131–140 of 262 posts
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.
> In practice, buybacks can be used to create what is effectively a shareholder dividend in a more tax-advantaged way. Whereas with dividends, they are taxed as income, and this is realized immediately. With buybacks, they are taxed as capital gains, but crucially the gains are not realized until the asset is sold. This could be indefinitely far in the future, so it's more capital efficient. It has the added benefit…
Which jurisdictions tax unrealized capital gains? Asking for a friend so I can avoid passing through.
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Being exceptional in cybersecurity is a pretty good indicator that someone will be successful in other fields. A good cybersecurity person will understand that cybersecurity is a mix of technical mastery and the art of understanding human behaviour.
> Being exceptional in cybersecurity is a pretty good indicator that someone will be successful in other fields. I am not so certain about this. In particular being exceptional in cybersecurity does not make you good at playing political games or having the traits that a lot of bosses want from employees (I will attempt to avoid starting a discussion whether I consider such traits to be good or bad).
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Loans are assets -1 = 1 And people wonder why finite natural resources skyrocket in value.
For every debt there's a debtor and a debtee. For the first debt is a liability, while it's an asset for the second.
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Loans are assets -1 = 1 And people wonder why finite natural resources skyrocket in value.
The best way to understand a loan is as the right to a future income stream (principal repayments and interest). The original debtor (the person/entity taking out the loan) establishes the credibility of that future income stream (based on income, expected returns on a project, etc) and sells it to the lender (usually a bank) for cash up front. Thus the loan is an asset on the bank's balance sheet, that is generating…
Unpopular opinion, but I don't think banks should be able to loan out money that's not theirs, and printing money is bad. Gold good, paper bad. But also, gold bad, because clipping. If only there was a solution.
How can there be more money in circulation if we can’t create more?
Since wealth can increase (there’s more wealth today than 1000 years ago) why would you expect that money wouldn’t?
Or do you think there should always have been only $1 constant dollar for all time?
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That’s not how banking works. Banks cannot lend “10–100× their assets.” Loans are assets. Deposits are liabilities. What limits lending is capital, not reserves, and leverage is tightly regulated at roughly 10× equity, not 100×. The interest math is wrong too. Banks pay interest on deposits, absorb defaults, cover operating costs, hold capital, and meet liquidity rules. Net margins are about 1–3%, not 50–500%. Fracti…
It can be difficult to figure out whether the theoretical limit is 10x or 100x in my mind because there isn't a reserve ratio federally (well, there is one, but it's zero) , and the other regulations surrounding that aren't so cleanly understood in a neat formula.
I know what you're thinking of here, but it doesn't mean anything like what you think it means.
So the US used to have a rule that every bank hand to have a certain percentage of its assets stored in its account at a Federal Reserve bank; it is this percentage which was gradually reduced to 0 by I think 2020. Note that only the funds in that account meet the requirement; a literal pile of cash contributes not a single cent.
The way banks are primarily limited nowadays is via capital adequacy ratio, which is essentially that you need to set aside a particular pile of capital that can be raided to guard against assets falling in value to 0. It's complicated because this pile of capital doesn't come from the money a customer deposits in their account (which needs to be held as an asset to offset the liability a depositor represents), but rather from income the bank makes in other ways. If a bank sells $1 million worth of shares, they get to issue ~$20 million more loans.
If a bank gets $1 million worth of new deposits, they get to issue... $0 more loans. Well, maybe less: if a bank gets $1 million worth of new bitcoin deposits, that probably reduces its capital ratio because bitcoin is such a risky asset.
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> That’s why the Bible and Quran are against usury. Now let's biblical exegesis to define what is legitimate interest and usury. The "good" (or "bad"?) thing about these holy scriptures is that they can be interpreted quite freely to fit a personal or institutional agenda.
That's why you have the Pope or the Supreme Court to tell you what the holy scriptures mean.
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> fractional reserve banking and do the math all models are wrong but some are still useful. This model isn’t useful at all since the fraction was legislated to be 0 years ago.
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…
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 to hold
Well this is usually the biggest of several limitations which impact whether a loan would be profitable to make for a bank or not so i don't entirely disagree but this is a legislative control, there's no "economic terms" here because in general no school of economics understands this or has anything to say about this control which you correctly point out exists and is central to loan decision making. People can argue about the degree of centrality because it's not the only factor so let me put it this way: it's central in a way which any notion of "fractional reserve" is simply not.
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.