Re:Finance is Not the Economy
by Bartweiss on Monday September 26, 2016 @04:20PM
(#12585202)
This is a reasonable point.
The distinction I was hoping to draw was between cash-flow loans and investment loans, where the former are (like interbank overnights) non-zero risk but immensely reliable. But it's probably impossible to set up that system without people manipulating it to get profitable rates (...like interbank loans).
Certainly, we don't have a great track record of the government properly evaluating what's actually for real safe. I was thinking that we could keep limit lending by preventing rate-based profits (like electric companies, which profit on coverage but not prices), but realistically that just moves the incentive from profit to popularity. Hand out good loans to bad risks, get reelected, blame the markets when they explode. Sounds painfully familiar, actually.
So yes: likely better to treat financial services as different from risk-bearing products altogether. You'd have utility "money storage" that does deposits, transfers, maybe offers financial advice, but doesn't extend any credit/investment of its own.
The distinction I was hoping to draw was between cash-flow loans and investment loans, where the former are (like interbank overnights) non-zero risk but immensely reliable. But it's probably impossible to set up that system without people manipulating it to get profitable rates (...like interbank loans).
Certainly, we don't have a great track record of the government properly evaluating what's actually for real safe. I was thinking that we could keep limit lending by preventing rate-based profits (like electric companies, which profit on coverage but not prices), but realistically that just moves the incentive from profit to popularity. Hand out good loans to bad risks, get reelected, blame the markets when they explode. Sounds painfully familiar, actually.
So yes: likely better to treat financial services as different from risk-bearing products altogether. You'd have utility "money storage" that does deposits, transfers, maybe offers financial advice, but doesn't extend any credit/investment of its own.