/biz/ - Business & Finance

>>19218702
Yea, this was a total nothing burger. The unemployment will disappear once we reopen and the pent up demand will make up for lost profits.

Explanation of whats happening:
2008: Banks were greedy and laws were bad. Banks would give loans to bad debtors (mostly poor homeowners, but also a few businesses like airlines and car manufacturers) then turn around and sell that bad debt as "good" debt. Then everyone found out that this debt was worthless and there was a desperate struggle to reclaim losses, if any. However, home owners were not bailed out, while banks and business were. What did this mean for business? They could do anything! Welcome to "too big to fail" economy son!

Now companies found they could pump up their numbers with buy backs and loans, sending their valuation sky rocketing. And since interest rates were effectively zero, banks were happy to keep giving out loans. Banks don't make any money holding on to money, they make money on interest, so to the banks, more loans = more profits. First it was only large business with real assets taking these massive loans and pumping their numbers. Then banks encouraged smaller and smaller businesses to get massive loans. Who cares if some go under when you've got thousands of loans all safely paying you a nice interest? Nobody even thought about paying off these loans and the bank didn't care either, as long as you paid interest. If you needed money, just buy back some stock and get another loan!

>>19139048
>>19138008
No shit. Companies learned that they can do whatever they want and government will save them. On top of that, they could fudge the numbers just a bit in combination with stock buy backs to sky rocket the price of shares. If you paid attention to the latest earnings, you'd see something interesting. How did these companies perform so well despite the catastrophe? The truth is, they were never performing that well to begin with. They took out loans and bought back stocks and manipulated earnings to balloon their value, which let them get more loans and repeat the process. This is why buy backs is a controversial topic right now, its good for share holders but it gives the illusion of growth when in reality the company has been stagnant. Remember the mantra: Green line go up!