The Path to Widespread Prosperity is Never Paved With Other People’s Money

by Don Boudreaux on November 30, 2011

in Business as usual, Country Problems, Crony Capitalism, Other People's Money, Risk and Safety, Seen and Unseen, Subsidies

Here’s a letter to USA Today:

The Small Business Administration’s student-loan program that Laura Vanderkam applauds for its alleged promotion of entrepreneurship is simply a pee-wee version of the malignancy that caused our current economic woes (“Entrepreneurs are public servants, too,” Nov. 30).

By encouraging young people to start businesses with loans backed by taxpayers, the risk-adjusted upside to each of these “entrepreneurs” is made artificially larger than the risk-adjusted downside.  Any such “entrepreneur” captures the gains from his or her success as fully as does a genuine entrepreneur (one whose loans aren’t subsidized) but, unlike a genuine entrepreneur, is able to socialize his or her losses – that is, to pass the bill for most of the losses onto taxpayers.  Government backing of these loans, therefore, causes too many excessively risky businesses to be launched.

Not only does this program unnecessarily increase tax burdens by obliging taxpayers to pay for losses that would not have otherwise occurred, it also diverts scarce resources from being used in ways that are economically justified and sustainable into ways that are unjustified and unsustainable.  That cleaning up the mess of such resource misallocations can be troublesome is shown by today’s lingering recession.

Sincerely,
Donald J. Boudreaux

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{ 89 comments }

Ryan Vann November 30, 2011 at 10:14 am

At least this is a bit more sensible than government guarantees of student loans. The students may actually learn something marketable by attempting a start up.

Jon Murphy November 30, 2011 at 10:39 am

I see where you’re coming from, Ryan, but I’m not sure I agree. A government-subsidized start-up has no stake (or limited stake) should the start-up fail. So what incentive does he have to make good marketing and business choices? It’s not his money he’s spending.

Ryan Vann November 30, 2011 at 12:04 pm

I was mostly coming from a point of sarcasm.

As to your question, which is certainly pertinent, there is still plenty of incentive to make good marketing and business choices. For one, there is a definite reward potential. Moreover not all people have lost any sense of virtue, and might be cautious when handling others money. It would be fair to say there is less incentive due to no skin being in the game, but there is still incentive.

Jon Murphy November 30, 2011 at 12:08 pm

I can agree to that.

Economic Freedom November 30, 2011 at 12:41 pm

“If you think education is expensive, try ignorance.”

Nuke Nemesis November 30, 2011 at 12:47 pm

Which party or ideology runs the education system in the USA? Free-marketers, Libertarians, Republicans or leftists, progressives and Democrats?

Economic Freedom November 30, 2011 at 5:38 pm

“… try ignorance”

I tried it.

I LIKE IT!

Nikolai Luzhin, Eastern Promises November 30, 2011 at 10:23 am

Don and Russ: Why do we let private firms borrow money? Doesn’t that crowd out and reduce future growth?

All please bow to Paul Krugman, who posted the answer two days ago (there is no such thing as crowding out, which is a myth held in the mind of the confidence fairies):

“this is just Say’s Law. We don’t know whether Norquist is honest enough with himself to realize that exactly the same logic applies to any spending, that according to his story anyone who borrows to spend, including companies making investments, is just displacing someone else’s spending. To his credit, Brian Riedl more or less admitted that when he made the same argument a couple of years ago.”

http://krugman.blogs.nytimes.com/2011/11/28/drowning-in-grovers-lake/

EG November 30, 2011 at 10:54 am

That’s missing the point entirely

Seth November 30, 2011 at 11:06 am

Of course. Can you point to where that is disputed here?

We call it competition.

We’d rather have competition governed by markets not politics because we believe markets better encourage risk taking AND prudence, which is more likely to result in products and services that consumers actually value.

While, competition governed by politics encourages risk taking without prudence and is more likely to result in things valued by politicians, primarily for campaign talking points: “I worked hard to help you(..but please pay no attention to the results).”

Nikolai Luzhin, Eastern Promises November 30, 2011 at 8:03 pm

if there is no crowding out, its not competition its jealously

Economic Freedom December 1, 2011 at 7:09 am

Nikolai has always kept his nose to the grindstone, and today he’s famous.

