4 ms·

Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will final

by scubbo 1y ago

Amen. It's been my experience that, for any innovation in financial technology, if you keep asking "and why is that beneficial?" for long enough, you will finally arrive (via tangents into "liquidity" and suchlike) at "it allows those with money to extract more money from those with less money".

r053bud 1y ago
Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.
blagie 1y ago
I don't know that's quite true. I've seen cases where it allows those with money to extract money from those with a lot of money too. Take this situation: Business A and business B are both doing well and competing with each other in a duopoly. a) No credit: Each business needs to be in the black, and competition is sustainable. b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under. This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable. This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.
- losteric 1y ago
  For the same reason, I’d argue mortgages are a bad thing for consumers by creating this prisoners dilemma around debt.
  - blagie 1y ago
    It depends on the format of mortgages. There are parts of the US where home ownership is bottlenecked by land prices, where this is absolutely the case. And there are parts where it's bottlenecked by construction costs, where this is not the case. "Are a bad thing" is also complex. I would agree they WERE a bad thing when introduced. Today, there is a complex problem of how you unwind this phenomenon. If you invested your life savings plus $800k of debt into a $1M home, and it's worth $500k, you have a serious problem. Simply eliminating access to debt would cause all sorts of economic disruption for consumers, almost certainly outweighing the benefits in lower housing costs. And the other piece of the puzzle are zoning and codes. 100 years ago, if you had a plot of land, you could cut the wood and build a log cabin. Today, construction is $$$$$$$ because of inspections, licenses, insurance, and a crew of bonded / licensed workers. A log cabin would be illegal and result in fines.
sologoub 1y ago
In general, the availability of credit has been a positive economic factor that helps enable capital expenditures that otherwise would only be available to the wealthiest. Lack of such credit leads to capture of means of production and rent seeking behaviors in economic terms. However, it’s become more and more clear that not all credit is created equal and what you spend the resulting capital on matters a lot. If one buys a house to live in or equipment to make money with - that’s generally good use of credit, assuming costs do not outweigh the benefits. I can’t think of a situation where buying lunch that one has to finance is a good thing (as different from credit card points harvesting/optimization). The implications of anything similar to payday loans going mainstream feels like a large societal risk.
- Garlef 1y ago
  Exactly. Key differences: - Houses are gaining value over time while consumer goods such as food, phones, TV, cars are loosing value over time. - A loan for a house can be paid back very slowly so that you effectively only pay your initial share of the price (and share the profits with the loan giver via interest). A loan for consumer goods must usually be paid back almost immediately.
  - s1artibartfast 1y ago
    It isn't just about appreciation. It is about utility and production. A car loan can be a great investment if it gets you to a job you otherwise wouldn't have, even if it is going down in value. Debt for an expensive degree that gets you a good job is the same, and entirely devoid of resale value. Debt for an expensive degree with no job prospects, not so.
    - 7373737373 1y ago
      This - utilization of credit in a way that helps the borrower pay back the debt can be okay (e.g. cost-effective, productivity raising tractor purchase), while allowing non-productive credit use (e.g. smart tv solely for entertainment or financial asset purchase) leads to individual's debt bondage and in the large, inflationary financial market crises and asset price bubbles https://youtube.com/watch?v=8FT-zyTX2nE https://youtube.com/watch?v=8FT-zyTX2nE
tptacek 1y ago
I have no idea what I think about BNPL products, but those "tangents into liquidity" basically eliminated most of the costs of trading. You can't negatively polarize me into thinking there's a social good to paying $50 to place a simple buy order; not having to do that is part of what "liquidity" means.
- deleted 1y ago
  [deleted]
- scubbo 1y ago
  You can't positively polarize me into thinking there's a social good to placing a simple buy order. That's precisely my point.
  - tptacek 1y ago
    Explain? If you don't think there's any good in the markets at all, how is the status quo ante of the 1990s, where everyone transacting paid a cut to corrupt middlemen, any better? It seems like it must obviously be worse.
    - scubbo 1y ago
      It is true to say that "a bad thing with an extra bad thing is worse than just the original bad thing", yes. If there exists a market for imaginary trading cards whose value is loosely predicated on how well a company markets itself (rather than on how much value it actually creates in the world), then I agree that it's desirable for that market to exist with as few capitalist hoarders as possible. So, yes, the absence of "corrupt middlemen" is a good thing, and a market without them is better than a market with them. But an even better outcome is for the whole damn edifice to cease to be.

by scubbo 1y ago

r053bud 1y ago

Yes. That’s literally the economic system we have agreed upon in the United States States and continue to vote for.

