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Ive reached the same conclusion, with some additional ideas to why. In recent decades the availability of capital has increased dramatically. Low interest rates

Ive reached the same conclusion, with some additional ideas to why. In recent decades the availability of capital has increased dramatically. Low interest rates, spray and pray venture capitalists, creation of new dollars at a rapid rate. The idea behind capitals returns were that it took great risk as capital is rare and hard to get. If capital becomes easier to get, that alters the risk/reward ratio. I think we are just watching the reward part shift to where it belongs in contrast to the lower risk.

mschuster91 5y ago
> In recent decades the availability of capital has increased dramatically. Yeah, if the receiver of the capital is already rich and/or well-connected. If you're not in the top 10%, all you get is 10%+ APR credit cards, payday loans and other usurious crap.
- b9a2cab5 5y ago
  You don't need to be in the top 10%, you just need to be likely to be able to repay your loans. Government subsidizes home loans, student loans, and small business loans to the tune of hundreds of billions of dollars a year through the Fed's asset purchase program. The reason broke people can't get anything better than a 10%+ APR credit card is because they're so unlikely to repay the loan that the issuer has to charge that much interest to break even. I actually took a look at my banking app and I'm offered "personal loans" up to $20k at under 6%, which is actually incredible considering this is an unsecured loan to a random person.
  - lovich 5y ago
    Do loan providers typically break even? Even with the federal loan systems you mentioned, they’re making a profit each year.
    - b9a2cab5 5y ago
      You make fat profits in normal years and potentially lose out catastrophically during Great Recesssion-like events. Lots of lenders straight up went bankrupt due to defaults. Of course since the government made it so you can't discharge student loans in bankruptcy that market isn't functioning anymore.

mschuster91 5y ago

> In recent decades the availability of capital has increased dramatically. Yeah, if the receiver of the capital is already rich and/or well-connected. If you're not in the top 10%, all you get is 10%+ APR credit cards, payday loans and other usurious crap.

b9a2cab5 5y ago
You don't need to be in the top 10%, you just need to be likely to be able to repay your loans. Government subsidizes home loans, student loans, and small business loans to the tune of hundreds of billions of dollars a year through the Fed's asset purchase program. The reason broke people can't get anything better than a 10%+ APR credit card is because they're so unlikely to repay the loan that the issuer has to charge that much interest to break even. I actually took a look at my banking app and I'm offered "personal loans" up to $20k at under 6%, which is actually incredible considering this is an unsecured loan to a random person.
- lovich 5y ago
  Do loan providers typically break even? Even with the federal loan systems you mentioned, they’re making a profit each year.
  - b9a2cab5 5y ago
    You make fat profits in normal years and potentially lose out catastrophically during Great Recesssion-like events. Lots of lenders straight up went bankrupt due to defaults. Of course since the government made it so you can't discharge student loans in bankruptcy that market isn't functioning anymore.