizable
In the supply side problem in economy the wise step would be to stimulate demand of investment goods (for creating production capacity in economy )..after some time this demand will trickle down into consumer demand..in the long terms this is step economy should taken...
In Indian economy during 2008 crisis government give a huge stimulus via fiscal policy but did not build enough capacity in industries this results into huge inflation afterwards....
Print loads of money. Right guys?
litterally can't go wrong
Even my damn teacher and textbook will actually agree with you...
Germany did it why cant we
@@EconomicsExplained
Cough Cough QE
@@ronanlanam1127 and look now they are in a decent position, almost 100 years later!
I find the videos become much more fun when a bit of personality shines through when you integrate jokes. Videos are great please keep making content thanks!
My corrupt government seeing this during my country's economic recession:
"Yeah...we know :)"
I guess some South American country
"Eastern Europe"?
Is it because of [CENSORED]virus
@@nephronum yup
I see you are from south america bro. Same boat here, our governments are just like “yeah, let’s stick with selling drugs” :(
I really like how you roasted so many corporations an countries without calling out names. Keep up the good work 👌.
"Economic crisis is a price for blowing up the economic bubbles by printing money and lowering interest rates." - Mark Twain
Your analysis of big banks behavior is perfectly expanded upon in a book I just finished, The Banker's New Clothes.
Last time i was this early, there was still a mortgage bubble
Internet explorer: Last time I was this early, there was still a dotcom bubble.
I wouldn't be surprised if they fight a popping mortagebubble behind the scenes.
Highlights the biggest flaw in our current capitalist system, points at a more “Social” means of organization as a possible solution.
I love it when the economics themselves show that an inverse of crony capitalism is a soft socialism state. When the people have the power the people will be the focus of the benefit.
last time i was this early the corona was still in Wuhan
👀
I never thought the day would come where I stop everything to watch an economics video as soon as it comes out.
Last time I was this early we were still using the barter system
our ancestors used an informal credit system, within their own communities not barter.
Thanks for your work. Very educational and clear. 👍🏻
‚now you have my interest.‘ legendary
You, my friend. Put out the most interesting content on all of RUclips. Champion. Keep it coming.
'what if hypothetically something has caused factories to shut down, airlines to stop flying...'
2020: WRITE THAT DOWN, WRITE THAT DOWN!
There is a good deal to be learned by studying how depression triggers aligned in the past. So, to understand why the "Great Depression" occurred in the 1930s, one must look at what occurred during the years building up to the crash.
A significant amount of the credit made available during the 1920s went into land speculation. A good primer on what occurred is found in the book "Only Yesterday" by historian Frederick Lewis Allen. Not only did investors become captured by the frenzy of the Florida land boom, this same frenzy occurred in many cities in response to population increases that triggered a significant increase in the demand for both commercial and residential land. An agricultural land boom also occurred during the First World War, during which time farmers borrowed heavily to expand their land holdings and production. A few years was required after the war ended for European farmers to recover, but by the mid-1920s global production exceeded demand, prices fell, farmers defaulted on loans when government guarantees were removed, and rural banks failed by the hundreds.
As the land boom crashed, investors shifted heavily into the stock market, driving up prices well beyond what any fundamentals supported. Thus, by the end of 1929 the U.S. economy was stressed across almost all areas of production as well in the financial markets. To be sure, imprudent bank lending deepened the crash and lengthened its duration, but it was a crash in the making because of the failure to utilize tax policy to tame the credit-fueled, speculation-driven land markets. A few economists (e.g., Harry Gunnison Brown, Scott Nearing and John R. Commons) had argued the case made in the late 19th century by Henry George, who showed that cyclical booms and busts would be tamed only if the full or nearly-full public capture of the potential annual rental value of land and of rents from other sources (e.g., the broadcast spectrum) became public policy.
Harry Gunnison Brown was joined over the succeeding decades by a small group of economics professors who continued to make Henry George's case. One could argue that recessions that began again following the end of the Second World War would have been even worse if local governments did not capture some land rent via the taxation of real estate. However, as land prices climbed property assessments rarely kept pace. This made speculation in land an even more profitable investment.
