How a Trillion-Dollar Market Remains Hidden in Plain Sight
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Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#2This reminds me of www.zidisha.org where you can make micro-loans to 3rd-world individuals.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#3This reminds me of www.zidisha.org where you can make micro-loans to 3rd-world individuals.
I think kiva.org is pretty successful in this space, too.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#4The market is really only here while cd interest rates are stuck at near 1%. That's likely to go on for a while. Right now the spread is big enough to make this work.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#5Market lenders aren't banks. They cannot use fractional reserve banking. If they take in $100 they loan out $100. A bank takes in $100 having loaned out $10K to satisfy reserve requirements 10% (likely less but keeping it simple).
So if most lending moved to market lenders we would see a collapse in the money supply.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#6Peer to peer small lending is easy. Peer to peer small debt collection is hard. That's why the low end of lending is so expensive.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#7Market lenders aren't banks. They cannot use fractional reserve banking. If they take in $100 they loan out $100. A bank takes in $100 having loaned out $10K to satisfy reserve requirements 10% (likely less but keeping it simple). So if most lending moved to market lenders we would see a collapse in the money supply.
Don't we already have a collapse in the money supply?
I wonder if the huge number of people/organisations that can loan money but not set up a fractional reserve system (eg because of regulations) amounts to a smaller amount of money available. People making smaller loans may be less risk-averse too?
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#8Market lenders aren't banks. They cannot use fractional reserve banking. If they take in $100 they loan out $100. A bank takes in $100 having loaned out $10K to satisfy reserve requirements 10% (likely less but keeping it simple). So if most lending moved to market lenders we would see a collapse in the money supply.
If the bank's reserve requirement is 10%, wouldn't it only be able to lend out $90 of the $100 it had taken in deposits?
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#9This reminds me of www.zidisha.org where you can make micro-loans to 3rd-world individuals.
The OP is likely referring to prosper.com and lendingclub.com which are for profit businesses for peer to peer lending in the US.
Re: How a Trillion-Dollar Market Remains Hidden in Plain Sight
#10Market lenders aren't banks. They cannot use fractional reserve banking. If they take in $100 they loan out $100. A bank takes in $100 having loaned out $10K to satisfy reserve requirements 10% (likely less but keeping it simple). So if most lending moved to market lenders we would see a collapse in the money supply.
If the bank's reserve requirement is 10%, wouldn't it only be able to lend out $90 of the $100 it had taken in deposits?
Yes. But typically banks can leverage - for example, the bank which employs me typically lends out around $125-$135 for every $100 dollars in deposits. I guess the OP was trying to explain the money multiplier but got the example wrong.
(Money multiplier is the inverse of the reserve requirement)