Hacker News Reader

Comment by Selfcommit | Hacker News Reader

Is it a terrible thing that massive amounts of money can't be promised and taxed? If that kind of lending is in fact good business(I'm not convinced it is) Couldn't the same loan be made through multiple smaller share holders? I don't think billion dollar loans are a requirement for society to function, or the best option.

View on HN

It could but that's the wrong perspective. In "free" system that respects private choice, what can and cannot be achieved isn't as important as what deciders decide on.

A large bank will perform risk analyses and consult with their data and math people, consult their legal people, consult their insurance people, and will choose what they think is best.

So your option can be totally feasible and never chosen by a large bank- a similar fate to many new technically feasible ideas.

But then again, if you were a large entity, would you prefer to be indebted to one large entity, or a thousand small ones? All things equal, I'd rather owe 1 person 1000$ than 1000 people 1$, and I imagine their lawyers and insurance people agree.

I understand why you would only want to owe 1 person $1000, but I think you see more ideas funded as the number of funding providers increases. My dislike of large banks is totally a bias here, but I'd like to think more funding options = superior to a single decision maker.

It's also true that for very very large loans banks already work together to spread the risk.

Yeah it is a huge problem: Without a way to source a billion dollars Intel can't build a new factory.

Now you could replace banks with e.g bonds sold in the public market, but you still need something to finance the IT of the world.

If Intel is sourcing a billion dollar factory, shouldn't their revenue be multiple times that? If you're telling me the factory they need costs $1 billion, my response is that the cost is only that high in a market full of banks that make billion dollar loans...

Sometimes it's not so simple. I recall Google issuing bonds because it was cheaper than repatriating non-US revenue from abroad to fund US investments (it would have been taxed twice, albeit at an extremely low rate on it's non-US revenue).

Intel's factories cost billions of dollars (actual cost is around $5 billion now, not a mere $1 billion) because they're unbelievably advanced. This isn't the housing bubble applied to factories. They're building a facility that uses the most advanced technology in the world on an industrial scale.

Their revenue is many times that, certainly, but that doesn't mean they just have billions of dollars lying about doing nothing, waiting for the company to need a factory.

Lets say that that billion dollar factory will earn itself back over 10 years. Do you have 10 years of mortages saved up?

Also I am going to have to ask for a source for your hypothetical reply.

> Is it a terrible thing that massive amounts of money can't be promised and taxed? If that kind of lending is in fact good business(I'm not convinced it is) Couldn't the same loan be made through multiple smaller share holders?

Sure, in fact, the same loan probably will be with the existing system. Large (hundreds of millions of USD) bond offerings to the public, from either a state agencies or private firms don't end up with only one purchaser in many cases, even if they have a big financial firm facilitating the offering.

The question is how do alternative mechanisms do this as well or better?

Reply on news.ycombinator.com