blagie 1y ago

I don't know that's quite true. I've seen cases where it allows those with money to extract money from those with a lot of money too. Take this situation: Business A and business B are both doing well and competing with each other in a duopoly. a) No credit: Each business needs to be in the black, and competition is sustainable. b) Credit: Whichever business borrows more money to spend on buying customers is more competitive in the short term (which can lead to monopoly long-term). Both businesses run in the red are and brittle. In any downturn, tightening of credit, etc. both are liable to go under. This competition to raise increasing amount of money to be competitive (to increasing devaluation and/or debt makes for a pretty broken economy), and makes traditional businesses (which invest in R&D from profits) increasingly unsustainable. This even goes to government level. Historically, if e.g. two European powers were in a war, whomever could borrow more to buy weapons / hire mercenaries would have an advantage. Access to credit made for more costly, more deadly wars, and broken national economies. If neither side had access to credit, both sides would be strictly better off.

losteric 1y ago
For the same reason, I’d argue mortgages are a bad thing for consumers by creating this prisoners dilemma around debt.
- blagie 1y ago
  It depends on the format of mortgages. There are parts of the US where home ownership is bottlenecked by land prices, where this is absolutely the case. And there are parts where it's bottlenecked by construction costs, where this is not the case. "Are a bad thing" is also complex. I would agree they WERE a bad thing when introduced. Today, there is a complex problem of how you unwind this phenomenon. If you invested your life savings plus $800k of debt into a $1M home, and it's worth $500k, you have a serious problem. Simply eliminating access to debt would cause all sorts of economic disruption for consumers, almost certainly outweighing the benefits in lower housing costs. And the other piece of the puzzle are zoning and codes. 100 years ago, if you had a plot of land, you could cut the wood and build a log cabin. Today, construction is $$$$$$$ because of inspections, licenses, insurance, and a crew of bonded / licensed workers. A log cabin would be illegal and result in fines.

sologoub 1y ago

In general, the availability of credit has been a positive economic factor that helps enable capital expenditures that otherwise would only be available to the wealthiest. Lack of such credit leads to capture of means of production and rent seeking behaviors in economic terms. However, it’s become more and more clear that not all credit is created equal and what you spend the resulting capital on matters a lot. If one buys a house to live in or equipment to make money with - that’s generally good use of credit, assuming costs do not outweigh the benefits. I can’t think of a situation where buying lunch that one has to finance is a good thing (as different from credit card points harvesting/optimization). The implications of anything similar to payday loans going mainstream feels like a large societal risk.

Garlef 1y ago
Exactly. Key differences: - Houses are gaining value over time while consumer goods such as food, phones, TV, cars are loosing value over time. - A loan for a house can be paid back very slowly so that you effectively only pay your initial share of the price (and share the profits with the loan giver via interest). A loan for consumer goods must usually be paid back almost immediately.
- s1artibartfast 1y ago
  It isn't just about appreciation. It is about utility and production. A car loan can be a great investment if it gets you to a job you otherwise wouldn't have, even if it is going down in value. Debt for an expensive degree that gets you a good job is the same, and entirely devoid of resale value. Debt for an expensive degree with no job prospects, not so.
  - 7373737373 1y ago
    This - utilization of credit in a way that helps the borrower pay back the debt can be okay (e.g. cost-effective, productivity raising tractor purchase), while allowing non-productive credit use (e.g. smart tv solely for entertainment or financial asset purchase) leads to individual's debt bondage and in the large, inflationary financial market crises and asset price bubbles https://youtube.com/watch?v=8FT-zyTX2nE https://youtube.com/watch?v=8FT-zyTX2nE

tptacek 1y ago

I have no idea what I think about BNPL products, but those "tangents into liquidity" basically eliminated most of the costs of trading. You can't negatively polarize me into thinking there's a social good to paying $50 to place a simple buy order; not having to do that is part of what "liquidity" means.

deleted 1y ago
[deleted]
scubbo 1y ago
You can't positively polarize me into thinking there's a social good to placing a simple buy order. That's precisely my point.
- tptacek 1y ago
  Explain? If you don't think there's any good in the markets at all, how is the status quo ante of the 1990s, where everyone transacting paid a cut to corrupt middlemen, any better? It seems like it must obviously be worse.
  - scubbo 1y ago
    It is true to say that "a bad thing with an extra bad thing is worse than just the original bad thing", yes. If there exists a market for imaginary trading cards whose value is loosely predicated on how well a company markets itself (rather than on how much value it actually creates in the world), then I agree that it's desirable for that market to exist with as few capitalist hoarders as possible. So, yes, the absence of "corrupt middlemen" is a good thing, and a market without them is better than a market with them. But an even better outcome is for the whole damn edifice to cease to be.