You can login if you already have an account or register by clicking the button below.
Registering is free and all you need is a username and password. We never ask you for your e-mail.
Lending money is a form of investment based on time preference. However, the total amount due in return, and expectation placed on timeframe for repayment before default should be fixed, not variable, and should not be allowed to be compounded.
If I have money and you wish to borrow $100 from me, you and I can agree that you’ll repay me $110 by the first of July, and if you fail to do so, the amount itself doesn’t increase, but I will inform others that you have failed to repay in full and on time.
What is wrong is if neither you or I have money, but I have connections that allow me to borrow from somebody else at a low rate, and then turn around and “lend” that same money to you at a higher rate, and when you fail to pay me for what I’ve “lent” you, I turn around and not only report you, but I also charge you increasing fees and compounded “interest” on your original loan.
The lender in today’s market has no wealth to lend, and no risk is taken in doing so. If their borrower defaults, they sell the debt and move along. If enough borrowers default, the government bails them out so they can keep lending.
view the rest of the comments →
[–] JohnGaltApproves ago
Lending money is a form of investment based on time preference. However, the total amount due in return, and expectation placed on timeframe for repayment before default should be fixed, not variable, and should not be allowed to be compounded.
If I have money and you wish to borrow $100 from me, you and I can agree that you’ll repay me $110 by the first of July, and if you fail to do so, the amount itself doesn’t increase, but I will inform others that you have failed to repay in full and on time.
What is wrong is if neither you or I have money, but I have connections that allow me to borrow from somebody else at a low rate, and then turn around and “lend” that same money to you at a higher rate, and when you fail to pay me for what I’ve “lent” you, I turn around and not only report you, but I also charge you increasing fees and compounded “interest” on your original loan.
The lender in today’s market has no wealth to lend, and no risk is taken in doing so. If their borrower defaults, they sell the debt and move along. If enough borrowers default, the government bails them out so they can keep lending.