
McKinsey: Half the World’s Banks Too Weak to Survive Downturn - anm89
https://www.bloomberg.com/news/articles/2019-10-21/banks-must-act-now-or-risk-becoming-a-footnote-mckinsey-says
======
throwaway66920
I believe this is the actual article

[https://www.mckinsey.com/industries/financial-
services/our-i...](https://www.mckinsey.com/industries/financial-services/our-
insights/global-banking-annual-review-2019-the-last-pit-stop-time-for-bold-
late-cycle-moves)

Broadly it seems to be less extreme than Bloomberg’s summary and more nuanced
to particular conditions.

I like how exhibit 6 is rotated to encourage reading it from either direction.
Haven’t seen that before in charts.

~~~
avs733
Well of course it's more nuanced. Bloomberg is about speed not MECE.

~~~
dfxm12
_MECE_

Mango-eating computer engineers?

No, that doesn't fit in based on the context clues...

~~~
stakhanov
Mutually Exclusive & Comprehensively Exhaustive. It's how to do bullet points
according to McKinsey. They had to invent it in the 1960s because apparently
by the 1960s no one at McKinsey was yet, you know, aware of the existence of
centuries' worth of literature on formal logic. So they reinvented the wheel
as far as that particular cultural achievement was concerened. Or the first
millionth of it, to be more precise, and left it at that, because the rest of
it would have no longer fit onto a single PowerPoint slide.

~~~
TurkishPoptart
God, these consulting companies are the _worst_.

~~~
throwaway66920
Alternatively, this is just some guy asserting that everyone at McKinsey
thinks they invented a brand new concept, when in fact, it’s just a heuristic
they teach people to communicate more effectively, because communication is
hard.

~~~
vraivroo
I see you are unfamiliar with McKinsey.

~~~
throwaway66920
Former employee

Edit: I cannot reply to the below, but I will say, that’s a pretty contrived
justification for your view.

Communication is hard. Few things done at a corporate scale are easy to
implement. People like to point at big consulting firms and say “I could have
done that” or “they could have just asked me” but that’s really just a
fraction of it.

~~~
tomrod
Former employee of former McKinsey employees. Grandparent point stands:
McKinsey seems to offer little to no value that isn't already known and easy
to communicate.

I will say though that McKinsey alums I know seem to be better at playing
corporate politics than the average, which can be a skill when married with
technical acumen.

~~~
op00to
You call it playing politics, others call it effective communication.

~~~
tomrod
Effective communication is pushing people the alums dislike out of their jobs
and building silos?

~~~
throwaway66920
“Playing politics” is is largely empathy and communication skills. Giving
people what they want is actually not intuitive because, again, people are
generally bad at communicating what they want. It’s common to hear people
maligned for being “political players” but I’ll be honest; if you’re bad at
office politics, it generally implies you don’t have people’s confidence,
trust, and friendship- often because you’re fixated on the idea that work
should stand for itself and not recognizing the massive importance that is
working with others.

Being a dick with your influence is a different concept

~~~
tomrod
Being a dick in influence is what I observe more often from my (biased,
certainly) sample of McKinsey alum. We both agree that salability of work
product is an important and underutilized skill.

------
dawg-
And if you're a bank, guess who is conveniently standing by ready to fix it
for you with an army of $2000 an hour consultants? McKinsey.

Same exact scam as the shady mechanic who wants charge you $400 to flush your
transmission fluid and convinces you that your car will surely blow up if you
don't do it.

~~~
bitcoinmoney
2k/hr?????

~~~
shantly
It's basically therapy for corporate executives, delivered via powerpoint,
with a healthy side of blame insurance. And yeah, it's expensive.

~~~
ploxolo
Dad worked at a bank (just below CEO). He once said that McKinsey was most
useful when you wanted to kill a project diplomatically, and make sure it
would stay put. Have McKinsey come in, make the recommendation that X project
was no good, and kiss it goodbye with McKinsey absorbing the blame. Other way
around was to give projects some extra push and credibility.

