David watches the end of the Tour de Taiwan Doubting to Shuo reports that the Legislature has cleared the way for local foreign teachers to unionize. Scott Sommers reports on Steven Krashen's discussion of the disastrous effect of testing on US education. That's Impossible! rounds up the latest on the Chiu Yi appeal, Wang Jin-pyng's run for the crown, the anti-name rectification march, and sundry other items. Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family. The Foreigner observes that Chiu Yi committed vehicular assault. And points out where KMT propaganda is dead wrong.
[Taiwan]
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, the a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, the a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, the a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, the a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, the a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
Taoyuan nights points out the problems of yi wo feng -- everyone rushing into the same business at the same time in the same place. I don't think low interest rates are the problem there -- those vendors aren't borrowing from banks, but from family.
ReplyDelete---
Michael, it's the flip side of the same coin, and still entirely due to interest rates.
Think of it this way. Imagine you are a family member. If you could get 10% off the bank completely risk-free, would you lend to some crazy young relative who is hoping to turn a risky 3% profit on your money over the year?
Hell no! Guanxi be damned, they can go get their own loan.
Now, re-examine the same situation but assuming you can only get 0.2-1.5% risk free from the bank, as is currently the case.
For many people, a risky 3% gambling opportunity might just look like it could pay off, if they misestimate the size of the risk involved in a copycat business.
Copycat businesses typically look low-risk (hey, look how much money HE'S making, it must be easy), which is where family lenders make their mistake.
But copycats invariably cause direct competition, price wars, halving of customers, (and are invariably followed by further copycats that compound the problem further).
In any event. I hope you can see the logic that it doesn't matter where the money is coming from - family or banks - the point is that when rates are low, money is more freely lent by everyone, and the result is unviable startups driving the viable ones out of business.
Mu.
I see your logic, but I think the problem here is that bank loans are not as low interest as you claim, if you could even manage to source one for a small vendor, and family loans are generally not at low rates either. None of the hard nosed Taiwanese in my wife's family lend at those low rates!
ReplyDeleteMichael
I see your logic, but I think the problem here is that bank loans are not as low interest as you claim.
ReplyDeleteYou're effectively saying that if you were in the position of some old Taiwanese guy, facing 0.75% returns from the bank*, you wouldn't even be tempted by a smooth tongued nephew talking of building a hotpot store empire?
You're also saying that banks and families can't be lending cheaply; my response is: where the heck is all this money coming from, then?
Where is the money coming from for the new businesses?
Why does it feel like everyone in rural Taoyuan is driving a million dollar car as they chew their bin guan?
Why are houses priced at 10-20x local earnings round here?
The biggest, and arguably most stable, Taiwanese bank is lending at 2.37% adjustable to consumers right now*. That is just 0.07% in real terms above even the official rate of inflation (which in turn is usually understated for political reasons in most countries). In other words: free money, have fun.
Consider that interest rates in most developed countries have averaged around 8% over the last 100 years. 2.37% in a less stable economy is very certainly 'cheap'.
And what rates must its smaller competitors be offering, to secure their business?
*Reference:
http://www.indexmundi.com/taiwan/
http://www.bot.com.tw/edplnrate/dplnrate.asp