3 ms·

>loans represent a redistribution of real-world resources away from people who have worked for them and towards people who the banks like. If these people have

>loans represent a redistribution of real-world resources away from people who have worked for them and towards people who the banks like. If these people have the resources, why do they need loans? And who is forcing them to do so?

arethuza 7y ago
Presumably the same reason startups take VC - to invest to create even more 'resources'.
- barkingcat 7y ago
  In other words - desire and greed. There is no way to talk about financial systems without at least mentioning the psychology that drives money systems the way they are now.
  - ehvatum 7y ago
    The time value of money is a sort of aggregated greed, I suppose, and the time value of money is the motivator for finance. But the financial system is also shaped by regulation, and the psychology driving regulation in a democracy is more complex than a hunger for money. People have a sense of fairness and practicality. Why is FDIC depositor insurance capped, for example? Why are banks required to give special treatment to loans to deployed armed service members?
StanislavPetrov 7y ago
Corporations take loans, issue bonds, take on debt and then use that capital to give corporate officers multi-million dollar payouts, golden parachutes and to buy back stock (which they hold) which makes the corporate officers and stockholders fabulously wealthy while the debt burden of the corporation grows. Eventually the debt burden grows higher and higher and becomes more and more of a drag on the company until the company goes bankrupt, employees laid off, pension funds insolvent and the remaining assets of the company are sold off in bankruptcy proceedings. But by then corporate officers who extracted millions and those who cashed out during the stock buy backs fueled by this debt walk away incredibly wealthy, free to repeat this same cycle of behavior at yet another company. And the Toys R Us worker (or worker at any of the thousands of other corporations where the same thing takes place) who made $35,000 a year finds himself out of a job and without the pension he thought he had coming.

arethuza 7y ago

Presumably the same reason startups take VC - to invest to create even more 'resources'.

barkingcat 7y ago
In other words - desire and greed. There is no way to talk about financial systems without at least mentioning the psychology that drives money systems the way they are now.
- ehvatum 7y ago
  The time value of money is a sort of aggregated greed, I suppose, and the time value of money is the motivator for finance. But the financial system is also shaped by regulation, and the psychology driving regulation in a democracy is more complex than a hunger for money. People have a sense of fairness and practicality. Why is FDIC depositor insurance capped, for example? Why are banks required to give special treatment to loans to deployed armed service members?

StanislavPetrov 7y ago

Corporations take loans, issue bonds, take on debt and then use that capital to give corporate officers multi-million dollar payouts, golden parachutes and to buy back stock (which they hold) which makes the corporate officers and stockholders fabulously wealthy while the debt burden of the corporation grows. Eventually the debt burden grows higher and higher and becomes more and more of a drag on the company until the company goes bankrupt, employees laid off, pension funds insolvent and the remaining assets of the company are sold off in bankruptcy proceedings. But by then corporate officers who extracted millions and those who cashed out during the stock buy backs fueled by this debt walk away incredibly wealthy, free to repeat this same cycle of behavior at yet another company. And the Toys R Us worker (or worker at any of the thousands of other corporations where the same thing takes place) who made $35,000 a year finds himself out of a job and without the pension he thought he had coming.