Let me rephrase it for you: In a free system which is not warped and corrupted by government intervention, that indeed does happen in appropriate proportions and degrees…
Sure: Since the boom and bust cycle is caused primarily by government intervention, then in a free system which is not warped and corrupted by government intervention, there would not be “too much” lending nor “too much” non-productive investments. You personally might conceive a different idea of “too much”, especially after the fact, but that’s just you either trying to play “God in hindsight”, or trying to control others’ value judgments into conformance with your own.
Banking is a pretty good business once you have all your ducks in a row.
The Federal Reserve has artificially maintained interest rates at a low level for so long that the banking business has been booming because of the incentives to spend. 30 years of good times with only a few hiccups. Of course, that party is coming to an end pretty soon.
The U.S. Government is more than generous at throwing tax payer money to even the most inefficient banks and outright scams, so bankers can set up whatever scheme they like. The government does so because the entire financial system is based on a scam that they must protect at all costs. I believe the government would allow a large portion of the country to starve before they allowed even some of the shaddiest banks to fail.
Being a banker often means you have special access into the political class, who will use their influence to do your bidding. Buying into both parties is pretty much a standard practice. Since the government has the monopoly on money, it’s hard not to play by their rules.
I believe we are seeing a contraction of the banking sector, however it was pretty big to begin with. The government will consume as many banks as it has to in order to protect their scam.
But let me also say this. There are some reputable banks out there who do not subscribe to the government’s way of doing business. I just wish there were more of them.
This is not to say that I believe it’s the government’s responsibility to feed the populace, but it does reflect where I believe their commitment lies.
The banking sector is so big because the government bailed out the banking sector. FDIC insurance, Wall Street bailouts, negative zero interest rate, hellllllllooooooooooooo! Micka, was it really that hard for you to figure out?
He’s not helping society much at all. He’s borrowing the food to enable himself to build the house. Then he will pay back the food from his excess. The society only get the benefit from the interest. But they are paying the lost opportunity cost of having the machine. I think that society is getting a raw deal.
Your opinion is noted. Btw, so why are you spending your time on here? You are depriving society by not producing food and being on here. Please, get back to the farm.
There was nothing counter factual about the section you cut and paste. And in that section he effectively said "not to borrow to productively invest is a bad thing… " presumably implying “to borrow to productively invest is a good thing”.
they considered the value they would receive from lending money to the person with ‘machine plans’ and they considered the value they would receive from lending money to the ‘houser’ the opportunity cost of lending to one was that they could not lend to the other (or make whatever immediate purchases they might want) and they chose what they appraised would give them the best return.
even from an objective viewpoint you can see that one income stream is greater than the other. in your story this is supposedly the case after all bidding and we are looking at the situation in a plain state of rest
you need to ask yourself why your entrepreneur with future production plans could not outbid the entrepreneur who’s plan constituted ‘dissaving’ . the machiners production plans simply where not economic. they were relatively worthless. taking away factors from consumer of the house would have been a waste of value. This is not my construction but yours.
do you think old folks at the end of their lives are evil deprivers of society when they decide to consume a good chunk of their capital before shedding their mortal coil.? they worked hard all their lives to save up capital just so they could enjoy it! if their enjoyment of it was outlawed… would people bother trying to be so productive if they could not enjoy the fruits of their frugality.?
The highest bidders for the savings will get the loan. That is how capital is allocated amongst the different alternative uses for it. That is how a market works.
he was writing an article for general consumption, not peer reviewed (even then he might be ok with assuming some knowledge on the part of the readership’
not to borrow to productively invest is a bad thing..
relative to what…?? its clear that its relative to the situation without government intervention. i.e. the counter-factual case.
What if the food bank has only just opened and the house-builder man simply arrived at the bank first? Then there is no bidding.
What if the food machine wasn’t so spectacularly efficient and so the macvhine man was only bidding 9.9% while the impatient house man bid 10%?
No. But then they don’t have much choice. Its not reasonable to make 90 year old’s work. But with respect to borrowing to consume, much of the time people do it for rather frivolous reasons that don’t even benefit them! I call it the “tailgating to Edinburgh effect”: people will often tailgate the car in front of them even on a very long motorway journey because it makes them feel like they’re going to get there quicker!.. actually they do get there quicker, about 1.5 seconds quicker out of a six hour drive! And they heap on a whole load of extra stress and risk in the process. Certain types of people (I know a few) have a similar attitude financially. They are forever borrowing to consume and the price they pay is to have to pay a continuous stream of interest to banks.
so obviously we need a law about what order people can walk into places because people can’t be trusted to make deals without your supervision.
of course, even an idiot could make up a story of an entrepeneur engaging in entrepeneurial error… and … this is supposed to prove that free-markets dont work !!! ha ha ha
thanks for making up stories of entrepeneurial error…
there is overconsumption in any boom. i don’t say this from a 3rd party arbitrary bias position. but from the position of the sam epeople had they not been intervened with by the government.
That’s how it works in a large, anonymous, complex society with the obfuscation of money. But in a small community with barter, it would be idiotic not to consider the consequences of the loan.