A couple banks in Australia are finally factoring the Buy Now, Pay Later (BNPL) obligations of customers for loan approvals. It is interesting that it has taken this long, as there are people with tens of thousands in debt owing to the BNPLs, which obviously affects their ability to cover other debt obligations, and do those little things like - pay rent, buy food and fill medications - which people are also using BNPLs for these days.
Over the last decade with extremely low interest rates to the point they were negative in some places, the "value" of investments have been artificially inflated, as the incentive was to spend, not hold. This drove the value of all asset classes upward incredibly high for about the last 12 years in a bull market and then some sectors of industry were further driven up due to the "economic pandemic practices".
Now with raising interest rates due to the inflation from pumping trillions in debt into an already overheated economy, there is a pullback on the markets toward the mean, which should be the actual value of economic activity of a business, but rarely is.
For example, looking at the dive in Tesla stock over the last year from a high of 407 in DEC 2021 to the current 150 is pretty devastating, but it is also good to remember that since DEC 2019, the price is up about 700% - based on what though?
For reference, Amazon stock is even over that same period of time.
But has still seen a +50% decrease since the high last year.
The last couple years has seen an incredible money grab strategy take place and consolidation of wealth into the richest hands. What people need to remember though is that "wealth" is not a very good indicator of actual value, because it is based on the value of stocks and asset prices, not the price they could be completely sold at.
You know what that chart is?
Guess
Elon Musk's Wealth
In December 2019, it was all worth 25B and today, 150B - sure, that is a far cry from the 340 max, but can that really be considered a "loss"? The reality is that while we like to look at all of these value, nothing is actually worth what the books say, it is all technical and, there is very little reality in where it comes from, as it is all based on finicky speculative investors who will never stay in that long. The people who stay in long are the retail investors like you and me, because we have to pay exorbitant fees and additional taxes on our trades, making us the losers holding the bags.
But don't worry about that - it is all above board and legal.
It is in the code.
Just like a computer game, the economy is a set of complex conditions based on many strings of code and similarly again, it has glitches, exploits and of course, plenty of skilled hackers doing what they do based on the very high incentive to do so. Wall Street is full of them, as are central banks, banks, corporations and investment firms. And, they work together to maximize wealth, with very little regard to the consequences of their activities, because other than keeping the game going, there is no incentive to improve wellbeing of anyone else in the system.
The economy is a shambles, and because of this, there are plenty of ways to exploit it, but most are out of reach of the ordinary person with many exploits actually leveraging the value of that ordinary person and extracting it. One of the reasons for the mess is that there is little correlation between the price and value of something, it is all subjective. Another reason is that there is very little transparency within the system, which is further exacerbated by complexity and variation across global systems, though there are corporations that use this to their advantage for things like avoiding tax obligations.
But, we the ordinary can't avoid our economic obligations, as there is near complete visibility on us and high personal punishment for non-compliance. So we comply. This means that not only are we targets for wealth extraction, we also have very limited opportunities and very few mechanisms to generate wealth using the code, not to mention that we also have on average a very low financial literacy to do so anyway.
What we are good at is taking on debt.
Which obviously is one of the drivers of monetary inflation. But not only that, the debt is used to then buy into and drive asset values up even further than they would have otherwise. For example, the trillions of dollars injected into the global economy throughout the pandemic is money that was borrowed from the future, meaning it didn't exist in the present moment, until it was credited into bank accounts magically. This was then used to consume and invest into products and business models that hadn't actually changed that much in terms of demand. Plus, the supply chain disruptions pushed prices up even further, meaning that with fewer products distributed, the corporations could make more money and using all those loopholes and pandemic rebates, pay less tax to make record profits for their investors.
But it isn't sustainable.
And this is what we are seeing now, with raging inflation and the only way to combat it is through raising interest rates. However, because normal people were overpaying for already overvalued assets and goods on debt, those who benefit from the raising interest rates are those who own the debt, the same group who were making massive profits.
Looking at it more like a game than a reality is probably the healthiest way to approach it, because it is easier to understand that in games, people cheat. Of course, the reality is that this is all reality and people are cheating constantly, but it is maybe easier to visualize the incentives and the reasons why people will do it. However, this cheating doesn't mean they are actually breaking the rules or laws, it is more that they cheat through opening up more access to possibility for a small group to generate wealth, while limiting access to the majority to do the same. It is a game where one small group has the cheat code, everyone else has to play the game they are given.
As we have seen in the last few months of crypto, how fragile many of the business models are and how they have been gaming the system on our trust. Just imagine how fragile the entire economy is and if we were to do all the calculations, how the balance sheets will have zero chance of actually balancing.
The game goes on unabated.
Taraz
[ Gen1: Hive ]
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What is unbalanced, i must say, is the word unabated (or abated)... they're super underrated.
:D
I gotta say I've been the lucky recipient of quite a few 0% APR offers on credit, made my revenue and paid off the cards while netting a nice profit to keep some of the extra underlying assets.