He’s the only person who can cut a steak with his nose.

The Other Eric November 30, 2011 at 12:25 pm

“…Let private firms borrow…” As in “allow.”

Nik, you won’t understand this (if, indeed you understand the meaning of the term ‘malignant’ above), but you really don’t seem to comprehend the idea of ‘free,’ or ‘open.’

Sam Grove November 30, 2011 at 1:29 pm

But when private investments go sour, it is the wealthy investors that have the most to lose, not hapless taxpayers.

Economic Freedom December 1, 2011 at 7:06 am

Nikolai left his only job because of illness and fatigue — his boss got sick and tired of him.

EG November 30, 2011 at 10:36 am

Even for this administration, this probably takes the cake as the worst idea they have come up with so far. You’re guaranteed to lose money in this scheme. Have they never met a “young entrepreneur”? They have horrible ideas.

Jon Murphy November 30, 2011 at 10:41 am

Except the Google Guys, Bill Gates, Mark Zuckerberg, Steve Jobs, Henry Ford, Andrew Carnegie, that guy who started Zygna, etc. The bigger problem here is knowing which projects will succeed and which will fail.

Will November 30, 2011 at 10:44 am

Good examples, but for every Bill Gates and Steve Jobs, how many people failed miserably? A 1000, 10,000, 100,000?

Jon Murphy November 30, 2011 at 10:48 am

I agree Will. They certainly are the exception to the rule. But it shouldn’t be up to the government to decide which products are good and which are bad. It should be up to the market (after all, the market is the only opinion that matters).

Ryan Vann November 30, 2011 at 12:06 pm

Entreprenuership failure is pretty much age neutral. Most start ups fail.

Will November 30, 2011 at 1:32 pm

The market should be the only thing that matters, but not to politicians; to them, it comes down to votes.

Darren November 30, 2011 at 2:04 pm

It seems to me that if left to the market, mistakes are corrected more quickly and at less cost to the public.

Jeffrey Neal November 30, 2011 at 2:58 pm

If government picks the “young entrepreneurs” will that make the success rate higher?

Of course not. No one is guaranteed success. Failure is part of the system, that’s why risk is a four-letter word.

Nikolai Luzhin, Eastern Promises November 30, 2011 at 8:06 pm

not enough

because our society so brutalizes business failure and has an inadequate safety net, not enough try.

There is a good case to be made that the punitive changes in the law on credit cards has really hurt new business formation during the present downturn.

Economic Freedom December 1, 2011 at 7:10 am

You’re on the right track, Nikky.

But you’re getting run over sitting there.

Nuke Nemesis November 30, 2011 at 12:52 pm

Which is why government bureaucrats and political appointees have no business making the decisions about who gets loans.

Will November 30, 2011 at 10:41 am

Nothing like a good old get rich scheme to lock young people into more debt that will be ultimately paid by the tax payers by promising to forgive loans if small payments are made for 10 years. (I am locked into a similar promise that I personally don’t believe will be funded in 10 years and thus I am trying to pay off my debt as soon as possible to save myself thousands of dollars). The problem is that no one is educating people on how loans work prior to taking out so much money in student loans. Providing more loans when they graduate will only add to the problem. I am curious if the average college or even grad student understands how interest works before they rack up $30K in loans (which is a very conservative amount, a lot of students have over $100K in loans). Many young people might put off school for a year or two and save money to help cover the cost of tuition if they just realize how much only 1 year of tuition at $10K will cost them over a 10 year period. That 1 to 2 years in the real world working would also probably make them better students and help them understand the value of a college degree (especially one in economics compared to European literature). For that matter, what is so wrong with a college educated person starting at the bottom learning the ins and outs of everyday business by selling lattes and bar-tending at night that Ms. Vanderkam so condescendingly references. It will probably make a majority of them more successful in the long run and a better “public servant” (whatever than means) than starting their own business right out of college with no real world experience in how to run the day to day operations of a business and will ultimately cost taxpayers and economy a lot less.

muirgeo November 30, 2011 at 10:53 am

I would challenge Don to show us ONE loan that is NOT backed by taxpayers.

Slappy McFee November 30, 2011 at 11:07 am

The table I borrowed from my neighbor so I could host Thanksgiving dinner. You should also note that because I did not purchase a table, I was unable to stimulate the economy.

