what if there are no loans available at fair interest rates?
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Replying to @danlistensto @bitemyapp
TBH what constitutes a "fair" interest rates depends on both who you are and what you are getting money for.
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Replying to @0K_ultra @bitemyapp
well there's the rub. it's possible (common, in fact) to pattern match to someone who actuarially resembles a bad bet but would actually be a good one. false negatives are a problem in systems like this.
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Replying to @danlistensto @0K_ultra
capital is a discovery/search process let us posit the existence of a possible systemic failure to capture certain kinds of opportunities is there reason to believe we are aware of a system that would have fewer such failure modes or that they would be less severe?
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Replying to @bitemyapp @0K_ultra
I'm thinking of the difference in interest rate and repayment structure between consumer credit card debt and small business loans from a local retail bank branch. credit cards constrained by too high interest. small business loans constrained by too selective acceptance.
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so the person I'm thinking about is one who pattern-matches to high risk and can't get the small business loan, but can't afford (nor should they be willing to) the usurius credit card interest rate. they won't be able to finance their plan at all under these conditions.
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Replying to @danlistensto @0K_ultra
Can you construct a concrete example for me here? The kind of business that would even be viable for a business loan usually has assets it can use to secure the loan if the owner's credit is poor.
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If you're telling me there is a missed financial opportunity in lending at low interest rates and very little upside to people with (speculative?) small businesses that have no concrete assets that can be used to secure the loan I am going to have a hard time taking it seriously
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Replying to @bitemyapp @0K_ultra
i'm talking about the class of people who for very good reasons look like poor shmucks to banks and will not be able to get a collateral-backed loan because they have no collateral. i'm saying that for structural reasons some people fall through the cracks
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Replying to @danlistensto @0K_ultra
The market is trying to tell them the thing they want money for doesn't have enough upside if investors aren't interested.
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yes, exactly. that's what i mean by "structural reasons". conventional financiers have good reasons not to make that loan. too high risk (statistically speaking) and too low upside (statistically speaking). there aren't many good alternatives in this case and that kinda sucks
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