4 ms·
its almost like making bets with money you don't actually have yet is a bad idea
by koromak 4y ago
its almost like making bets with money you don't actually have yet is a bad idea
- borski 4y agoThis is literally the definition of fractional reserve banking, used by almost every bank worldwide.
- cj 4y agoYou're right, but that doesn't necessarily make it a good thing. As a consumer (or a business client in the case of SVB), how does it benefit you that the bank doesn't simply hold your deposits in a figurative safe somewhere? At a minimum, I wish I could say it benefits us by banking being free. Lending could be opt-in. There could exist banks who charge a premium for simply being the custodian of your money. (These must already exist) Fractional reserve makes money easily available to those seeking money they don't have, at the risk of depositors whose money they're putting on the line. (For better or worse. I'm not for or against it. I'm certain there are massive benefits to the system. But the reality is the average depositor probably doesn't realize their bank deposits aren't actually theirs - and that's why we have the FDIC)
- borski 4y agoLoans are what drive the economy. I’ve used loans for cars and my home, as have most people in the country. Many people make decisions based on income, and not on cash they already have, as few people have massive accumulated cash wealth. Loans are not always a bad thing.
- omgwtfbyobbq 4y agoLoans aren't a bad thing as long as they are effectively collateralized. If someone misjudges the value, volatility, etc, of collateral used for loans, those loans could be a bad thing if the borrower stops paying.
- borski 4y agoSure. That’s true of any financial instrument.
- stocknoob 4y agoYou’re looking for a brokerage.
- malermeister 4y agoMaybe the whole economic system just isn't viable, as we've seen time and time again?
- borski 4y agoCitation needed. Also, I’m all ears for a viable replacement that doesn’t devolve into autocracy or government-endorsed corruption, and still allows for taking risk and forward progress.
- malermeister 4y agohttps://en.wikipedia.org/wiki/Great_Depression https://en.wikipedia.org/wiki/Great_Depression https://en.wikipedia.org/wiki/Great_Recession https://en.wikipedia.org/wiki/Great_Recession Here's some citation for ya. As for viable replacements that allow for forward progress: https://en.wikipedia.org/wiki/Workers%27_self-management https://en.wikipedia.org/wiki/Workers%27_self-management (Also, for that matter, it's not like capitalism doesn't tend to devolve into autocracy and corruption)
- epgui 4y agoThese links do not support your claims.
- borski 4y agoThat there have been downturns is not an indicator that capitalism does not inherently work in the long term. There are always downturns, no matter the system.
- anon84873628 4y agoHenry George would argue that it's the landlords, not the capitalists, who are causing the downturns :)
- astrange 4y agoPretty sure worker-owned companies still need investment and loans.
- UncleOxidant 4y ago"its almost like making bets with money you don't actually have yet is a bad idea" Banking is supposed to be a very boring business (at least under Glass-Steagal-like regulation). Making "bets" with money they don't have isn't something retail banks are supposed to be doing. Yes, we know that some banks were doing this prior to the '08 GFC, but wasn't that supposed to have been reigned in by the reinstatement of Glass-Steagal-like regulation since then? (of course, there is some distinction between retail banks and investment banks, is SVB the former or the latter?)
- borski 4y agoLoans are bets. You’re limiting bets to investments, but lending money is a bet that the person you lent it to will be able to pay it back; albeit a properly collateralized bet with solid underwriting, hopefully. But it’s certainly not a 100% guarantee. Retail banks absolutely underwrite loans.
- za3faran 4y agoMaybe running an economy on interest bearing loans was not a good idea after all, who would have known? We've had checks notes only a few thousand years to know that.
- soVeryTired 4y agoFractional reserve banking isn't a thing anymore.
- borski 4y agoWhat? This is literally how nearly all banks around the entire world work.
- MatteoFrigo 4y agoThe Bank of England explains why the fractional reserve mental model of banking is not really accurate. See https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf?la=en&hash=9A8788FD44A62D8BB927123544205CE476E01654 https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...