Randy November 30, 2011 at 11:07 am

That’s a fairly good point. Bankruptcy laws, for example, subsidize risk taking. It seems to me that the issue is the method. That is, risk taking is uncommon, and given the potential upside of entrepreneurial risk taking it may be a good idea for a society to subsidize it in some way. But wouldn’t it be better to do this by say, praising and promoting entrepreneurial spirit? The problem with having a political system handing out money is that it is a political system handing out money – so now the politicians imagine they should determine the winners and losers, not to mention thinking they have a right to defacto control of the business.

Methinks1776 November 30, 2011 at 12:21 pm

That’s a fairly good point. Bankruptcy laws, for example, subsidize risk taking.

How do bankruptcy laws equate to taxpayer subsidies for risk? If I lend you money and you file for bankruptcy because you don’t have the ability to repay your loan, I don’t get my money back. This isn’t a subsidy. I took a risk by lending to you and I suffered the consequences – good or bad. Presumably, I’m not terribly stupid and the rate at which I lent to you compensated me for the risk that I in making that loan. I don’t see the subsidy. And where are the taxpayers in this scenario?

That is, risk taking is uncommon, and given the potential upside of entrepreneurial risk taking it may be a good idea for a society to subsidize it in some way.

“Society” (whatever that means in this context) in a capitalist economy already fully participates in entrepreneurial risk taking. Those who desire higher returns and are willing to take the risk to possibly achieve them already do that. Private investors perform this function. Private investors participate in both the upside and the downside. Why should you have to shoulder my risk if you do not participate in the upside? And if you like that arrangement, I have some very risky trades I’d like to try but I’m not willing to risk my own capital. Wanna give me a loan I don’t have to repay if I fail and where I keep all of the profits? :)

But wouldn’t it be better to do this by say, praising and promoting entrepreneurial spirit?

The best way for government to praise and promote the entrepreneurial spirit is to get the hell out of everyone’s way.

jjoxman November 30, 2011 at 12:32 pm

Second everything!

When will people realize the difference between private (i.e. voluntary) funding and public (i.e. non-voluntary) funding? The two are completely different.

Seth November 30, 2011 at 12:44 pm

And…to be clear, the fading confidence is the prudence of someone who now has to consider the consequences of taking a big risk.

Seth November 30, 2011 at 12:42 pm

“I have some very risky trades I’d like to try but I’m not willing to risk my own capital.”

lol.

In my business, we often get leaders who want to try something new and exciting that that they are confident will take us to a new level (that is, if they get to try it without shouldering any of the risks while getting credit for a new idea).

It’s amazing how quickly their confidence fades when we say, “Try it. It if works like you believe it will, it should help you exceed your bonus targets.”

Randy November 30, 2011 at 12:44 pm

“How do bankruptcy laws equate to taxpayer subsidies for risk?”

True, the lender can assess the risk… but then, can he or she always effectively assess the risk? Say for example a liberal judge who decides to start letting everyone off easy because “times are hard”, or a political decision to force banks to reduce mortgage payments.

The best way for government to praise and promote the entrepreneurial spirit is to get the hell out of everyone’s way.

Agreed, but I won’t complain if a politician should choose to grab some headlines by officially recognizing the role of the entrepreneur.

Methinks1776 November 30, 2011 at 12:58 pm

Randy, I don’t understand what you’re getting at.

There is no such thing as perfect risk assessment. This is nothing new or exciting. Whenever you make any decision you expose yourself to tail risk like judicial activism, political intervention and getting hit by a meteorite.

Still, the existence of difficult to price tail risk doesn’t imply that bankruptcy laws subsidize risk taking and it in no way support’s Muirdiot’s idiotic assertion that all loans are subsidized by taxpayers.

I’m almost 100% certain that if my business blows up tomorrow, I’m not getting TARP.

Randy November 30, 2011 at 1:54 pm

I disagree with your assessment. Bankruptcy is a political system, and it therefore has the potential to override analytical calculations of risk. To my mind that does make it effectively a subsidy – though not as obviously so as a direct payment from tax receipts. Muirgeo’s thought was that all loans are in some measure backed by taxpayers. I agree, though I wouldn’t take it to be an effective counter to Don’s point that all subsidies can and frequently do lead to resource misallocation.