Relying on out-of-date assessed valuations rather than current market values created a serious analytical problem for government statisticians. They simply did not understand that any increase in the price of land is inflationary and did not include such increases in their calculation of inflation. Another failure has been to accurately calculate the annual aggregate rent that is privately captured as unearned income (whether imputed or actual). Since the administration of Ronald Reagan, the federal government has not monitored land prices. The figures utilized in the econometric models relied upon by the Congressional Budget Office and the Federal Reserve are around 5 percent of the actual potential rent in the economy (see Joseph Stiglitz or Mason Gaffney on this particular problem).
I offer here a very rough estimate of the rent attached to just one part of the economy, the residential property market. At mid-2020, the median price of a single-family property was around $295,000. There are about 140 million existing housing units in the United States. If we assume a fairly conservative median land-to-total value ratio of 35%, this means that the aggregate residential land value in the U.S. is $103,250 per property, multiplied by 140 million = $14,455,000,000,000 ($14.455 trillion). Economic theory tells us that this aggregate land price occurs because of the capitalization of the net amount of rent that remains in private hands after taxation. If most or all of the rent were captured via taxation there would be nothing to be capitalized and land prices would fall to very close to zero. What the rent fund might be depends on the discount rate. If we assume that investors will invest in land if they can obtain an annual increase of 5%, the the rent fund would be calculated as follows: 5% of $14.455 trillion = $722.75 billion of rent JUST for the land under existing residential buildings. Add in the number of vacant residential lots around the U.S. and this figure will increase considerably.
Tragically, the public capture of land rent never became public policy, allowing the land market cycle to operate from boom to bust. It is on schedule to crash again in 2026. I have prepared a relatively short video in support of this forecast for anyone who reads this and has an interest in more details:
ruclips.net/video/fmA6ZPs-wus/видео.html
I have checked out other economics channels but your's the best.can u do a video related to cryptocurrency
I already have :)
@@EconomicsExplained ok
Great video, brav - really enjoyed this one! 🙏
0:57
my country finally in this show ❤️
i think the benefits of infrastructure spending are WAY overstated, especially when it comes to roads...
in melbourne they are upgrading the train line to a raised train line, allowing cars to pass under the train line...
Cost: $1.6BILLION
Benefits: saves cars waiting a few minutes everyday for a train to pass
On bailouts: one proposal I encountered (an Extra Credits video interview on money) is requiring the bailout to be paid off multiple times
Another great video, thanks a lot for all of your videos!!!
non-economist non-politician idea: if the govt bails out your company, the govt now owns x dollars worth of newly created stock in your company where x is whatever price the bailout cost
In some cases it was used - and during the last crisis German state become the biggest shareholder of Commerzbank.
(in practice bailouts are technically speaking loan or shares purchase, just on very favourable conditions)
Our Govt(Ireland) became the majority shareholder in most of our banks
I believe the government should then sell it to a more competant business.
bailing out isnt just grants, its generally low interest loans, usually with some requirements. buying stocks is also an option and was used by many countries during 2008.
Your remedies was what make depression great.
Hey man, it sounds like the gain on your mic is a little low, cause you're losing some of the end of words in your audio. If you listen closely, you're losing some of the words that end with s, t, f, and others. If you turn up your gain a little bit, it should help fix this. Other than that, another great vid, keep up the good work and stay safe 👍
Wow one of the best explanations I’ve seen so far
*Greece : yep , we are taking notes*
I think they are busy fighting an invasion force on its borders.
@@SangoProductions213 what? Turkey?
@@SangoProductions213 Bulgaria?
Your content is gold! Keep up the good work
So you mean to tell me that the economy depends on consumer spending and not "job creators"?
Who knew????
Supply side economists, specially the ones who worship Milton Fried man
CITIZEN SPENDING not GOVERNMENTAL SPENDING ,because GOVERNMENTAL SPENDING will make the COLAPSE WORSE
Could you do a video on Cuba and the strain the embargo has caused it, as well as how Cuba attempts to cope with it?
Can you make a video about the economy of the Roman Empire
Congrata on 300k subs, iv been following since 10k ✊
What you don't do is blow your load with 0% rate cuts and 700 billion in QE *before* anything happens, those are steps to come out of a downturn.
