> I can’t understand why banks keep lending money for deals like that.
Because if they ever stop lending the music just abruptly stops. The entire US economy grinds to a halt and takes the entire world down with it. Even just raising the interest rates is enough to provoke cataclysmic events that wipe out billions and billions of dollars overnight. I can't even fathom what would happen if banks stopped lending money.
The US economy is so addicted to cheap credit it would rather forgive debts and bail out banks than let it all come crashing down. Debt is so pervasive, everyone is so thoroughly leveraged, that if there's too many defaults it would cause an endless cascade of further defaults that could threaten the entire economy. It'd take an act of god to fix this.
Where in the text of their comment did they say that?
The sentence you quoted doesn't have anything to do with the point you claimed they're making.
And the GP is right: banks have to lend because the system is set up to use credit for investment, personal consumption, and to balance shocks. Doesn't take anyone being altruistic.
They are propping up the world economy though. They're not sitting on top of their cash reserves like dragons and their hoards. They are "efficiently allocating the capital" by lending at interest. That's the number one cause of inflation. They make it so there's so much money circulating it slowly becomes worthless.
Someone needs a $1,000 loan. Bank issues it against some collateral. They grab the cash and spend it. Whoever receives that money deposits it at the bank. They keep $100 and loan $900 back out. It eventually gets deposited again. A significant fraction is loaned out again! Then it gets deposited again!! Then $1,000 turns into $100,000 literally overnight! Not one cent of it real until the loans are paid back, until somebody actually goes and extracts value from this planet! Exponential growth in a linear planet, it's unsustainable.
The entire global economy is leveraged this way! It's not real until the loans are paid back! If people start defaulting on these loans, it's fucking over. People depend on those payments in order to pay back their own loans. Defaults generate more defaults which generate even more defaults, like a society level stack unwinding. Next thing you know the government is "injecting liquidity" into banks. If they don't bail out the banks everything come crashing down.
We live in the age of CBDCs, of programmable currency. We have governments speaking of negative interest rates and expiring money to drive consumption. People have to keep consuming, they have to keep spending money. The motor of capitalism must keep turning. Otherwise the loans go unpaid and everybody gets liquidated.
Because if they ever stop lending the music just abruptly stops. The entire US economy grinds to a halt and takes the entire world down with it. Even just raising the interest rates is enough to provoke cataclysmic events that wipe out billions and billions of dollars overnight. I can't even fathom what would happen if banks stopped lending money.
The US economy is so addicted to cheap credit it would rather forgive debts and bail out banks than let it all come crashing down. Debt is so pervasive, everyone is so thoroughly leveraged, that if there's too many defaults it would cause an endless cascade of further defaults that could threaten the entire economy. It'd take an act of god to fix this.