Methinks1776 November 30, 2011 at 2:04 pm

Bankruptcy is a political system, and it therefore has the potential to override analytical calculations of risk.

No, it doesn’t. Bankruptcy laws as well as all legal precedents associated with bankruptcy are baked into the interest rate I charge you to borrow my money. Possible wonky outcomes in bankruptcy court are a probabilistic outcome, not a subsidy.

Muirgeo’s thought was that all loans are in some measure backed by taxpayers. I agree,

I understand you agree. You haven’t said why. Surely you’re not claiming that because the lenders who are unable to collect when they borrower goes bankrupt are also taxpayers that loans are backed by taxpayers!

Methinks1776 November 30, 2011 at 2:08 pm

Randy, do you realize you’re claiming that outcomes in the tails of the a probability distribution are subsidies?

Randy November 30, 2011 at 4:20 pm

“Surely you’re not claiming that because the lenders who are unable to collect when they borrower goes bankrupt are also taxpayers that loans are backed by taxpayers!”

Well… yes. But more to the point I’m saying that when a political system covers the cost (or part of the cost) it is a subsidy. Yes, this may be a non-standard definition.

Jon Murphy November 30, 2011 at 4:24 pm

When a firm goes bankrupt, the government doesn’t step in to pay its bills (bailouts aside). All bankruptcy count does is a) determine IF the company can be restructured b) determine which creditors get first pick when the company pays off its debts (usually through liquidation). Those who are at the end of the line usually get shafted.

The purpose of bankruptcy was not to create a government safety net, but to help ease the pain of failure. Before, you could be thrown in jail for not paying debts. Now you can work towards arbitration or some kind of payment plan.

Methinks1776 November 30, 2011 at 4:34 pm

first of all, “yes”? Please tell me you’re joking.

Secondly, what are you talking about when you say:

when a political system covers the cost (or part of the cost) it is a subsidy.

In what standard bankruptcy procedure does a political system cover any of “the cost”? What is “the cost”? You’ve climbed so far out on a limb I’m no longer assuming the meaning of any of the words you use.

Ubiquitous November 30, 2011 at 6:01 pm

@Methinks1776:
Secondly, what are you talking about when you say:

when a political system covers the cost (or part of the cost) it is a subsidy.

It’s a common anarcho-capitalist assertion. The claim is that government, under a limited government arrangement, subsidizes a police force and a court system, which are costs of doing business. Ergo, some costs of private business are socialized.

Methinks1776 November 30, 2011 at 6:17 pm

Aha! Okay, now I get it. Thanks, Ubiquitous

Randy November 30, 2011 at 7:01 pm

Methinks,
I don’t think I’m wrong, but I’m really not up to getting into a detailed example to explain it. So, I’m going to stop now with a couple of thoughts; If bankruptcy isn’t about socializing costs then what is it about? Why have it at all? And, the alternative to bankruptcy is not debtor’s prison, it is saving and/or doing without.

Methinks1776 November 30, 2011 at 8:09 pm

So, it’s not what Ubiquitous said?

If bankruptcy isn’t about socializing costs then what is it about?

It is about the recognition that the debts cannot be repaid or that they can, but only under new terms. This is between the parties who willingly entered into those contracts. Where is the socialization? I’m not sure why it’s so difficult for you to do more than repeatedly restate your assertion. It shouldn’t require a long, detailed example.

vikingvista November 30, 2011 at 9:14 pm

Randy–

“To my mind that does make it effectively a subsidy”

There are only two ways that bankruptcy, as usually practiced, can be considered a “subsidy”:

1. Taxpayers fund the court proceedings and legislators who write the laws. But this is no different than any other government jurisprudence.

2. Laws restrict the available choices that might be available in a completely privately enforced debt agreement, thereby granting a state-enforced benefit to one of the parties, at a cost to everyone else. That cost is, as methinks writes, incorporated into the interest rates.

The basic idea of bankruptcy is to determine ownership of property with multiple claims, which occurs when a person possesses less property than he owes his debtors. But there is no situation that cannot be written into debt agreements to allow for any contingency (and in reality, in complex structured debt agreements, they are). There is therefore no reason that the functions of bankruptcy could not be completely handled in the private sector (and absent government intervention, they of course would be). Even so, the amount of taxpayer “subsidy” involved to support the court costs is trivial.