I don't see any airline as too big to fail. We've lost big players in the past - Pan-Am, TWA et al. Planes go into storage then leased or bought by the next highly leveraged player. It's an industry with many moving parts. Buffett famously avoids them. This may be a cue for Amazon to break into the scene having a sizable cargo fleet already. Great video - amazed you found stock footage of people fighting over a loo roll!
Eurozone: CRY
PD: Spain episode please :)))
PD?
@@alexandrub8786 Post data
Hey man great video! I think you need to adjust your noise gate. The voice is being cut off prematurely in parts.
Next time, make a video about how crime and drug dealing work in an economic sense, just an opinion
Youssef HEGAZY 2 this dude wants to sell drugs
@@sm1522 not me, I just want to know how crime affects global economy, research purposes.
@@JoJo-xp6wr bans on products and how they affect the economy would be also interesting. Like that alcohol ban in USA.
@@alexandrub8786 not banning, committing the act
@Economics Explained Hi, I recently came across a political Movement called Progressivism which was common during Enlightement Era and basically started the Industrial Revolution. I love your videos and think You are doing a great job, I remember in some video I watched you were asking the viewers, what they tought would be a great solution for our world economy to prosper. I think the Progressivism is the way to go... Wish you well
Bailed out companies should never be allowed to buy back their stocks.
Love you videos mate.
Would be great to see a video on how exactly interest rates are dropped, and the impact on the nations currency.
Either way, looking forward to future videos.
I love how to represent a vicious cycle it’s literally a guy spinning a bicycle gear
Rufus hanna Lol yes gotta love it 😂
2 things on this otherwise great contribution:
- A CEO's job is to act in the interest of his company. If bonusses stand in the way of that, because that makes the CEO only care about short term gains, then the solution is to forbid - at least - short term bonusses.
- bailing out big corporations should be done in a way that the government buys shares from the shareholders (or receives new shares from the company it concerns). The company can then be saved and, after the crisis is over and the company is profitable again, the shares can be sold, hopefully at a profit. This hopefully helps in preventing taxpayer's money just going up in the air...
a CEOs job isn't to act in the interest of the company, it's to act in the interest of the shareholders. this is because it's the shareholders (read: the board of directors) who hires and fires the CEO. sounds like the same thing but it's not, especially when dealing with public companies. if the shareholders (that is, the board of directors) want short term gains, which they typically do because it increases their personal net worth in the short term at a relatively low risk level, then the CEO is going to be conpensated based on short term gains.
look at the way a venture capital fund will incent founder CEOs... they generally won't do much, maybe pay a salary in the low 6 figures, and the CEOs of (even highly valuable) startups don't have very high salaries. some will take salaries as low as $1 and not take any form of cash payment, forgoing all liquidity for a greater return in the future, sometimes the far future. the reason this is, is because shareholders in a startup are not looking for short term gain. they want 1000%+ in 5 years or 2000%+ in 10 years, not 5% in 3 months like shareholders in public companies. what's more is that in a startup, the CEO will often be either the primary shareholder or one of the biggest shareholders in the company, so his incentives are much different than the hired CEO of a public company. both want big paydays, but the way they get them is different due to their alignments with the shareholder's goals. the shareholders invest in the two types of companies for different reasons and that all has to do with their appetite for risk. the more short-term and guaranteed an investment is, the less risky it is. this explains the difference in shareholder attitudes, shareholder behaviors, CEO behaviors, and incentive structure.
@@justinthen7631 "a CEO's job isn't to act in the interest of the company, it's to act in the interest of the shareholders".
That's not true. It probably depends on the jurisdiction you're in, but in my country the law explicitly states that members of the board of directs of the company need to act in accordance with the interest of the company. However, a CEO that only cared about the shareholders and not about other interests (minority shareholders, employees, costumers, etc.) will probably not be a good, effective leader and will be forced out of the company reasonbly quickly.
Also, why are you confusing the board of directors with the shareholders? Members of the board of directors are, in general, named and fired either by the shareholders or, when it comes to big companies, the supervicory board of the company. As the CEO is also a member of the board of directors, CEOs are hired and fired by the supervicory board or the shareholders, not by the (other) board members.
