5 ms·

No one is going to make a loan for such high risk to get a 5% return.

James_K 2y ago
Suppose instead of loaning to a single company, you loan to many different companies to balance out the risk and return. Just a thought. Additionally, it would make sense to randomly give out larger loans for the sake of potential innovation.
- s1artibartfast 2y ago
  You can't make loans at a loss and make up the difference with volume. VCs target 10X (1000%) exit because the average startup is a loss at 5% return on interest. Imagine funding 10 companies, 9 bankrupt, and the remaining one only pays back 5% more than you loaned it.
  - James_K 2y ago
    You assume loans need to be profitable. In a situation where the government is issuing loans, it also reaps the rewards of increased tax revenues from high performing businesses. The objective of the loan is to stimulate the economy, not to turn a profit.
    - s1artibartfast 2y ago
      I don't think the economy needs or benefits from that type of stimulus. It just sounds like burning taxpayer money to me.
      - James_K 2y ago
        If you don't think the economy benefits from investment, why do people do it?
        s1artibartfast 2y ago
        I dont think it benefits from failed investments.
        James_K 2y ago
        Your original premise here was that 90% of these investments fail. You need to invest in the ones that fail to get the good ones. You can appreciate this dynamic when the funds are privately managed.
        s1artibartfast 2y ago
        One method of return is equity ownership, the other is taxes or low interest rates. I don't think the latter is nearly as viable to recoup the investment. Look at the numbers. We're talking about going from 1000+% to 5%. Additionally, I don't think the government could manage an investment fund without complete corruption. Would you trust the president or Congress to invest your money? VCs make money when they invest their money in winners. Politicians make money when they invest your money in their own pocket.
        James_K 2y ago
        There is a thing called "electing", which in democratic countries allows you to put trustworthy people in positions of power. Additionally, there is no real reason for a head of state to be personally managing a national bank, and within such an institution there may well be rewards for productive uses of funds. Again, the government doesn't need to recoup the money it loans out through interest because a government will always have sufficient funds through taxes to cover the deficit. Those taxes will, of course, be levied on the precipitants of said loans and raised through the increase in productivity derived from the loans. The government is not a person, it is all people. The objective of government lending is not to extract money from society and transfer it to the government, the objective is to increase productivity within society and thus make things better for those living in it. The issuance of loans and investments is not a practice of profit making, but one of management—deciding which projects are undertaken and by whom. The positive effect of this is to improve society, and the fact that investors profit is a negative outcome of the whole arrangement, as was pointed out earlier. For someone so concerned about government corruption, you seem to have no issue with private corruption. Investors are the people we task with managing our economies, yet their wages are massive. They extract huge quantities of funds from the enterprises they manage. The payment they receive is far greater than the actual value of their work in a free market, but they avoid such pressures by maintaining a monopoly on their wealth. The position of "shareholder" is not one for which there are job applications. The skilled workers actually managing money are paid far less for their work than the shareholder expects to make dividends. If you remove the shareholder, but maintain the person managing investments, you drastically streamline the entire system.

Suppose instead of loaning to a single company, you loan to many different companies to balance out the risk and return. Just a thought. Additionally, it would make sense to randomly give out larger loans for the sake of potential innovation.

s1artibartfast 2y ago
You can't make loans at a loss and make up the difference with volume. VCs target 10X (1000%) exit because the average startup is a loss at 5% return on interest. Imagine funding 10 companies, 9 bankrupt, and the remaining one only pays back 5% more than you loaned it.
- James_K 2y ago
  You assume loans need to be profitable. In a situation where the government is issuing loans, it also reaps the rewards of increased tax revenues from high performing businesses. The objective of the loan is to stimulate the economy, not to turn a profit.
  - s1artibartfast 2y ago
    I don't think the economy needs or benefits from that type of stimulus. It just sounds like burning taxpayer money to me.
    - James_K 2y ago
      If you don't think the economy benefits from investment, why do people do it?
      - s1artibartfast 2y ago
        I dont think it benefits from failed investments.
        James_K 2y ago
        Your original premise here was that 90% of these investments fail. You need to invest in the ones that fail to get the good ones. You can appreciate this dynamic when the funds are privately managed.
        s1artibartfast 2y ago
        One method of return is equity ownership, the other is taxes or low interest rates. I don't think the latter is nearly as viable to recoup the investment. Look at the numbers. We're talking about going from 1000+% to 5%. Additionally, I don't think the government could manage an investment fund without complete corruption. Would you trust the president or Congress to invest your money? VCs make money when they invest their money in winners. Politicians make money when they invest your money in their own pocket.
        James_K 2y ago
        There is a thing called "electing", which in democratic countries allows you to put trustworthy people in positions of power. Additionally, there is no real reason for a head of state to be personally managing a national bank, and within such an institution there may well be rewards for productive uses of funds. Again, the government doesn't need to recoup the money it loans out through interest because a government will always have sufficient funds through taxes to cover the deficit. Those taxes will, of course, be levied on the precipitants of said loans and raised through the increase in productivity derived from the loans. The government is not a person, it is all people. The objective of government lending is not to extract money from society and transfer it to the government, the objective is to increase productivity within society and thus make things better for those living in it. The issuance of loans and investments is not a practice of profit making, but one of management—deciding which projects are undertaken and by whom. The positive effect of this is to improve society, and the fact that investors profit is a negative outcome of the whole arrangement, as was pointed out earlier. For someone so concerned about government corruption, you seem to have no issue with private corruption. Investors are the people we task with managing our economies, yet their wages are massive. They extract huge quantities of funds from the enterprises they manage. The payment they receive is far greater than the actual value of their work in a free market, but they avoid such pressures by maintaining a monopoly on their wealth. The position of "shareholder" is not one for which there are job applications. The skilled workers actually managing money are paid far less for their work than the shareholder expects to make dividends. If you remove the shareholder, but maintain the person managing investments, you drastically streamline the entire system.