~~~
zxcmx
Or launch a thing, to be fair.

We came up with a product internally. So our CEO hired a top-tier consulting
company to sell our own idea back to us. That process cost millions.

But they _do_ make real slick presentations and they have higher status than
internal staff, and the CEO can say that a top-tier consulting firm
recommended we do x, y and z... Blame insurance is right.

Once you hit a certain scale, e.g. where CEO is so stratospherically above
rank-and-file in social status that it's not appropriate to speak directly
anymore, consultants can act as a social buffer. Among other things they can
launder recommendations from regular staff to management and put that
objective shine on them.

The downside is that we know for a fact (when they accidentally published an
android app to the playstore, I reversed it and it was our code) that
collateral, research and demos that we paid for got sold to others.

------
twh270
Much, possibly most, of the economic value in a downturn comes from weeding
out the weaker companies -- through bankruptcy, acquisition, or
restructuring/pivoting.

I well remember the "dot com" crash. It wiped out tons of companies that had
no business existing (pardon the pun).

(Of course when it comes to banking, that can be a bit of a special case as
we've witnessed multiple times.)

And yes, downturns are hard on people, and this is why a social safety net is
invaluable. Gives them time to find a new job, or retool their skills, or
otherwise adjust. And I don't pretend that's easy either.

~~~
ur-whale
I believe the consecrated term is "creative destruction"

------
lepetitpedre
Sadly, regular taxpayers will pay the bill. Just like last time.

~~~
dmix
Once again completing the cycle of moral hazards in the name of reducing the
"impact" of rescissions in the short-term. The only metric that apparently
matters.

~~~
QuesnayJr
In the last recession, unemployment in the US reached 10%. How big does
unemployment have to reach before you take the quotes away from "impact"? 15%?
20%? Unemployment in Spain reached as high as 26% because Spain was unable to
reduce the impact.

~~~
dmix
The unemployment rate is the short term metric which is exactly what I’m
taking about.

A long term perspective means preventing future recessions too, not just
fixing the short term problems. Creating new moral hazards, negative
incentives, behaviour and careers which would have been tarnished and
discredited normally are allowed to continue, often with the same people and
companies.

If we were serious about preventing recessions our policies should not only be
measured in how they deal with the fallouts but also addressing the things
that cause it in the first place, and balancing what’s lost by not letting the
markets naturally correct themselves.

~~~
QuesnayJr
We've had recessions for the entire history of capitalism, under a large
number of legal regimes. We had recessions back when banking was much more
tightly regulated. We had recessions under laissez-faire. Recessions are
endemic to the system. Our choices are either "combat unemployment" or get
ready for socialism to finally win the war of ideas.

~~~
dmix
> or get ready for socialism to finally win the war of ideas.

Yeah how's that working out in Venezuela and Ecuador (who only half-heartedly
did it and still got burned).

~~~
QuesnayJr
It's working out badly. But we get 25% unemployment, and a lot more countries
are going to try it.

------
Merrill
Problems with weak banks are usually solved by merging them with stronger
banks.

It's the non-bank financial institutions that are more worrisome. Recall that
Lehman Brothers and AIG were not banks.

~~~
scribu
> Recall that Lehman Brothers and AIG were not banks.

AIG was an insurance company, yes.

But Lehman Brothers _was_ an investment bank.

From Wikipedia:

> in 2008, Lehman was the fourth-largest investment bank in the United States

~~~
Merrill
"Investment banks" were only colloquially banks. They were not members of the
Federal Reserve, not regulated by the Office of the Comptroller of the
Currency, and not FDIC insured. Survivors became banks after the crisis, but
in their place we now have lots of hedge funds, private equity funds, etc.
that have grown large to do similar financial operations without bank
regulation.

[https://en.wikipedia.org/wiki/Shadow_banking_system](https://en.wikipedia.org/wiki/Shadow_banking_system)

------
geodel
Not that I disagree. Its same pattern: half of the universities, most of
liberal art colleges, 60% of IT companies, 70% of private Doctor practices and
so on are too weak to survive next shock. The only sad part I see is nasty
businesses like McKinsey is not fitting in any pattern of failure.