The rest of your comment is interesting, but I don't feel like it goes against anything I typed in my first comment (which I did type in a bit of a hury to be honest, so maybe that comment isn't so clear). I fully understand why CEOs who should act in the interest of the company can stop doing so when a big amount of their salary depends on short term successes. That's why I stated that this problem can be solved by forbidding such bonusses. In that way, CEOs will be forced to actually do a good job and make sure their company does well in the long instead of just doing crazy things hoping it'll get them their bonus in the short term.
Do a vid. On how to resolve the current Economic slowdown of India .
he did it one's right, i heard something like the slow down will continue this year and the economy gonna pic up next or so
i mean 1,2 billion people is hard to maintain i imagine
@@deivydasbaksa3324 yeah..India should have been autocratic like China
@@korabkanwar6784 freedom and free speech come's with a price. But even the autocratic china failed to contain corona virus.
@@IxoraNera yeah..but the brighter sides are infinite.
Excellent video, thanks you helped me understand the Corporate Moral Hazard.
Loved that 1:36 . Illuminati confirmed
FYI, *there's a way* to punish reckless companies and their investors: as a condition for a bailout ask that they raise part of the money on financial markets by selling new shares. It's a reasonable thing to ask since it's often done by companies at times when they need money anyway and it lowers the value of existing shares, balancing the effects of buybacks in previous years.
“ you might find yourselves without a major service line airlines or grocery stores, or banks” .......... no I don’t think this is what it would do........ it’s like you said, the entire system revolves around people just playing the system and choosing the “sensable” choice or stock buy backs over saving ............. making a company shut down, is not a bad thing. It opens oppertunity for new companies to step in.......
Making companies accountable is what we NEED to start doing
A massive company thought impervious to economic downfall has just gone bankrupt. Would you like to start new company in the same market?
@@ferencgazdag1406 yes! Big companies suck! They can't be efficient. People talk about economies of scale, but huge corporations are so bloated and inefficient that they just pool their money together to buy other companies to stave off redundancy. The business model of gigantic corporations is to lie enough so that investors will keep propping them up with that free money. As long as the investors are fooled, then the bonuses keep coming in for the CEOs.
Corporations are the problem. Companies need to be lean, competitive, and not monopolies, so that if one goes down, there are others to pick up the slack.
@@ferencgazdag1406 yes! Big companies suck! They can't be efficient. People talk about economies of scale, but huge corporations are so bloated and inefficient that they just pool their money together to buy other companies to stave off redundancy. The business model of gigantic corporations is to lie enough so that investors will keep propping them up with that free money. As long as the investors are fooled, then the bonuses keep coming in for the CEOs.
Corporations are the problem. Companies need to be lean, competitive, and not monopolies, so that if one goes down, there are others to pick up the slack.
"It opens oppertunity for new companies to step in......." - starting a new company in a sector with as high upfront costs and barriers to entry as airlines, shipping, banking, etc. is no easy task. It isn't a simple job to replace those kinds of things. Especially if that industry is already teetering. Not that means it shouldn't be tried, but don't count on it as if it's nothing.
@@shorewall They are no efficient, but they had a lot of money, and they lost it all very fast. You expect something similar with your startup.
This is a great analysis if you are from a stable economy and developed country, but, what about developing countries? What are our tools? A video on that could be cool.
Watching 14 minutes of stock footage many times completely unrelated can be distracting sometimes. My suggestion is to try a whiteboard, or real, related footage of the thing you are talking about, or a vlog kind of style. Your voice is really captivating, but the footage man.
you can just not watch it
Best of luck with that... You're oh so helpful
Since when was seizing the means of production a bad thing? nationalise the industries, that both punishes the ceos and the shareholders while maintaining the essential services
People like you are why this crisis is even possible
@@raaaaaaaaaam496 By acting recklessly and waiting for the goverment (aka people aka taxpayers) pay his debts?
Mek101 What if? People thinking government interference is the solution to a problem caused by government interference.
@GamingRanger
1) it wasn’t government interference, it was non-interference
2) what i’m talking about goes beyond the government, I’m talking about the people directly being able to have what they need
My country is doing all of the policy, they lowered interest rates, there is no income tax and cooperation tax/sales tax is lowered with rent exemptions, there are huge infrastructure taking place across the country from bridges to metros to highways. Lastly there are large subsidies for many companies that offer supplies for food, medicine and other essentials.
