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Giving Person A a "good deal" on loans so they can loan that money to Person B at a great profit isn't so different from just giving money to Person A.
by strbean 7y ago
Giving Person A a "good deal" on loans so they can loan that money to Person B at a great profit isn't so different from just giving money to Person A.
- jovial_cavalier 7y agoYes it is, because they have to pay the money back... The money they make isn't "fake" in some sense, like you're making it out to be. It's real utility that they have generated by providing liquidity. Loaning money is not a get rich quick scheme. There is risk involved.
- strbean 7y agoFair point that the interest accrued is coming out of the pre-existing money supply. Doesn't really change the thrust of my comment that you quoted though - they are being handed the ability to accrue capital. Also, this is getting a little into the weeds philosophically, but injecting large amounts of capital in this way increases the money supply (and by much more than the amount of capital injected). In a sense, this is a tax on everyone who was not a recipient of that capital via a reduction in the purchasing power of their capital. Generally, consumer prices aren't going to go up in this case... but tons of people who had no investments have been looking at this crash as an opportunity to get in the game, and these efforts to prop up the markets with monetary policy in the face of an honest-to-goodness crisis can feel a little gatekeeper-ish.