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That doesn’t seem like a good description of banks. Banks mostly invest in future income streams like loans and securities. Non-cash assets are valued by their
by skybrian 4y ago
That doesn’t seem like a good description of banks. Banks mostly invest in future income streams like loans and securities. Non-cash assets are valued by their expected cash value. An apartment building is an expected stream of rent money.
Predicting the future is often difficult.
- meltyness 4y agoI'll give that it's reductionist, but that's kind of the point. Loans are investments, securities often are too as keys to liquidity and creditworthiness. Money is money, I'm not contesting that. The question no one asked is if everything should be stockpiled. I think there's no question that we should make things better or more plentiful.
- skybrian 4y agoBusinesses think about what to keep in stock quite a lot and often the answer is "as little as possible." Carrying inventory costs money, more when interest rates rise, and it's potentially wasted if it doesn't sell. There's a tradeoff because prudent disaster preparation is expensive, but worth it if the disaster happens. The question is, who will pay for it? Often, the government.
- meltyness 4y agoBut that's another illusion mirroring the banking structure -- fractional reserve -- that some 90% of your assets should be generating rent, and 10% in reserves. If banks pick winners, everything becomes a bank.