Debt by a billion decentralized cuts

Tesla however just pipped it by a fraction, going from $85 dollars to a high of 695 in the same time frame, a gain of a couple percent more than Bitcoin. Tesla is the epitome of market sentiment, since the company really doesn't make anywhere near enough of anything to have it valued so highly.

It feels like it wasn't that long ago that one of my brother's, the anti-soothsayer of technological future, was telling me that "electric cars will never make a significant impact". He also predicted that digital cameras will never replace film and, the internet is a passing fad.

I will let you know what the "oracle" has to say on the next trend.

800% gains is "pretty good" on any investment in a ten month period, but there is one industry that has been absolutely booming in the same period and this particular Australian company represents a much larger problem - from my perspective. It went from $12 to $141 in the same period, an 1100%+ gain. The company is Afterpay, a Buy now, pay later business model that has seen a massive uptick in the last 10 months and it probably deserves it.

The model is an online shop of retailers selling to the public, with an inbuilt payment model, where buyers can pay in installments, much like "lay-buy" was back in the day. There are no fees as long as you pay on time.

Sounds great! Except, it is just another debt trap where people are encouraged to buy with future money they have no guarantee of having, meaning that they will eventually fail to pay on time and have to pay fees, much like most people who use credit cards. Hang on... this sounds just like a credit card... Why not just use a credit card then? Well, with easy sign up and "no long forms", the people who have already maxed out their credit cards can extend their debt just a little bit further. Brilliant!

3. Late Payments There are no finance charges or interest associated with this Agreement. However, if an Installment Payment is not paid on or prior to the due date specified in the Final Payment Schedule and remains unpaid for a period of ten (10) days after the due date (or such additional grace period required by applicable law), the Late Fee indicated above in this Agreement will be imposed, up to a maximum of $8.00 and which in no event will exceed the maximum late fee permitted by applicable state law. Additionally, the aggregate sum of Late Fees associated with a particular order will not exceed 25% of the order value at the time of purchase. Thus, lower value purchases may be subject to fewer or lesser Late Fees in the event of late payment.

I wonder how many will end up paying the 25% of purchase price max in fees?

In Finland, a place that had very low personal debt a few decades ago but has tripled it since to now be 2/3rds of the GDP, these "quick loan services" have exploded in traffic too, as have the people seeking aid from debt management services, as the extension of debt has led people to over-extend. It now seems common place for middle-aged adults with jobs, to still get financial support from elderly parents. This is what I consider a "slow bleed" of wealth and I am quite sure that once those parents pass and the kids get the inheritance, it will drain fast.

But, where is it draining into?

As I was saying, money attracts money and debt attracts debt and this relationship is highly correlated. With a consolidation of corporations into conglomerates and near monopolies in some industries, this consumption bleed is pouring into a few hands by the bucket load. Not only this, a lot of the largest earners in industry like the Google's and Apple's, don't actually hire so many people in comparison to what they pull in. The tech company, profit to labor ratio is insane and due to the nature of their business, they need less and less workers as technology advances.

Look at the model of Afterpay, which is a financial company that offers middleman services. Yes, what they are risking is their money, but they aren't risking much of it if you consider the model. And pretty much all of the financial services similar are doing the same. Even though they are centralized points of control, they generally have highly decentralized risk models, as they distribute the risk across all of their users. It is very much like "anti-crypto" that at least from an ideological standpoint, is looking for a higher distribution of ownership.

The financial services are the same, except what users own is their debt. Any one failure or even a relatively high percentage of failures of the user base to pay their debt, and the rest of the "debt network" will absorb the cost. This is much like how Hive works in terms of decentralizing ownership and distribution of applications and tokens. The more applications and users there are participating in the network, the less impact failures have.

Pushing this out to debt means that those with wealth to attract wealth, can risk a large percentage of it by loaning it out, but don't actually expose the entire amount to risk at any one time, as each debtor only has a fragment of the total amount and the risk of all debtors defaulting simultaneously is very low, especially since there are legal ramifications for not paying. This means that the law itself is protecting the banking system financiers, by punishing those who don't hold up their end of the bargain.

This allows for a "death by a thousand cuts" scenario, but it works on distributed volume, where each individual is only able to be cut a handful of times to have their resources harvested. But, it isn't a thousand cuts, it is billions of cuts, as most people in this world are wearing some level of debt and paying interest or fees on it and in comparison, there aren't that many financial institutions and investors into them. This means that there is a global slow reap of wealth, with very little risk exposure to the "liquidity" providers as they can control the tap, meaning that they don't have to extend a line of credit too far to anyone.

I don't know about you, but I was explaining this to someone today and they had never really thought about it before, since they made the assumption that the banks were risking a lot. If you then consider fractional reserve lending, they can further distribute to lower their risk, without actually risking anything that they own.

The only thing that ever trips them up - is their own greed, as they bleed people so dry that they become liabilities and when there are too many defaulting, it can set up a collapse.

It is not just that wealth attracts wealth it is that wealth is able to lower the risk exposure while still making enormous gains, as they do not have to put their eggs in the one basket. They know all about decentralization, but while we in crypto use it to protect our freedoms through ownership, they use it to enslave us via debt.

Taraz [ Gen1: Hive ]

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