~~~
helpPeople
I don't agree on the private doctor practice. Source, married a dr

Worst, worst case, the ~15k/yr in rent, ins, and software put a dent in
profits, but if each visit is min 75$, you can figure out how hard it is to
break even. Upper revenue is 200k+/yr

~~~
toomuchtodo
Reimbursement compression along with EHR/EMR requirements has seen a lot of
practices acquired by large health systems.

~~~
helpPeople
Not to get too bogged down with details, but this winter she is looking to
change EMR systems. The current one is the most expensive/established EMR for
her field.

Rent is 12,000 dollars of expenses. EMR is almost trivial.

~~~
et2o
Vast majority of private practices are closing or being purchased by larger
hospital systems.

~~~
throwaway5752
Sure, same is true for software startups. Trade long hours and slightly above
market pay for a lump sum payment and predictable patient load? The increasing
complexity of interacting with health insurance providers and diagnostic labs
has something to do with it, also. Why wouldn't a lot of them do that?

------
StreamBright
McKinsey, the ultimate power point company. They also nobody got fired for
hiring them. I could not believe this reasoning but it exists. We tried to
solve problem X but even McKinsey failed. This problem is declared unsolvable
now.

------
olivermarks
McKinsey & Accenture could do with some anti trust investigation at this
point, they have too much of the outsourced brain work and strategy of
important western firms executed in a cookie cutter way that then exploits the
inside knowledge for future projects. This banking prediction is an example of
this type of thinking. McKinsey are the problem not the solution

~~~
TuringNYC
Serious question: could you cite some Accenture projects with serious brain
work? They are typically in the systems integration category while MBB
(McKinsey Bain BCG) get the prestigious work.

~~~
olivermarks
I meant Accenture in the context of executing McK (& BB) projects in a closed
loop. MBB & Deloitte are pretty short on 'serious brain work' and long on copy
and paste of their own and others work in my recent experience

------
richliss
AKA On behalf of our banking customers we're going to be advising that
governments get ready to do another bailout.

~~~
omginternets
>do another bailout.

I know you're being tongue-in-cheek, but in theory, are governments even
capable of doing another bailout?

My understanding is that public debt in most Western countries (not sure about
China/India) is through the roof. Other than printing money and risking a
cataclysmic devaluation, what can be done?

~~~
IAmEveryone
The problem was never with banks failing, it was with some of them being "too
big to fail". This news therefore doesn't mean attempts to prevent another
2008-like crisis have been unsuccessful.

Also, let's the remember the last bailout was a somewhat underrated success: "
TARP recovered funds totalling $441.7 billion from $426.4 billion invested,
earning a $15.3 billion profit or an annualized rate of return of 0.6% and
perhaps a loss when adjusted for inflation.".

Apart from that, public debt is up considerably in the US (mostly due to tax
cuts) but rather flat in the EU. Nothing would preclude another bailout of the
same magnitude as the last one.

But that's a somewhat silly question. Because if there's one thing we can be
sure of, it's that the next crisis will be different than the last one.

Italy going bankrupt is a far more imminent danger than private banks, and one
that would be too big to contain, for example.

~~~
howard941
From the bank shareholder's perspective the bailout was a stunning success.
For the rest of us debtors, for those who greased the runways for the
shareholders with their lost homes and lost savings that went to paying off
debts in disinflationary dollars when stimulus and reasonable inflation would
have made paying debts off easier, it remains an ongoing disaster.

~~~
ChrisLomont
>For the rest of us debtors...it remains an ongoing disaster

Taxpayers didn't pay for bailouts. The Fed did. Taxpayers did make a profit
form them, however, since the profits the Fed saw from the bailouts were, by
law, handed over to Treasury (except for statutory operating expenses),
offsetting taxes.

