Trillions in Bad Loans May Sap World Economy for a Long Time
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Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#2So, if one views the global financial system as a big distributed belief propagation algorithm (eg. min-sum) how do loans fit into this?
Perhaps it makes sense switching to a "quantum-like" dynamics where one may "borrow" energy for a short amount of time before having to repay it, as in Heisenberg delta E * delta t uncertainty. So decreasing interest rates amounts to messing with some kind of Planck's constant.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#3Almost like the better part of a decade of free money tends to create bad debt.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#4Almost like the better part of a decade of free money tends to create bad debt.
I like how they devoted a whole paragraph to that point, although it's probably the most important one in the whole article.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#5So, if one views the global financial system as a big distributed belief propagation algorithm (eg. min-sum) how do loans fit into this? Perhaps it makes sense switching to a "quantum-like" dynamics where one may "borrow" energy for a short amount of time before having to repay it, as in Heisenberg delta E * delta t uncertainty. So decreasing interest rates amounts to messing with some kind of Planck's constant.
This isn't quite a relevant xkcd, but I do think it's relevant. Whilst it'd be cool to be able to apply models from physics to economics, there may be issues in applicability.
http://www.smbc-comics.com/index.php?db=comics&id=2556
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#6Have to paste it:
http://i2.wp.com/armstrongeconomics.com/wp-content/uploads/2...
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#7So, if one views the global financial system as a big distributed belief propagation algorithm (eg. min-sum) how do loans fit into this? Perhaps it makes sense switching to a "quantum-like" dynamics where one may "borrow" energy for a short amount of time before having to repay it, as in Heisenberg delta E * delta t uncertainty. So decreasing interest rates amounts to messing with some kind of Planck's constant.
Money is irrelevant.
It's clearly not a question of borrowing resources. It's conning people into thinking they have more resources than they actually have, while redistributing money around the economy. Until, the music stops and people notice they don't actually have anywhere to sit.
PS: It's sad how closely you can model the financial system as a pyramid scheme.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#8Have to paste it: http://i2.wp.com/armstrongeconomics.com/wp-content/uploads/2...
Debt is an obligation of repayment in the future. So technically it is money that we owe our future selves and others. Of course, the future is uncertain, which is what makes debt risky (and profitable). If we enter another recession, much of that debt could default.
This idea of basically seeing into the future, pricing risk/rewards was what always drew me to study finance. Sounds cool on paper, but the reality is much messier and morally ambiguous.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#9Wouldn't this only sap the global economy if all those bad loans were backed by average Joes, who were then hurt by the loss of return? If instead they were backed by governments and multi-national conglomerates who already had hoardes of (free?) cash, then the effect on the economy would be limited.
Re: Trillions in Bad Loans May Sap World Economy for a Long Time
#10So, if one views the global financial system as a big distributed belief propagation algorithm (eg. min-sum) how do loans fit into this? Perhaps it makes sense switching to a "quantum-like" dynamics where one may "borrow" energy for a short amount of time before having to repay it, as in Heisenberg delta E * delta t uncertainty. So decreasing interest rates amounts to messing with some kind of Planck's constant.
Money is irrelevant. It's clearly not a question of borrowing resources. It's conning people into thinking they have more resources than they actually have, while redistributing money around the economy. Until, the music stops and people notice they don't actually have anywhere to sit. PS: It's sad how closely you can model the financial system as a pyramid scheme.
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