*Plural s at the end of words exists*
Economics Explained: No, I don’t think I will
Finally some good economics related videos with cool jazz in the backround , to hell with all that cheesy -ass Hans Zimmer type beats
Question, Could declaring a reckless war to a random country, say, a country in the middle east, or maybe a giant red country in asia help fix an economic crisis?
Stability and confidence only came at the last minute... I thought it was gonna be the first video without mention. 🙆🏽♂️
Why did you stop pluralizing words that require it in the given context? I find it oddly annoying.
Yeah, he makes some really weird grammatical mistakes.
Question: how come the Quantitative Easing that the USA did after the GFC didnt cause significant inflation in the USA? can we assume that will happen here in australia the same way - as in not much inflation caused by the money printing?
The answer could be that QE caused asset price inflation as opposed to consumer price inflation. I.e. inflation showed up in asset prices (stocks, bonds etc)
imagine my panic when the girl in the video input my PIN at 7:01
Was it as much panic as when you posted to the internet that that was your pin? :D
@@shorewall bruh you need the physical card to use someone's pin
@@jordanlucien426 We'll find David, don't worry.
You get a like purely for that first section header...although I think every video of yours I’ve liked so far!😏 Nice job!
As to the *moral hazard:*
Nationalise the company. Make the stocks worthless. Replace the management. Forbid bonuses to all management.
Move the HQ out of some expensive skyscraper back to where their manufacturing is.
But guys like Trump and Johnson are never going to do that, as it attacks "their" kind of people.
You do know that every company’s goal is to make more money, while the skyscraper costs a lot it’s in a central location and acts as a means of advertisement too
I think you should talk to some Venezuelans about how nationalised companies fare.
Such a great video, really learned a lot here !
Thank you for producing this high quality content
Bruh we have to first fix corona and only then think about the economy
Shareholders of companies are concerned with two things when considering investments in corporations
1. Dividends
2. The cash flows from the sale of the shares
With this in mind consider the determining factors of these forms of future cash flows moat notably the future share price. The price of shares is generally determined by the expectations of future cash flows from the company which is calculated either with a perpetuity equation using the cash flows from dividends, or a future expected sale price plus the annuity of the cash flows from dividends. Given this we can determine algebraically that the the price at t0 now is dependant o the future expected price of the shares in the corporation. Given this the shareholders of the company even if they are short term investors, should be concerned with the long term health of the corporation. Now like you always say stability is the foundation of an economy and similarly stability and a more sure expectation of future cash flows will improve the prospects for an investor in a specific security. Now while certainly an expectation of bailout can effect the management decisions of a corporation the uncertainty of the companies future cash flows due to risk of either a lack of a bailout similar to perhaps Lehman or measures that governments impose on the corporation as conditions for bailout. At the very least perhaps the shareholders at least are not specifically interested a bailout. I can definitely perhaps see the incentive for management to take shortcuts given the limited careers of their executives. But all the while they should be concerned with the share price and so they should be concerned with the long term share price. Anyways this is more or less the explanation that I was taught by my finance professor concerning the objectives of short term investors. Would love to hear feedback and I live the videos!
I wasn't really able to parse most of that, but I will put my take on Share prices. I see Corporations as a Ponzi Scheme, or Pyramid. People buy in with the dream that the price will go up, allowing them to sell at a later date for more money. Everyone who ever buys a stock does so for this reason. But nothing can go up forever.
So it all comes down to PR and image. Do investors see the stock as likely to go up in value? CEOs get their multi-billion dollar bonuses for raising stock prices. So the CEO is incentivized to do only things that will make the stock look good and go up, even if that isn't true or wise. A lot of times, the things that will raise the stock price in the short term will have negative long term effects. And things that will help the business in the long term might hurt the stock price in the short term.
So corporations are reduced to short sighted, greedy ogres. They sit on a pile of gold, but don't know how to use it wisely. I have nothing but contempt for these bloated mega corps, that pretend to offer value. They are inherently inefficient and wasteful, solely concerned with looking good to investors in the short term, without a long term plan aside from buying out other companies and growing so large that they are a monopoly, and therefore worthy of bailouts.
