141–150 of 262 posts
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The $100 does become a liability on your balance sheet. You’re right that interest doesnt and is an expense. In the context of this post, does it matter? He’s not teaching bookkeeping here. He’s explaining the time value of money.
He's explaining the time value of money but uses an example that accrues interest before any time has passed?
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That's in the US. Canada for example never had any legal reserve requirements. However legal limits aren't the only ones that apply. Canadian banks still keep more than zero reserves around. The more useful limitation in economic terms and in legal terms is on the amount of capital banks need to hold. A capital cushion is what makes your deposits stable, not reserves. If you have a big enough capital cushion, you can…
Canada is not an exception and operates via the same mechanism https://lop.parl.ca/sites/PublicWebsite/default/en_CA/Resear... Fractional reserve is a model only for textbooks, it is not an accurate model of how the banking system works in most western economies with a central bank and sovereign currency today. >> The more useful limitation in economic terms and in legal terms is on the amount of capital banks need t…
Your view of fractional reserve banking is rather.. unorthodox. Pray, tell me, why do banks bother with deposits, then?
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Long-term treasury bonds are fairly volatile. That's how Silicon Valley Bank went under: their long-term bond holdings dropped in value enough to make them insolvent.
They can swing a few percent. So can gold. Either one could make a bank insolvent. In the long term treasury bonds are not volatile, especially if you hold them to maturity.
This is bad, don't read it. When you borrow $100 you do not create a liability which includes the interest to be paid. People who don't understand the very basics of finance and accounting shouldn't write about finance and accounting.
The people who are in a position to influence the world are those who understand it, and if this article nudges people with a hacker mindset towards having more influence, then that's a good thing.
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Yes, at the time of the initial transaction the borrower would not have a liability on their balance sheet that included the interest due. Over the course of the borrowing period the borrower would accrue interest expense commensurate with the passage of time that would increase the borrowers total liabilities. The author misunderstands the fundamental accounting definitions of liabilities (and also assets). Liabilit…
Most of the really stupid stuff written is written in good faith. It's not an excuse. There are many good books written about the financial system, accounting, etc. Rather than writing just another (incorrect) blog post, why not point to the good sources of information?
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That's why you have the Pope or the Supreme Court to tell you what the holy scriptures mean.
There are many Christians very fervent opponents of listening to such authorities and stick to the Bible itself. Nowhere in the Bible for example it is written that one can pay off sins by giving money to some authority. But someone had to pay for the Saint Peter’s Basilica so there was an incentive to adjust scripture.
> Nowhere in the Bible for example it is written that one can pay off sins by giving money to some authority.
I'm no expert but doesn't James 2:26 says "Faith without works is dead."?
Surely giving some money (that you had to work hard for!) to the greatest charity in the world (the Catholic church) should count as a good work?
(But I'm just playing devil's advocate here. I don't know what their official reasoning is.)
This is bad, don't read it. When you borrow $100 you do not create a liability which includes the interest to be paid. People who don't understand the very basics of finance and accounting shouldn't write about finance and accounting.
It was quite a good article if you don't care to nitpick over terminology. Too many technical people avoid the business side of things because they find it boring or are too cynical to engage with it, which limits their impact. Instead we get sleazebag money guys running the world. The people who are in a position to influence the world are those who understand it, and if this article nudges people with a hacker mind…
are those who can pay people who understand it*
https://chatgpt.com/share/695e125f-1254-800a-8661-d7a046f4c2...
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You might be right. It's also possible you are wrong though. Some things have a lot of moving pieces and if one piece is off the entire thing is wrong - so you have to commit to getting a grounding that is quite thorough to have any understanding at all. I'd argue accounting is one such subject, finance is one, the legal system is one, software engineering is debatable, math isn't one.
I am a CPA by training originally, but have spent most of my time in operational finance roles for PE-backed technology companies. While my work is all finance and accounting related, I mostly work with SQL and Python day to day creating internal applications for things like ARR etc. I agree completely on your "thorough grounding" comment. I spend a lot of time explaining to finance people how tools like python, SQL,…
Common and/or various ways the two groups misunderstand each other, and how you help them to anchor to the underlying base concepts? Yes please. For example, we know that interest accrues over time, but we still use shorthand for the annual interest as a step function because it makes intuitively more sense.
This is bad, don't read it. When you borrow $100 you do not create a liability which includes the interest to be paid. People who don't understand the very basics of finance and accounting shouldn't write about finance and accounting.
The $100 does become a liability on your balance sheet. You’re right that interest doesnt and is an expense. In the context of this post, does it matter? He’s not teaching bookkeeping here. He’s explaining the time value of money.