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Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've n
by md_ 5y ago
Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've never heard of it) for a rather dramatic example of this.
More to the earlier point, though, this is really not how most lending works, so the idea that this somehow means that "absent central bankers, we'd all make 2% APY risk-free on bank deposits" is just silly. The global equity market is $50T, the global corporate bond market something like $100T. Total cash-equivalents (M2) in the US is $21T.
Even if "pledging shitcoins as collateral for speculating on coinbase" were zero-risk--which of course it isn't--the market for such loans is, unfortunately, too small for all of us to retire risk-free.
- lowkey 5y ago> Of course, even collateralized loans to buy real estate are not, despite what you said earlier, risk-free--see 2008 (and google the term "CDO", in case you've never heard of it) for a rather dramatic A CDO is a synthetic debt derivative - not really the same thing as a loan. As for real estate vs cryptocurrency as collateral for a loan, two key differences that make lending essentially risk-free to the lender, not the borrower: 1. With crypto-lending the lender takes possession of the collateral at the time of loan issuance so they can liquidate if needed at any time 2. Crypto is traded in liquid markets 24/7 and the value of holdings can be marked to market in real-time or liquidated instantly to pay off a loan. Neither of these options are available in real-estate lending. > More to the earlier point, though, this is really not how most lending works I’ll bite, other than asset-backed lending, how else does most lending work?