Basically, every corporation dreams of fooling investors long enough so they can get too big to fail. There is no brain power at the top of these corps, at least, not concerned with operating as an actual business.
Shorewall but see this isn’t what stock prices represent, a stock price is a representation of what investors believe future cash flows from company to be this can be represented in a basic perpetuity formula of d/r d being the dividend payments and r being the discount rate now if the value of a stock is based upon future cash flows forever then we can determine that investors will be concerned with the cash flows and therefore the company’s health forever. Moreover if the executive team cares about raising stock prices of a given security then they will invest their resources in a firm in a way that maximizes cash flows forever we can also represent the value of a stock with the equation of p(0)=((d/r)-((d/r)/(1+r)^t)p(t)/1+r^t)
This is the equation for an investor who plans on selling a security at time t
Here p is price of security at (t) which is time d is dividends r is the discount rate.
This represents the annuity of the cash flows gained from a given security for an amount of time plus the sale price of the security at time t now if we apply this same formula to price at time (t) we can understand how even to a short term investor who plans to sell the security in the near future that the value of the security is in fact based upon the the cash flows to infinity. Therefore, it is not in fact in the interest of either investor or management to take short term action plans that will bury a company’s future cash flows and therefore price
"Crazy commie out there to seize the means of production"
That sounds like a good idea. Maybe only necessary temporarily. But I'd prefer that by far compared to bailouts or the feeding frenzy of bankruptcy.
@@richardflynn4112 hahah got eem
@@richardflynn4112 "I'm 14 and this is deep."
@@richardflynn4112 I guess you missed the "only neccessary temporarily part".
Governments have put companies nationalized insolvent but vital private institutions before, cleaned up their books and sold them for profit many times in the past. This has the benefit of not allowing moral hazard by signaling that the institution might be saved but those who own or run it won't without having to deal with the mess of having a vital institution liquidate.
This isn't really Communist because it is temporary but it often gets portrayed as such.
If you think the other two alternatives are better or you have a way of solving the problem without a vital institution collapsing or bailing out people who committed wrongdoing then I'd like to know.
Excellent analysis
More bailouts, QE and austerity is the future until the Guillotines come back.
can companies be forced to keep a fund in place for national emergencies? or is that legally unworkable?
"subsidies for toilet paper'" :)
Can you do a video explaining how the U.S. student loan debt has gotten so out of control? I’m terribly ignorant on the issue, as well as what other nations experience this, but it seems like a vastly complex issue that greatly affects our economy.
Liar, liar, pants on fire.
Not everyone in OZ got the cash handout during GFC.
@@thelakeman2538 like I said, not every taxpayers get the bonus. Do you always believe everything said on YT?
Be a critical mind.
@@thelakeman2538 , ok, since you appear to be lazy, I will let you know that people who earned >100k miss out. Use your mind, Google is out there.
@@RUHappyATM Realistically though, there's a lot less people earning 100k+ in Australia than those earning 100k wouldn't really need it as they have a higher percentage of their money in savings compared to those earning less money.
Also, those earning less, if given extra money from the government would most likely spend that money straightaway rather than save it as they would just see it as extra money that they can now spend (plus a lot of them haven't completed any form of higher education). People earning >100k would see this as an insignificant amount that wouldn't be worth spending straightaway which isn't good for the economy and defeats the purpose of giving money out to the taxpayers in the first place.
Wayne Swan really thought this through, huh?
@@oddcoyote2598 wtf! Who is arguing the morality of mean-testing the Handouts? Just pointing out the inaccuracy. It's only add a few secs to say "the majority...got the Handouts". When he didn't say that he would imply that millionaires also got the Handouts.
hay EE. what would your opinion be on aiming for 0% inflation/deflation and encourage spending by having very high income taxes but allow people to write off almost anything from their personal taxes. essentially encouraging spending by forcing people to either spend their money or give it to the government, I'm sure most people would take the former.
"The Economics of the Corona Virus (Covid-19)"
It must not be named!
What are your thoughts on "bail-outs" in the form of a government provided loan (no or low interest) or shares so that private companies become part public owned. E.G. if the Aus Gov bailed out QANTAS by buying a heap of shares thus turning QANTAS into part public part private and can generate revenue for the government when it almost inevitably returns to profits?