What I absolutely hate about the current system are future derivatives, ESPECIALLY short positions. I've earned my fair share of profit using this technique because at the end of the day I've got to keep up with the Joneses and this is clearly a down market, but I think we would all be better off if people weren't making money by betting on companies to fail. The whole practice is disgusting, even if it is done in the spirit of risk management.
It isn't just the betting on companies to fail, it is all of the derivative market(estimated at about 3/4 of all "money" in the world, where money is being made in an opaque and unregulated industry, that has no checks and balances almost and, only some people can actually truly access it. And, it is speculation on what is essentially nothing....
I spent a year earning a master's in finance, and by the end of the year I was left in utter disgust over all the ridiculous derivative products. I vowed to only use my finance knowledge to help my friends and family and refused to accept any offers at big energy companies, investment banks or consulting firms. At least I know how to take advantage of all the tax writeoffs.
Stocks has fallen so much I do have a craving to buy into them..
When they jump a sell for profit can be made. I mean surely they have to start rising again.
Not all will rise, so that is why people are so hesitant. If it was a sure thing, of course - buy!
https://ecency.com/hive-167922/@slhp/is-higher-interest-rate-really-that-bad-from-a-historical-and-mathematical-perspectives
I was looking at the interest rate historically, and this was my take.
I think neutral rate is better for most people.
Now look back in time when NASDAQ went parabolic the crashed, it took over 15 years to break even.
https://www.wsj.com/articles/u-s-stock-futures-little-changed-ahead-of-data-1425302537
The crash after all that hype on what was essentially nothing was extreme - but it will keep "recovering" now there is actually an industry behind it. I suspect that crypto will be similar in this regard once it actually has products.
99% of crypto are hot air with no purpose, good ones will survive and recover.
Market cap however are still overly weighted in a few, there is essentially no reasonable “basket” for an index. NASDAQ has a survivors bias with defunct stocks swapped out.
More than 70% of crypto market cap are BTC, ETH, and the top 3 stable coins 😓 if you group layer 2 coins on ETH and BNB, there is hardly much value left outside.
Smaller and good ones still have tremendous amount of upside until we have more diverse representation, or do you see crypto as winner takes most forever?
Stocks rise by 1000%, then fall by 2-3 times. HIVE grows by 3000% then drops by 10 times. Only the salaries of people almost do not change. And this is the idea - to find money for investment at the right time.
Invest at the right time, get out at the right time.
I will double my investment in Hive at the end of the year. And I will increase the investment by 5 times if we get to the price of $0.12.
10 to 12 is very possible, though I am hoping it doesn't get down there again. If it does though, I will buy at least some more.
I believe that the pandemic was created intentionally to change the flow of money/economy in the world. It is also created for some social purposes such as making people stay alone, which had already been uptrend.
I don't think they could agree to plan it that well ahead of time, but once the ball was rolling, incentives kicked it increasingly harder. Everyone with an opportunity to gain power over others, took it.
Sometimes I feel I should go to Amazon forest and starts living there without using cash or any Card 😂😜
Unfortunately current system is supporting ultra rich people and they can do whatever they want to do
Not a bad idea!
The system isn't going to change - because we support it too. If we stop supporting, it does change.
Do they have credit scores over there like they do in the US? Ultimately those are supposed to work to keep people from taking on debt they shouldn't. Unfortunately, I think a lot of times it just puts them at a bigger disadvantage. They still get the loan, they just get a worse interest rate which just digs their hole even bigger.
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Not in the same way it is in the US and in Finland, I don't think it is used at all - at least on the visible layer. They can check debt though of course.
Another scam someone was able to set up to extract more and remove more opportunity from the masses.
Yeah, it is pretty horrible and shameful. Just another way they exert control.
This is a powerful piece. Especially in the context in the way of some of the things that I'm thinking about. It really hit me where you said, "This means that not only are we targets for wealth extraction, we also have very limited opportunities and very few mechanisms to generate wealth using the code, not to mention that we also have on average a very low financial literacy to do so anyway."
If we aren't willing to learn about how we are being manipulated, we are already lost.
Buy now pay later sounds good but I personally don't subscribe to this as it has the ingredients of keeping me in debts and living a kind of life that's not mine or I shouldn't live at the moment.
I remember different people coming to the company I worked with to give you goods on credit to pay later, I can't deny its good nature but I see a lot of abuse of usage in this and if the job terminates, I stay in debt and the one who sold the goods to me also suffers delay in return majorly from a country like mine where there's no job security.
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Pretty much all systems that work on debt and interest rate repayments, will lead to misuse and poor results.
Shouldn't one live within his or her income level rather than living on loans much depression come from this kind of life.
Beautifully constructed.... Thanks for the insight and it may really be a good thing the Buy now pay later has finally been placed in motion
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Thank you :)
People who need BNPL are being lured into perpetual debt trap. The system is enslaving them forever!
The economy is very fragile when I saw how one week of lockdowns pushed back all the packages being delivered. It was crazy to see what happen because of just one thing breaking up in the supply chain.
Overall, I don't think Elon lost at all and he has always said that Tesla was too high. So I don't blame him for wanting to take in some of the profits even if some of it is to pay the government or Twitter.
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