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Suppose there was a bank local to American Samoa and another international bank with a branch in American Samoa, and the latter could offer higher interest rate

Suppose there was a bank local to American Samoa and another international bank with a branch in American Samoa, and the latter could offer higher interest rates because it saw fewer average defaults when lending money. Are you saying we should prohibit American Samoans from putting their money in the international bank and getting higher returns, effectively forcing locals to lend to other locals?

Lionsion 9y ago
> Are you saying we should prohibit American Samoans from putting their money in the international bank and getting higher returns, effectively forcing locals to lend to other locals? If it improves the local economic conditions by keeping money flowing in the local economy, then such a ban seems like a reasonable trade-off for the common good. Being a greedy individualist, by focusing on chasing after marginally higher savings account interests rates, is likely going to be self-defeating in this case. Your dozens of dollars in extra interest payments are unlikely to compensate you for the other economic hardships you'll encounter because there's no local bank that will bother to make loans to your community.
- SamReidHughes 9y ago
  It worsens local economic conditions by directing local resources to unprofitable forms of work.
  - mannykannot 9y ago
    I doubt the consequences are worse than those of not having a functional banking system.
  - frgtpsswrdlame 9y ago
    But it doesn't direct local resource to unprofitable forms of work, it directs local resources to less profitable local forms of work rather than more profitable foreign forms of work. That seems like a perfectly reasonable trade-off for a community to make.
  - Lionsion 9y ago
    > It worsens local economic conditions by directing local resources to unprofitable forms of work. That has to be one of the most myopic and heartless things I've read all week. You're not going to improve local economic conditions in American Samoa by sucking all the money out their economy, so it can be used to chase profit elsewhere, while its people sit around idle because you've judged whatever work they can do as "unprofitable." I advise you to put down whatever hyper-libertarian economic polemic you got your idea from and read something more humanistic.
    - SamReidHughes 9y ago
      You're treating the economy like a perpetual motion machine.
      - Lionsion 9y ago
        You're just dropping slogans. Please reply substantially on why you seem to think communities like American Samoa would be better off if its people couldn't get bank loans.
        SamReidHughes 9y ago
        I'd think it's obvious that they can't invest their money profitably if you don't let them do that.
        Lionsion 9y ago
        >> lease reply substantially on why you seem to think communities like American Samoa would be better off if its people couldn't get bank loans. > I'd think it's obvious that they can't invest their money profitably if you don't let them do that. I don't think you're really wrapping your head around the situation. No one's saying they "can't invest their money profitably." What's being said is that it's better for their community if their community's money is deposited in a local bank that makes loans to the community, rather than an international bank that won't (and perhaps pay slightly more in interest). If you're having trouble wrapping your head around terms like "better for their community," you may have an easier time if you roughly translate it to "more profitable for their community."
  - empath75 9y ago
    You should probably google ‘comparative advantage’
  - eecc 9y ago
    Nope, not necessarily unprofitable. Sometimes it’s enouh to be _less profitable_ to be taken offline.
deleted 9y ago
[deleted]
JamesLeonis 9y ago
It's much simpler: Private Banking is offered for a profit, not because it is in demand. If an international bank can make more black ink stateside rather than Samoa, even if the risk/reward ratio isn't that different, the larger bank chooses the more profitable market to distribute it's loans. This puts Samoa in an awkward spot where they have a dearth of services, despite demand, simply because every bank made this analysis. It's classic Tragedy Of The Commons. A public bank, in contrast, does not have to put this absolute profit first, giving them the flexibility to enter markets where they might not be as successful, but they don't have nearly the competition for their services. Additionally, since this is operated by the state, they can benefit from business loans and interest as another form of revenue, giving them room to cut taxes or improve services. EDIT: As consolidation creates both larger businesses and larger reserves of capital, this causes the bank to make more conservative loans. They must play more defensively. As these banks retreat from "riskier" markets, it leaves genuine demand behind. Look at the article's description of "predatory lending" near the top of the article. Because there is this pent-up demand, a local bank could open a branch that captures some of that demand, and incentivizes locals with higher returns than the international bank because they can charge a higher interest rate. But the IntBank wouldn't still enter this market because the size is still too tiny to warrant their attention and/or the interest rates locally don't move the needle in their global reserves. It's literally too small to be worth the effort.
- zeveb 9y ago
  > It's classic Tragedy Of The Commons. It's not a tragedy of the commons unless something artificially prevents banks from charging a profitable rate for loans. If no other bank is doing business there, and if any bank which does do business is allowed to make a profit, then certainly one will. Indeed, that's what the 'loan sharks' are doing: providing desired services at a market-clearing rate. It seems to me that a public bank will end up having to be subsidised from the general fund to cover its losses, which in the case of American Samoa probably isn't very large.
  - exelius 9y ago
    I think the risk for a business is that when the rates get too high, shadow banking just takes over. Which it will, because the rates will be really high. It’s a whole lot of work to serve 55,000 people with a GDP of $13,000 per capita. There just isn’t enough economic activity to make this work from an international bank.