>those who greased the runways for the shareholders with their lost homes

Most of those those losing homes did so by taking loans they could not pay,
and the ripples were felt by those not taking such loans, in their retirement
funds. Those who left those funds alone recovered the value and then some
after the recession. Those who did not, or could not, did lose value.

But don't just blame bankers. Also blame borrowers defaulting.

~~~
pjmorris
> Taxpayers didn't pay for bailouts. The Fed did.

The 2+ Trillion dollar expansion of the Fed balance sheet during the crisis
costs taxpayers every day that they pay interest on a loan enabled by that 2T+
expansion. Every house that used to be $200K and is now $500K is part of the
price people are paying for how the crisis was managed.

> But don't just blame bankers. Also blame borrowers defaulting.

The core function of a bank is to evaluate risk. Being able to do so correctly
enables the bank to make loans at a profit. Being unable to do so means that
the people involved should go do something else. Debtors have been defaulting
for millennia, it's a well-understood process. The financialization and
securitization of housing was the creation of bankers, not borrowers.

~~~
ChrisLomont
>The 2+ Trillion dollar expansion of the Fed balance sheet during the crisis
costs taxpayers every day that they pay interest on a loan enabled by that 2T+
expansion.

Taxpayers don't pay interest on Fed assets. You have a fundamental
misunderstanding of how monetary policy works. What makes you think your
statement true? Did you read it in a explanation of how the Fed works, or did
you make it up?

>The financialization and securitization of housing was the creation of
bankers, not borrowers.

This is shortsighted and incorrect. If borrowers didn't default, there would
be no crisis. Many were expecting housing to rise forever and were taking out
second mortgages as piggy banks, then got in trouble when prices didn't
increase forever. High risk borrowers could keep refinancing at higher and
higher prices since house prices were climbing. When the prices stopped
climbing, this process stopped.

>Debtors have been defaulting for millennia, it's a well-understood process.

And bubbles from irrational people have been happening for millennia too. Does
this simplistic tautology allow me to assign all blame to borrowers?

~~~
pjmorris
Compare your

> 'Taxpayers don't pay interest on Fed assets.'

with what I said; 'they pay interest on a loan enabled by that 2T+ expansion'
(of Fed assets.) The Fed bought ~1.5-2T of MBS, turning bad loans that would
never be repaid - credit that simply never should have been issued - into bank
reserves. Those reserves both inflate asset prices and enable the banks to
make loans on which interest is paid.

> When the prices stopped climbing, this process stopped.

The price climb - and the influx of less able borrowers - was primarily
enabled by securitization.

> And bubbles from irrational people have been happening for millennia too.
> Does this simplistic tautology allow me to assign all blame to borrowers?

Borrowers can only exist if they've borrowed from lenders. Hence my point
about lenders needing to evaluate risk to continue to be lenders.

~~~
ChrisLomont
>Those reserves both inflate asset prices and enable the banks to make loans
on which interest is paid

Banks don't need those assets to make loans. Banks can make loans whenever and
where ever they want, and can simply borrow from the Fed. This is the point of
short-term interest rates - banks can lend past reserve requirements whenever
they find a decent loan to make. It's the difference between exogenous and
endogenous theories of money, and modern economies with central banks usually
work this way to allow the market to decide how much money is needed, not how
much reserves a bank can obtain because a central bank absorbed assets.

And most loans rate people get are tied pretty directly to Fed rates, not bank
reserves. This is again due to endogenous money creation - demand creates
money, not reserves. So the Fed and banks having 0 reserves or having 100
trillion reserves is nearly irrelevant - it is interest rates that matter, and
those are set directly by the Fed board.

Also, if you recall, the banks were famously _not_ giving loans after the
bailouts, despite having the capital to do so [4]. I guess that also doesn't
help your claims.

>they pay interest on a loan enabled by that 2T+ expansion

If you're going that far afield, then it's simple to point out what financial
trouble they would be in if the Fed didn't make those loans. People would
likely be far worse, in which case it makes the argument for those loans even
stronger.

