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There is no real cost of defaults. The money that wasn't paid back was created out of thin air with no effort from the bank. Money laundering is taking ill-go

by npoc 3y ago

There is no real cost of defaults. The money that wasn't paid back was created out of thin air with no effort from the bank. Money laundering is taking ill-gotten gains and processing them to make them look legitimate. This is exactly what the central banking system, in partnership with the government, does. However much you try to justify what they are doing you can't deny that the banking system is charging interest on every unit of currency in existence and they created them all for essentially free. People absolutely should pay more interest - the free-market rate. It's absolutely wrong that people who get into debt are rewarded for doing so, at the cost of people who don't, who have the value of their savings, wages and pensions stolen. It's a vicious cycle - lower than free-market interest rates force people to have to borrow money. Look at what it has done to prices of houses relative to wages over the last 50 years. It's reached the point that many people are now forced to take on 35, even 50 year mortgages, just to buy a very modest home. Look up the Cantillon effect. See here for some of the terrible, far reaching effects: https://wtfhappenedin1971.com/ https://wtfhappenedin1971.com/

notahacker 3y ago
I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by furiously incorrecting everyone in this thread, you'd probably feel a bit embarrassed to be posting stuff like "there's no real cost of defaults" . The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. If you're still struggling to believe there's no real cost of defaults to banks, I invite you to look up bank insolvencies. Perhaps someone could make a wtfhappenedin2007 website. I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! For the record, what you're actually advocating for with higher "free-market" interest rates is that poor people pay rich people more over the course of 25 years than they currently do over 35 or even 50 years to secure a house, which is less likely to appreciate in value. US home ownership rates were down at 40% before governments got involved in the mortgage market. It's impossible to pretend that anyone benefits from such a system other than people who are much, much richer than average home buyers.
- Alpha3031 3y ago
  Ugh, you know, I think what I hate most about the market fundies is that their perception of what interest rates would be is absolutely untethered from any semblance of empirical reality. Like, sure, it would be fucking nice if the long-run equilibrium rate were anywhere near where they think it would be, but believing r* is close to what it was back in the 70s is a bit like believing you can will the economy into having higher productivity growth through the magic power of wishful thinking. But nooo, it's definitely not having enough free market that's the problem, we should just finish what Reagan started, certainly the union busting had no contributions to the declining labour share at all. It would be funny if it wasn't fucking terrifying.
- npoc 3y ago
  > The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. I think the confusion is down to the fact that I'm looking at the central banking system as a whole, rather than individual banks. You're not looking at the bigger picture. The point I'm making is that when the loan is made, fresh money is handed to the debtor, at no cost to the banking system (they simply change some electronic digits) and so if it isn't repaid, the banking system is no worse off than it was before. This is something you're blind to. Sometimes it's difficult to see the wood for the trees. This is the fundamental problem with Keynesian economics as we know it - for all the talk of elasticity of money, human nature determines that the elasticity only goes one way - expansion. The system is incentivised to keep increasing total debt (because of interest payments on money it doesn't really own) and because it doesn't have to work for the money it lends out, it can hold interest rates below the free-market rate, ensuring it has a monopoly on the money lending.. >I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try.
  - 3y ago

by npoc 3y ago

notahacker 3y ago

I'm going to be honest, if you put half as much effort into learning the very, very basics of how the system worked as you did into campaigning against it by furiously incorrecting everyone in this thread, you'd probably feel a bit embarrassed to be posting stuff like "there's no real cost of defaults" . The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. If you're still struggling to believe there's no real cost of defaults to banks, I invite you to look up bank insolvencies. Perhaps someone could make a wtfhappenedin2007 website. I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! For the record, what you're actually advocating for with higher "free-market" interest rates is that poor people pay rich people more over the course of 25 years than they currently do over 35 or even 50 years to secure a house, which is less likely to appreciate in value. US home ownership rates were down at 40% before governments got involved in the mortgage market. It's impossible to pretend that anyone benefits from such a system other than people who are much, much richer than average home buyers.

Alpha3031 3y ago
Ugh, you know, I think what I hate most about the market fundies is that their perception of what interest rates would be is absolutely untethered from any semblance of empirical reality. Like, sure, it would be fucking nice if the long-run equilibrium rate were anywhere near where they think it would be, but believing r* is close to what it was back in the 70s is a bit like believing you can will the economy into having higher productivity growth through the magic power of wishful thinking. But nooo, it's definitely not having enough free market that's the problem, we should just finish what Reagan started, certainly the union busting had no contributions to the declining labour share at all. It would be funny if it wasn't fucking terrifying.
npoc 3y ago
> The money was "created out of thin air" is the loaning bank's debt to the account the borrowed money is assigned to, not the bank's asset, so there's a very real cost to them if the borrower defaults and stops repaying them. Banks can become bankrupt, just like any other business, and no, they can't "print" their way out of it. I think the confusion is down to the fact that I'm looking at the central banking system as a whole, rather than individual banks. You're not looking at the bigger picture. The point I'm making is that when the loan is made, fresh money is handed to the debtor, at no cost to the banking system (they simply change some electronic digits) and so if it isn't repaid, the banking system is no worse off than it was before. This is something you're blind to. Sometimes it's difficult to see the wood for the trees. This is the fundamental problem with Keynesian economics as we know it - for all the talk of elasticity of money, human nature determines that the elasticity only goes one way - expansion. The system is incentivised to keep increasing total debt (because of interest payments on money it doesn't really own) and because it doesn't have to work for the money it lends out, it can hold interest rates below the free-market rate, ensuring it has a monopoly on the money lending.. >I'm also chuckling away at you complaining that the current system means mortgages take too long to pay off a sentence after complaining that people who get into debt are rewarded! The two are not contradictory. They are punished with a long mortgage, but are still better off than the poor folk who try to save up for house instead and have the value of their savings stolen while they try.
- 3y ago