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>> If this was true, you could easily check to see how well lenders have done If the lenders are banks, they will do well no matter what because the money whic

>> If this was true, you could easily check to see how well lenders have done If the lenders are banks, they will do well no matter what because the money which they loan is printed out of thin air and they have 0% reserve requirement so it doesn't affect their business if the PE borrower doesn't pay back. The banks' liabilities just keep going up with no consequence; just like government debt keeps increasing without consequence. Banks would like it if they could just constantly keep making direct loans to themselves to pay off their own old debt, that would be a simplified version of what is happening now. Unfortunately for banks, they need intermediaries to funnel the money back to them; any make-believe business such as PE firms will do. Bigger PE firms provide more throughput. Moreover, even if the Fed decides to increase the reserve requirement % some day and the bank is suddenly forced out of business, the managers/executives of the bank still walk away with the huge salaries and bonuses from the time they were making the loans and collecting free interest - There is 0 risk for them... They will probably get even better paid jobs at some of the PE firms that they helped. The reality of the current system is that everyone who holds or earns cash ends up paying through inflation; most inflation these days does not show up in the CPI; because rich people can only buy so many bags of potatoes; there are other factors beyond price which limit demand for consumer products (this is what CPI ignores)... Inflation among the rich will not show up in CPI; instead it goes straight to the stock market and speculative investments.

valuearb 7y ago
Is this Doctorow himself, because none of what you said is accurate in reality. Banks don't create money out of thin air, the fed does. Banks can get loans from the fed, and the vast majority must be paid back, or the bank will go bankrupt itself. A bank can't survive loaning itself money, that's ridiculous. Every day it's burning cash paying salaries, rent, marketing costs, it has to earn significantly higher returns on money it loans out than it pays depositors and interest to the fed, or it burns through it's capital and dies.

valuearb 7y ago

Is this Doctorow himself, because none of what you said is accurate in reality. Banks don't create money out of thin air, the fed does. Banks can get loans from the fed, and the vast majority must be paid back, or the bank will go bankrupt itself. A bank can't survive loaning itself money, that's ridiculous. Every day it's burning cash paying salaries, rent, marketing costs, it has to earn significantly higher returns on money it loans out than it pays depositors and interest to the fed, or it burns through it's capital and dies.