It would be interesting to check even correlation between Fed balance and
interest rates.

Here's [1] an IGM Forum economist poll of most of the country's top economists
on whether or not the bailouts improved unemployment. I'd guess being
unemployed is worse than claimed interest rate hikes.

Here's [2] their answer to the question: "the benefits of bailing out U.S.
banks in 2008 will end up exceeding the costs" \- resulting in strong support
with certainty (especially considering the types of questions these polls ask
- check other questions).

So there's not much real argument on the bailouts being beneficial.

Now that the Fed is selling off MBS [3], shouldn't that cause the reverse of
what you claim absorbing them did? Because those effects are not see in the
markets. Maybe your effects did not happen?

[1] [http://www.igmchicago.org/surveys/bank-
bailouts](http://www.igmchicago.org/surveys/bank-bailouts)

[2] [http://www.igmchicago.org/surveys/bailouts-banks-and-
automak...](http://www.igmchicago.org/surveys/bailouts-banks-and-automakers)

[3]
[https://www.federalreserve.gov/monetarypolicy/bst_recenttren...](https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm)

[4] [https://research.stlouisfed.org/publications/economic-
synops...](https://research.stlouisfed.org/publications/economic-
synopses/2016/02/05/bank-lending-during-recessions/)

~~~
pjmorris
I'm sorry to come back to this so late, but I've been otherwise occupied, and
I think the topic really matters. I agree with the GP that the bailouts were a
success for the banks and an 'ongoing disaster' for many others.

> Banks don't need those assets to make loans.

I agree with you on the endogenous theory of money (cf. Steve Keen), and
understand that banks aren't constrained by 'loanable funds.' I was meaning
capital and regulatory reserves, and mentioneing them only to acknowledge that
not every dollar of the Fed's money creation went to asset price inflation.
Just most of them.

> So the Fed and banks having 0 reserves or having 100 trillion reserves is
> nearly irrelevant - it is interest rates that matter, and those are set
> directly by the Fed board.

This is where I think you err. Once a bank's minimum capital requirements are
met, its managers are going to look for maximizing returns on the capital
available to them. To say that that will not have effects on the economy at
large doesn't make sense to me.

> Also, if you recall, the banks were famously not giving loans after the
> bailouts, despite having the capital to do so [4]. I guess that also doesn't
> help your claims.

How so? Here are the chief claims I've made: > The 2+ Trillion dollar
expansion of the Fed balance sheet during the crisis costs taxpayers every day
that they pay interest on a loan enabled by that 2T+ expansion. > The core
function of a bank is to evaluate risk. > Debtors have been defaulting for
millennia, it's a well-understood process. > The financialization and
securitization of housing was the creation of bankers, not borrowers.

I don't see how any of these are contradicted by the data in the St. Louis Fed
'Bank Lending During Recessions' article you linked. The entire investment
world recognised that they'd underpriced risk for years, and there was a
correction.

> If you're going that far afield,

I don't think this is far afield at all; I think it's critical to consider the
effects of additional capital, in the form of debt, on the real economy.

> then it's simple to point out what financial trouble they would be in if the
> Fed didn't make those loans. People would likely be far worse, in which case
> it makes the argument for those loans even stronger.

Which people? The banks, yes. A creditor's assets are someone else's debts, so
larger debts are good for banks. Generally borrower's situations are improved
by brrowing less, at lower interest rates for a given asset.

> Here's [1] an IGM Forum economist poll of most of the country's top
> economists on whether or not the bailouts improved unemployment. I'd guess
> being unemployed is worse than claimed interest rate hikes.

Here are my favorite comments from the economists in that poll:

> There were much better policies, but what was done was better than nothing,
> give the bad policies that preceded.

> The question presumes Paulson’s forced alternative. If the only choice is
> between evil and Armageddon, evil might look ok.

From experience, being unemployed is terrible. Avoiding it on a mass scale is
crucial. But avoiding unemployment is a pretty narrow question compared to the
entire picture. Wages (real, median) have pretty much stagnated while housing
(both a necessity and an asset) has inflated above historical norms (see
Robert Shiller's chart from 1890-2005, and the Case-Shiller indexes.) That
puts pressure on employed people that the poll question leaves out of
consideration.

> Here's [2] their answer to the question: "the benefits of bailing out U.S.
> banks in 2008 will end up exceeding the costs" \- resulting in strong
> support with certainty (especially considering the types of questions these
> polls ask - check other questions).

First, I note that the number of economists who strongly agree is outnumbered
by the group who are uncertain or disagree.

> Now that the Fed is selling off MBS [3], shouldn't that cause the reverse of
> what you claim absorbing them did? Because those effects are not see in the
> markets. Maybe your effects did not happen?

There's been a ~10% decline after a ~400% increase. How much of an effect
would you expect to see?

Lastly, my favorite comment from the second pol:

> Not compared to an ideal policy of an orderly reorganization imposing losses
> on creditors according to seniority. But better than chaotic.

He sort of sounds like Bagehot, "“Lend without limit, to solvent firms,
against good collateral, at 'high rates". The choice that was made was to lend
without limit to the largest firms against all collateral at low rates. That
choice has consequences as well as benefits, and I would urge you to seriously
consider both.