Lionsion 9y ago

> Are you saying we should prohibit American Samoans from putting their money in the international bank and getting higher returns, effectively forcing locals to lend to other locals? If it improves the local economic conditions by keeping money flowing in the local economy, then such a ban seems like a reasonable trade-off for the common good. Being a greedy individualist, by focusing on chasing after marginally higher savings account interests rates, is likely going to be self-defeating in this case. Your dozens of dollars in extra interest payments are unlikely to compensate you for the other economic hardships you'll encounter because there's no local bank that will bother to make loans to your community.

SamReidHughes 9y ago
It worsens local economic conditions by directing local resources to unprofitable forms of work.
- mannykannot 9y ago
  I doubt the consequences are worse than those of not having a functional banking system.
- frgtpsswrdlame 9y ago
  But it doesn't direct local resource to unprofitable forms of work, it directs local resources to less profitable local forms of work rather than more profitable foreign forms of work. That seems like a perfectly reasonable trade-off for a community to make.
- Lionsion 9y ago
  > It worsens local economic conditions by directing local resources to unprofitable forms of work. That has to be one of the most myopic and heartless things I've read all week. You're not going to improve local economic conditions in American Samoa by sucking all the money out their economy, so it can be used to chase profit elsewhere, while its people sit around idle because you've judged whatever work they can do as "unprofitable." I advise you to put down whatever hyper-libertarian economic polemic you got your idea from and read something more humanistic.
  - SamReidHughes 9y ago
    You're treating the economy like a perpetual motion machine.
    - Lionsion 9y ago
      You're just dropping slogans. Please reply substantially on why you seem to think communities like American Samoa would be better off if its people couldn't get bank loans.
      - SamReidHughes 9y ago
        I'd think it's obvious that they can't invest their money profitably if you don't let them do that.
        Lionsion 9y ago
        >> lease reply substantially on why you seem to think communities like American Samoa would be better off if its people couldn't get bank loans. > I'd think it's obvious that they can't invest their money profitably if you don't let them do that. I don't think you're really wrapping your head around the situation. No one's saying they "can't invest their money profitably." What's being said is that it's better for their community if their community's money is deposited in a local bank that makes loans to the community, rather than an international bank that won't (and perhaps pay slightly more in interest). If you're having trouble wrapping your head around terms like "better for their community," you may have an easier time if you roughly translate it to "more profitable for their community."
- empath75 9y ago
  You should probably google ‘comparative advantage’
- eecc 9y ago
  Nope, not necessarily unprofitable. Sometimes it’s enouh to be _less profitable_ to be taken offline.

deleted 9y ago

[deleted]

JamesLeonis 9y ago

It's much simpler: Private Banking is offered for a profit, not because it is in demand. If an international bank can make more black ink stateside rather than Samoa, even if the risk/reward ratio isn't that different, the larger bank chooses the more profitable market to distribute it's loans. This puts Samoa in an awkward spot where they have a dearth of services, despite demand, simply because every bank made this analysis. It's classic Tragedy Of The Commons. A public bank, in contrast, does not have to put this absolute profit first, giving them the flexibility to enter markets where they might not be as successful, but they don't have nearly the competition for their services. Additionally, since this is operated by the state, they can benefit from business loans and interest as another form of revenue, giving them room to cut taxes or improve services. EDIT: As consolidation creates both larger businesses and larger reserves of capital, this causes the bank to make more conservative loans. They must play more defensively. As these banks retreat from "riskier" markets, it leaves genuine demand behind. Look at the article's description of "predatory lending" near the top of the article. Because there is this pent-up demand, a local bank could open a branch that captures some of that demand, and incentivizes locals with higher returns than the international bank because they can charge a higher interest rate. But the IntBank wouldn't still enter this market because the size is still too tiny to warrant their attention and/or the interest rates locally don't move the needle in their global reserves. It's literally too small to be worth the effort.

zeveb 9y ago
> It's classic Tragedy Of The Commons. It's not a tragedy of the commons unless something artificially prevents banks from charging a profitable rate for loans. If no other bank is doing business there, and if any bank which does do business is allowed to make a profit, then certainly one will. Indeed, that's what the 'loan sharks' are doing: providing desired services at a market-clearing rate. It seems to me that a public bank will end up having to be subsidised from the general fund to cover its losses, which in the case of American Samoa probably isn't very large.
- exelius 9y ago
  I think the risk for a business is that when the rates get too high, shadow banking just takes over. Which it will, because the rates will be really high. It’s a whole lot of work to serve 55,000 people with a GDP of $13,000 per capita. There just isn’t enough economic activity to make this work from an international bank.