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You go into debt and then you pay it off. Or you default on your debt, and the creditor makes off with whatever asset you used as collateral. I'm not trying t

You go into debt and then you pay it off. Or you default on your debt, and the creditor makes off with whatever asset you used as collateral. I'm not trying to do away with the concepts entirely, just trying to place limits on them so that a larger portion of our economy is people having business ideas which relate to the real world and acting on them and a relatively small portion of it is people playing money games. What we're doing now is dangerously lopsided: why innovate or build anything or tackle hard problems when you can do better by playing money games or supporting those that do?

WalterBright 2y ago
> why innovate or build anything when you can do better by playing money games or supporting those that do? Innovations in money are the lubricant that drives the economy. People like to hate on banks, for example, but an economy without a banking system is a crippled economy. A lot of those money games are actually means to spread out risk, which enables people to take larger risks in innovation and building. A lot of companies have been founded and financed by credit cards. What would it cost the economy to do away with credit cards?
- __MatrixMan__ 2y ago
  > Innovations in money are the lubricant that drives the economy Drives the economy toward what? Economic agents don't necessarily share interests, often one succeeds at the expense of another. When the risk is spread too widely, it becomes difficult to determine whether you're helping somebody help you, or whether you're helping somebody harm you. It's not clear where to participate and where to interfere. This leads to an unfortunate situation where the the simplest conclusion for many is that the entire system is their enemy. There's a balance to be struck re: how widely you spread risk, and we've overshot it. The net risk of being insensitive to the agents' needs is higher overall, even if it's spread evenly. We've removed the steering wheel in favor of an additional engine, and the road won't remain a straightaway forever. If we keep this up, sooner or later we're going to be unable to avoid a fatal obstacle.
  - WalterBright 2y ago
    > often one succeeds at the expense of another Transactions in a free market are mutually beneficial, otherwise people wouldn't agree to them.
    - __MatrixMan__ 2y ago
      That's only true if all parties have the option to back out: If Bob doesn't like the terms of Alice's loan, he doesn't have to take it. But if Alice grants Bob a loan and then later sells the debt to Charlie, Bob didn't get the opportunity to consent to the transfer. Depending on Charlie's behavior, it may suddenly be in Bob's best interest to default on that loan. So it's not necessarily mutually beneficial, in fact it's frequently exploitative. But suppose Alice sells the debt to 1000 people in tiny slices, 200 of which are depended on by Bob in some way, 600 of which are independent parties that neither help nor harm Bob besides profiting on his debt, and 200 of which are working with Charlie in a mining endeavor which is poisoning Bob's water or whatever. It creates an information asymmetry where Bob may not be capable of determining who he is harming or helping if he defaults on the loan (Charlie and his 200 cronies, however, they have accountants on staff and know exactly what they're doing). That's the second problem: Bob can't make an informed choice regarding the real-world consequences of his behavior, so the system becomes blind to those consequences. Bob and the rest of us who live nearby--whose retirement portfolios may have been unwittingly contributing to the problem--still have to deal with the consequences. Had the consequence of holding Bob's debt been known to us, perhaps we'd prefer to take the hit to our portfolios than to deal with the fallout of Charlie's actions.
      - WalterBright 2y ago
        Selling a loan does not change the terms of the loan.
        deleted 2y ago
        [deleted]
        __MatrixMan__ 2y ago

WalterBright 2y ago

> why innovate or build anything when you can do better by playing money games or supporting those that do? Innovations in money are the lubricant that drives the economy. People like to hate on banks, for example, but an economy without a banking system is a crippled economy. A lot of those money games are actually means to spread out risk, which enables people to take larger risks in innovation and building. A lot of companies have been founded and financed by credit cards. What would it cost the economy to do away with credit cards?

__MatrixMan__ 2y ago
> Innovations in money are the lubricant that drives the economy Drives the economy toward what? Economic agents don't necessarily share interests, often one succeeds at the expense of another. When the risk is spread too widely, it becomes difficult to determine whether you're helping somebody help you, or whether you're helping somebody harm you. It's not clear where to participate and where to interfere. This leads to an unfortunate situation where the the simplest conclusion for many is that the entire system is their enemy. There's a balance to be struck re: how widely you spread risk, and we've overshot it. The net risk of being insensitive to the agents' needs is higher overall, even if it's spread evenly. We've removed the steering wheel in favor of an additional engine, and the road won't remain a straightaway forever. If we keep this up, sooner or later we're going to be unable to avoid a fatal obstacle.
- WalterBright 2y ago
  > often one succeeds at the expense of another Transactions in a free market are mutually beneficial, otherwise people wouldn't agree to them.
  - __MatrixMan__ 2y ago
    That's only true if all parties have the option to back out: If Bob doesn't like the terms of Alice's loan, he doesn't have to take it. But if Alice grants Bob a loan and then later sells the debt to Charlie, Bob didn't get the opportunity to consent to the transfer. Depending on Charlie's behavior, it may suddenly be in Bob's best interest to default on that loan. So it's not necessarily mutually beneficial, in fact it's frequently exploitative. But suppose Alice sells the debt to 1000 people in tiny slices, 200 of which are depended on by Bob in some way, 600 of which are independent parties that neither help nor harm Bob besides profiting on his debt, and 200 of which are working with Charlie in a mining endeavor which is poisoning Bob's water or whatever. It creates an information asymmetry where Bob may not be capable of determining who he is harming or helping if he defaults on the loan (Charlie and his 200 cronies, however, they have accountants on staff and know exactly what they're doing). That's the second problem: Bob can't make an informed choice regarding the real-world consequences of his behavior, so the system becomes blind to those consequences. Bob and the rest of us who live nearby--whose retirement portfolios may have been unwittingly contributing to the problem--still have to deal with the consequences. Had the consequence of holding Bob's debt been known to us, perhaps we'd prefer to take the hit to our portfolios than to deal with the fallout of Charlie's actions.
    - WalterBright 2y ago
      Selling a loan does not change the terms of the loan.
      - deleted 2y ago
        [deleted]
      - __MatrixMan__ 2y ago