~~~
ChrisLomont
>This is where I think you err. Once a bank's minimum capital requirements are
met, its managers are going to look for maximizing returns on the capital
available to them. To say that that will not have effects on the economy at
large doesn't make sense to me.

How did I err? Banks have unlimited capital available, borrowable at Fed
rates. It does have an effect on the economy - it lets the economy grow at
rates demanded by commerce instead of being constrained by too little capital
or by being overflooded with capital.

But the fact remains banks getting assets bought by the Fed has almost zero
effect on loans, which was your claim. This is empirically true as I
demonstrated, and have given the theoretical reasons for.

>Here are my favorite comments from the economists in that poll:

Yes, you can post-select the side you want to be true. Now take the entire
post instead of cherry-picking the answer you believe. It's not worth
providing evidence of complex things with nuance to someone who has chosen
their side and post selects the parts they like. So stop being dishonest with
the evidence.

>Wages (real, median) have pretty much stagnated

Wages are a tiny part of total remunereation or of cost to employ. Fortunately
BLS tracks both those variables - then the fact is that total remuneration has
increased due to perks and legal requirements (go check the data), and cost to
employ has gone up (due again to legislation requireing more cost per employee
that is now paid by employers yet benefits the employee). BLS tracks all these
- wages is far too simplistic.

Also, demographics have changed - a younger workforce is earlier in a career,
and gets paid less, yet can still make more at each point in a career than
previously. This is also a true effect and can be teased out of Census data.

Also, median wages now includes women and minorities, who have seen tremendous
growth in their median wages for decades. The only class that has lost some is
white men, and even there the losses are not very large.

So the "flat wages" is far from the truth on the quality of life gains people
have seen. I doubt many would like to live at the equivalent wage in 1980
compared to now.

>while housing (both a necessity and an asset) has inflated above historical
norms (see Robert Shiller's chart from 1890-2005, and the Case-Shiller
indexes.)

Case-Schiller ignores (among other things) that the size of houses has
increased. Not even factoring in quality increases like better insulated,
lower cost to maintain, safer, when you simply factor in cost per square foot
the values are remarkably flat for decades. [1]

The increase in size is mostly because people want and can afford bigger
houses than in the past.

In short, your wage and housing views are too simplistic and ignore important
nuances that reverse the evidence for the position you're taking. In both
cases you're moving too many variables to make the claims you're making, and
by holding important variables constant you get the opposite conclusions, ones
which are the correct measurement regarding quality of life improvements.

>Lastly, my favorite comment from the second pol:

If you've chosen your answer the the point of not reading all new data with
equivalent belief, then I see how you've reached your current world view. The
comments you pick from so many while ignoring the totality or central points
of the polls shows tremendous bias in your ability to absorb well sourced
data. As such it's not worth it to continue if you treat this like climate
deniers. Every complex system will have uncertainty - but the uncertainty is
not the central feature of this one.

