Lenders Have to Lend

I know this may be pointing out the obvious, but I think it needs to be said:  Lenders have to lend, just as much as borrowers have to borrow.  I know most people understand the "borrower" part of this phrase, but they seem to act as if lenders are somehow only putting their money on the street as some sort of charitable activity, and if we don't sufficiently kow-tow to all their needs, they will run away and never help us all again.

The fact is that people with large pools of money -- banks, pension funds, insurance companies -- HAVE to lend.  And in a time where stocks are dicey, they probably have more, not less, cash than normal they want to lend, much of it short-term.  Now, they may be temporarily scared off from doing so for a few days or weeks as they try to assess what is safe and what is not, but they can't stick their money in a mattress or buy tons of gold or invest in ammunition and run for the hills.  Banks have to pay off depositors; insurance companies often aim to break
even on premiums and payouts and make their money on investing the cash
in between; pension funds can't make their long-term obligations
without making steady returns.Their very survival, in many cases, depends on making continuous returns off their free cash. 

Wisdom from Schoolhouse Rock:

You got a couple hundred bucks saved up in your birthday stash.Why not deposit them dollars in the bank instead?
Then at the end of the year you'll come out way ahead,
Because the bank'll pay you money in exchange for the use of your cash!
And that's called interest; you're makin' money that way,
And you can buy that gear about a year from today.



  1. Gil:

    Good post.

    About the song... I think it's funny that the song says "With the pictures of the presidents" and then lingers on the image of Franklin, who wasn't one.

  2. xpatUSA:

    Interesting that she used credit in the end. Pretty smart for a country gal. Although she was paying about 1%/mo interest, inflation was probably depreciating her payment at a greater rate!

    See John Williams' Shadow Government Statistics CPI chart here:


    Did I get that right?


  3. kebko:

    I've seen the shadow stats site referenced several times here & there & it's tempting to buy some of the ideas. But, it looks to me like in order to believe the stats, you'd have to believe that US GDP is at about the same level as it was in 1985, which just seems silly.

  4. TDK:

    The usual attitude to lenders is the biblical one: suspicion of usury. The cry now is that people were "forced" to borrow more than they could afford. Once the banks were wicked because they red lined people. Now they are wicked because they didn't.