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The economy isn't controlled by one or two startups who luck out - its controlled by the spending power of the average person on the street. If they can spend,
by JofArnold 15y ago
The economy isn't controlled by one or two startups who luck out - its controlled by the spending power of the average person on the street. If they can spend, everyone benefits. Loans help them spend, but the consequences of taking on loans they cannot long-term (due to ignorance, bad loan selling or change of circumstances) afford to service means they stop spending. And where they stop spending, us entrepreneurs run out of money. Loans are the antithesis of value creation, as I added in my other comment.
Same applies to small businesses and even tech startups. Just think what'd happen to our industry if angels started exercising the "debt" part of "convertible debt". Lucky angels are so nice ;)
- dantheman 15y agoI'm going to have to disagree. When depositors decide to save and defer consumption, entrepreneurs notice this (due to interest rate decreases) and can invest it to increase production. In general when the savings rate goes up, interest rates go down, and we see a shift from consumer goods to capital goods. Taking out loans to go on vacation, etc is not a good use of the money and will hurt someone. Taking a loan to invest in a business, fix a leak, etc will create value either by creating new opportunities or preventing catastrophic failure (e.g. a stitch in time saves nine). This is why pay day loans aren't evil, if for some reason you had an unexpected cost and won't be able to make a mortgage payment or truck payment the penalties could be quite severe, and thus a small loan to get over that bump is a fiscally rational choice - unfortunately many people borrow too much or too often and don't have a plan to live within their means.