“Let Them Fail” – Billionaire Explains To CNBC How Capitalism Is Supposed To Work

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Zero Hedge: Then Wapner asked: “Are you arguing to let airlines fail?”

Palihapitiya, who was speaking on the phone, responded with a very assertive “Yes.”

Wapner seemed blown away by this. Struggling to process the answer he had just been given, he followed-up, incredulously: “But how does that make sense in the broader scheme of the economy?”

Then Palihapitiya went off.

“This is a lie that’s been propagated by Wall Street. When a company fails, it does not fire its employees…it goes through a packaged bankruptcy…if anything, what happens is the employees end up owning more of the company. The people who get wiped out are the people who own the unsecured debt and the equity…but the employees don’t get wiped out and the pensions don’t get wiped out.”

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“And if a bunch of hedge funds get wiped out – what’s the big deal? Let them fail. So they don’t get the summer in the Hamptons – who cares.”

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Opinion: Excerpt from our post December 20, 2018:

Take a trip back to 2009 when a new US president and Treasury Secretary were faced with a deep financial crisis. Then Fed Chairman Ben Bernanke worked hand and glove with Obama/Geithner to prop up the US economy by printing four trillion in counterfeit dollars and depositing them in ‘too big to fail’ banks.

Excerpt from our post June 7, 2019:

The point here is that the global economy, particularly the US and EU, has never gotten over the 2008-9 financial crisis. If, as we have said many times before, the US and EU economies had gone into depression, both would have emerged years ago stronger and without untold trillions in new debt.

I used this cartoon to make the point.

Image result for kicking the can down the roadToday we can officially say that we are down the road and kicking the same can, except the debt has grown from $12 trillion to $24 trillion, not counting the $6-10 trillion being created as I write this.

The Fed has taken over ALL the capital markets. ‘Too big to fail’ became the mantra of the 2008 financial crisis, and it is the (unspoken) mantra of the current crisis.

“Let them fail”, as Chamath Palihapitiya says, sounds really harsh, but he is correct. Bailing out businesses and hedge funds that have made disastrous business decisions only encourages more bad decisions.

When businesses file bankruptcy they are often saved by a rival or emerge smaller, leaner and under new and more competent management.

Did you know that Apple, the world’s largest company by market capitalization, was once in dire straits? While never actually filing for bankruptcy, Apple was on the verge of going bust in 1997, source.

The major US airlines spent $45 billion buying their own stock back that today is worth much less than they paid for it. The Federal government is planning to bail them out with $50 billion. Does that make any sense on any level?

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