Why finance shouldn't be open to your average Schmoe

Tuesday, 30 April, Year 5 d.Tr. | Author: Mircea Popescu

Generally "the people"i clamor for - nay, outright expect! - access to anything pertaining to finance. So, should everyone have a bank account ? Yes, they say. Even people unable to add in their head ? Why should somebody unable to do basic arithmetic have a bank account ? What for ?

The underlying assumption, of course, is "fairness", understood in the following broken terms : every live bipedal with wide nails and without feathers is equal, identical and equivalent to every other. So if one were to have a bank account and another were to not have a bank account, this is "unfair" in the sense that it breaches the expectation of bipedal equalidentiquivalence.

Here's the problem :


So this idiot - who is married! woe unto the poor woman and may God never curse any children with the misfortune of knowing him - wants to borrow 35`000 (that's thirty-five thousand) dollars to buy a new couch, new curtains and whatever else. That he can't afford. On credit. This so far would be common, pretty much all the ungulates inhabiting the United States are guilty of this sin. But he wants to do it all in BTC.

Let us do the most basic, most naive, most primitive, absolute minimal sort of financial analysis. Bitcoin average price six months ago was 10. Bitcoin average price today is 130. Should the idiot have borrowed his 35k six months ago and be due to repay today, he would consequently owe no less than 455k on principal alone. What of "my ability to comfortably repay this loan regardless of what happens"ii ? Does he make 10*455/6*12 = 9.1 million a year (after tax) ? I dare say no, he doesn't.

He would like to stress that he can get this loan from his bank. Somehow I doubt this, with the credit freeze-up happening all over the world. Why would banks lend to consumers when they can just as well lend to the government, point to weak consumer figures, get government to buy more of their toxic balance sheet, use the capital thus cleared to lend to the government and point to weak consumer figures ?

You can hardly get a loan for actual legitimate business purposes in the US these days, let alone braindamaged "home improvement" projects stemming from the circumstance that the woman is stuck at home, too ugly and socially awkwardiii to get a lover and too braindamaged by "women's studies" to actually understand how deeply she sucks and start putting her time and energy into fixing it. So she wants new carpets and upholstery, which will come in handy when nobody ever visits. Not to mention will also give the appearance that she's doing something and that's why there's no food ever cooked in the kitchen that cost to equip more than an entire African village ever spends on food during a century.

So why is he getting a BTC loan if his bank would give him dollars ? Why! "the potential interest-rate savings on BTCjam (and here:) make it worth our while to try here first". Get a load of that. The interest-rate savings. It costs at least 5% to insure dollar exposure against BTC appreciation. Per month. Over six months the FX risks he's undertaking are more than the usury rates in most states, yet there's "savings". Why ? Because he can't do math.

Why should this person be allowed a bank account ? (And for that matter, until and unless he learns to spell "principal", why should this person be allowed posting priviledges in "Loans" ?)

  1. "The People" being any one person aware of the circumstance that the sum value of their property, knowledge and experience does not justify the administrative costs of obtaining an actual identity (which have always been small and always dropping as technology improves) nevertheless aiming to inject themselves into conversation between actual people with actual assets, actual knowledge and actual experience as if one of them. []
  2. Remember this phrase ? You've heard it before, haven't you. Kludge, of course, invented it. Woe onto that woman too, as she soon enough found out. []
  3. To get a better appreciation of the general worthlessness of the average US female these days, consider this call of desperation :

    This week is about fostering relationships in the greek community, and that's not fucking possible if you're going to stand around and talk to each other and not our matchup. Newsflash you stupid cocks: FRATS DON'T LIKE BORING SORORITIES. Oh wait, DOUBLE FUCKING NEWSFLASH: SIGMA NU IS NOT GOING TO WANT TO HANG OUT WITH US IF WE FUCKING SUCK, which by the way in case you're an idiot and need it spelled out for you, WE FUCKING SUCK SO FAR.
    If you are one of the people that have told me "Oh nooo boo hoo I can't talk to boys I'm too sober", then I pity you because I don't know how you got this far in life, and with that in mind don't fucking show up unless you're going to stop being a goddamn cock block for our chapter.

    So yeah, good news : if you've married a US chick you're probably safe. She's never going to cheat on you, unless some barn animals get horny while she's passed out drunk. Actual people would never bother with her for a list of reasons so long it's not worth compiling.

Category: 3 ani experienta
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6 Responses

  1. Juica Reuins`s avatar
    Juica Reuins 
    Tuesday, 30 April 2013

    Expected nothing less from you on a daily basis little buddy. You care entirely too much about other random people you child!

  2. fluffypony`s avatar
    Wednesday, 9 April 2014

    LOL! I just came across this:)

    As I said in the post (shown in the screenshot) - "At this juncture I'm not willing to risk borrowing and re-paying on BTC that is unlinked to fiat currency." BTCJam at the time (not sure about now) had a mtgox-linked rate, where you borrow based on the USD rate and repayments are linked to that USD rate. It would have been ludicrous to borrow it unlinked, as you pointed out.

    Also, this was an attractive idea for me because the South African banks are not like US banks - they are far less likely to give credit (they've been nailed on numerous occasions for irresponsible lending, so now they're on the opposite side of the lending fence) and their interest rates are insane compared to the EU and the US. The effective APR for the BTCJam loan would have been significantly better than from the local financial institutions. Security was offered by virtue of the home loan being collateral (there's a legal precedent and instrument for this here, as it is commonly done in South Africa), but again it would have been at the fiat amount and not at the BTC amount.

    We ended up funding this by taking the money out of one of our access bonds. I initially calculated the cost implication of doing this based on the bond on the property in question, but it turned out to be cheaper to take it out of one of the bonds on another property that was basically paid off. Had I known that I wouldn't have gone down this road at all:)

    Had I been given the loan, however, it would have been better than the offer from the banks, so I would have been better off. Lenders would have suffered, as BTC rose more than the ~20% (in USD terms) I would have ended up paying, but that is the nature of things.

  3. Mircea Popescu`s avatar
    Mircea Popescu 
    Wednesday, 9 April 2014

    South African banks are not like US banks - they are far less likely to give credit (they’ve been nailed on numerous occasions for irresponsible lending, so now they’re on the opposite side of the lending fence)

    The point you omit here is like so : you may be an individual to yourself, or to your wife, or to your friends. But for strangers you are just a member of your group. Another group, the South African banks, have sunk some money and other resources into determining that you as a group shouldn't be lent to. So the only reasonable conclusion Bitcoin lenders - whose interests are exactly mapped on the SA bank's, incidentally - could come to would be... exactly the same.

    Executive summary : you don't escape a group just like that, because you in your head see yourself as different. Which goes right into this older article.

  4. "Why should this person be allowed a bank account ? (And for that matter, until and unless he learns to spell "principal", why should this person be allowed posting priviledges in "Loans" ?)"

    You spelled "privileges" wrong :-)

  5. Mircea Popescu`s avatar
    Mircea Popescu 
    Friday, 23 September 2016

    Yeah yeah, judge, pledge, knowledge but privilege. I'm sure.

  1. [...] mircea_popescu: I showed my wife that blog post fluffypony She was laughing fluffypony She says [...]

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