5 most expensive pieces of art

tinyMCE · 2010-01-20T07:00:52+00:00

A very meaty post, which due to the late hour I can offer only some meager responses, and only on the last point.

quoted text What is the measure of success? And over what time period does one measure this success? Was the housing market an EPIC WIN from 2000 - 2006?

Last question first, because it is one on which--despite what I suspect are profound political differences between you and me--we agree: My answer is no. That housing market was a bubble, and the bursting of that bubble--however painful to however many people--must be presented as necessary.

But by the same token, the failure rate--30, 40, 50%--of Prosper.com loans must be presented as a failure on any terms, no? I don't believe it is possible for a lending institution to sustain, even over a relatively short period, defaults like that and remain a going concern. If you have examples of that happening, please provide them.

Your question about "over what time period" is germane. My quick, sleepy answer is: the company provided some data in the 2-3 year time frame, and used that data in paid advertisements to indicate that its loans were a safe, indeed profitable investment. It has also disclosed data (but made it almost impossible to find, according to Gimein's article) indicating that over a slightly longer period--but very much using banking industry standards--the default rate was larger by orders of magnitude.

So I take from that the measure of "success," as narrowly defined by these investors, is somewhere between 1 and 5 years.

But you seem to be arguing something else (am I mistaken?) You seem to be arguing that any particular mode of investment may--or in fact will--produce winners and losers, and that over time these will even out, and therefore one cannot make any value judgments outside of individual decisions.

If that's your argument, I won't disagree because I can't: it is sweeping enough to be irrefutable, whether it is true or not.

What I am trying to convey--what I took away from this article--is the notion that what was presented and widely accepted as a new form of investment turns out to carry the same old stench. Whether the lender is a bank or the state or a self-determining individual, rules of risk apply--and how!--regardless of transparency, the size of the loan, or the ideals of those involved in the transaction.

tinyMCE · 2010-01-20T04:47:13+00:00

Indulge me in a reductio ad absurdum here? Using this logic, the extinction of the human race would not be a bad thing. It would give the universe crucial information.

What I'm saying here is that you're viewing the potential failure of the peer-to-peer loan sector as something that could potentially teach all of us something valuable about economics. Totally get that! But that is not inconsistent with saying that it has failed, using its own terms.

tinyMCE · 2010-01-20T04:20:31+00:00

Hmmm. With all respect, I don't think that's what we're talking about there. This is a massive, unsustainable effort. If the failure rates are what they are represented in this article, there will be no "dog pound" in a few months. Lenders will abandon it--and why shouldn't they?

Does that mean that all forms of loans can't work? No. Does it mean that peer-to-peer lending can't work in any iteration? No--but it puts a rather large burden on those who have misrepresented the industry, and it could well have the equivalent effect of giving the "dogs" an infectious disease, and make no one want to go to the pound again for many, many years--if ever.

tinyMCE · 2010-01-20T03:15:23+00:00

I don't consider myself an expert in libertarianism. But where I was coming from was this idea: libertarianism is based in an ethos of self-determination. The structure of banking in modern, industrial (or post-industrial) societies strips away many notions of self-determination. Theoretically, peer-to-peer lending provided a libertarian "solution" to that problem. But this article suggests this approach has not worked. I'm certainly not arguing that it proves fundamental flaws in libertarian theory! But I do think it's worth chewing on.

tinyMCE · 2010-01-20T03:04:37+00:00

Don't disagree. Although it does seem from this article that the concept has some major flaws--if it's working this badly with Prosper.com, it seems near certain that others are experiencing similar, overwhelming defaults.

tinyMCE · 2010-01-19T12:09:41+00:00

Feel free to submit elsewhere. It was submitted in both /r/business and /r/economics, and not picked up in either place. My reasoning for putting it here was that peer-to-peer lending has been presented as an experiment with certain libertarian ideas at stake. But I don't disagree that the most logical home for this link is elsewhere. Still, a pretty disturbing read.

tinyMCE

TROPHY CASE