>First, I note that the number of economists who strongly agree is outnumbered
by the group who are uncertain or disagree.

This precisely shows me you're dishonest. Why pick those categories while
ignoring the "agree" one? To make the result not be what it is? For anyone
reading this far, here are the results: Strongly agree 10%, Agree 49%,
uncertain 13%, disagree 13%, strongly disagree 0%, no opinion 0%.

That you cite those two cases while ignoring so many counter to what you want
to be true is dishonest and misleading at best.

With this level of intellectual dishonesty there is no reason to continue.
It's not worth trying to deliver good evidence when you're clearly going to
misread and selectively cite it.

[1] [https://www.aei.org/carpe-diem/todays-new-homes-
are-1000-squ...](https://www.aei.org/carpe-diem/todays-new-homes-
are-1000-square-feet-larger-than-in-1973-and-the-living-space-per-person-has-
doubled-over-last-40-years/)

~~~
pjmorris
> This precisely shows me you're dishonest. Why pick those categories while
> ignoring the "agree" one?

Because it shows evidence of dissent in the community of economists polled. I
am happy to admit all of the specifics into the discussion. I am adamantly
opposed to painting over the real disagreements in the economics community,
because I think it's important.

> That you cite those two cases while ignoring so many counter to what you
> want to be true is dishonest and misleading at best.

On the other hand, you seem to think that I should accept the top-level
conclusion you want me to accept without any reference on your part to the
real disagreement present in the polls.

I don't think 'dishonest' is a fair characterization of my attempt to point
out that you are presenting your favorite side of the argument without
considering the dissent.

> How did I err? Banks have unlimited capital available, borrowable at Fed
> rates. It does have an effect on the economy - it lets the economy grow at
> rates demanded by commerce instead of being constrained by too little
> capital or by being overflooded with capital.

Please clarify here: what would 'over-flooded with capital' look like?

------
Apocryphon
I wonder how credit unions would fare.

------
helpPeople
I look at 8 year automotive loans, and I wonder- who is about to get screwed.

People with jobs at gas stations buying new $30k vehicles.

Either inflation is about to get bad, and our parents/Grandparents lose big or
deflation happens and young people are screwed.

Are there any other options?

~~~
segmondy
$30k vehicles are cheap these days. My mouth dropped when I was at the auto
show and seeing SUVs like navigator and escalade with price of $80k+

~~~
mywittyname
The _median_ new car price is quickly approaching $40k. Probably 65% or so of
new cars cost more than $30k.

------
std_throwaway
We can always make more money if we really want to. The economy might run out
of oil, sand, gold, land, and willpower but it will never run out of money
until the central banks stop the money supply or politicians cause a hard
fault.

~~~
jsjohnst
No wonder you are hiding behind a throwaway, as you clearly don’t know what
you’re talking about and are just posting mindless drivel. If you want to know
the outcome of “we can always make more money” attitudes, look no further than
Zimbabwe. In ~2007 they had a 50 cent paper note. ~6 months later a common
paper note was $10,000,000,000. Just a short while after that, paper notes
were being printed in _one hundred trillion dollar_ increments. What could you
buy with that $100T note? Basically not even something from a vending machine
(aka worth less than 1 USD in value).

Source: I have all the above paper notes from Zimbabwe and have read about the
economic policies that led to the collapse of the currency.

~~~
std_throwaway
Zimbabwe did not run out of money.

I did not say that a bank can make everybody rich by printing money just that
there is no limit to the money that the banks can print, as is evidenced by
Zimbabwe. They ran out of everything else but not money. We are basically
expressing the same thing from different viewpoints.

~~~
AnimalMuppet
If Zimbabwe is your example that shows that you're correct, it also shows that
your point is completely irrelevant in the real world. So they didn't run out
of money. That did them no good whatsoever.