Randy December 1, 2011 at 9:44 am

Methinks,

“It is about the recognition that the debts cannot be repaid or that they can, but only under new terms.”

You’re stopping short. Why is a political system necessary for this recognition? Recognition of the fact that I can’t pay (or won’t be paid), at least not anytime soon, doesn’t have to mean that the debt is relieved, or that the contract is terminated.

“It shouldn’t require a long, detailed example.”

Agreed. But in this case I suspect that it would. And that even then it is unlikely that you would ever just give up :)

Its been an interesting discussion, and opened up some new avenues of thought for me, but its not worth the effort to continue at this point. The last word is yours if you wish.

Nuke Nemesis November 30, 2011 at 11:13 am

So how has this taxpayer backing of private debt worked out so far? Ever heard of Fannie Mae or Freddie Mac? Solyndra? Any of this ring a bell?

Sam Grove November 30, 2011 at 1:37 pm

You’re kidding, right?
I forgot, you’re muirstupid.

Darren November 30, 2011 at 2:11 pm

I would challenge Don to show us ONE loan that is NOT backed by taxpayers.

For smaller loans the cost of taking care of a loan that is not paid back can be more than the loan itself is worth, either for the lender or the borrower. So, in a practical sense, those loans are not really backed by anyone.

Greg Webb November 30, 2011 at 9:36 pm

The one I made to my socialist friend from law school who “forgot” to pay his quarterly federal income taxes.

Economic Freedom November 30, 2011 at 11:13 am

“the risk-adjusted upside to each of these “entrepreneurs” is made artificially larger than the risk-adjusted downside.”

I find it nauseating when librarians call something “artificial.” Librarians are all about artificiality. It is called economic freedom if a corporation decides to destroy a rainforest, but it is the most insane, artificial, moneygrubbing thing that anyone could do.

Jon Murphy is a foolish troll and I will not engage in ANY discussion with her. She is a person who wastes time on blogs and has only a downside. Yes, it would be a extremely risky to invest in her. She shall be ignored henceforth and forever. I disagree with everything she blindly regurgitates. She is not smart, and is wasting her and our time playing on her company’s computer at work. When her boss finds out how she wastes economic resources and people’s time, I hope she gets fired and gets zero unemployment insurance. Homelessness and hunger is what she deserves. She’s a totally artificial sorry excuse for a living, breathing human being. She will never become an entrepreneur because she has zero ingenuity or novel ability. No more will I answer her ignorant comments. She makes artificial, blanket statements and has ZERO subtlety in everything she vomits up. She is a broken record of mindless librarian platitudes. She is actually a lot like Milton Friedman without the wit, wisdom, or intelligence. No more. I’ve had enough of her for the rest of the century.

Nuke Nemesis November 30, 2011 at 12:50 pm

Last time I went the the library, the nice lady behind the counter never mentioned economics. And she wasn’t really all that nice, or helpful, either.

So “artificial” is just not a term I associate with librarians. Are there all-natural books now?

Economic Freedom November 30, 2011 at 1:03 pm

I simply cannot bring myself to repeatedly type “lib(e)r(t)arian.”
So, I save myself a little work by excising two letters from the word. Librarians are general considered useful and inoffensive by most people. Lib(e)r(t)arians are just the opposite, imo, so there can really be no confusion who I am really disparaging. You may consider it a running joke if you wish.

Sam Grove November 30, 2011 at 1:40 pm

Very well, I will consider you a running joke.

rbd November 30, 2011 at 11:14 am

Aren’t folks who receive SBA loans required to put up some kind of collateral? A buddy of mine obtained one of these SBA loans several years ago and they leined his property.

Ryan Vann November 30, 2011 at 12:17 pm

That seems about right. Government loans can be pretty harsh in regards to matters of default or non-payment.

Methinks1776 November 30, 2011 at 4:43 pm

I seriously doubt these “young people” for whom these loans intended have been productive long enough to have accumulated any assets beyond a flat screen TV, a gaming system, their parents’ old couch and a totally rad pair of kicks.

Nuke Nemesis November 30, 2011 at 11:17 am

So we have start-up loans funded by taxpayer and awarded by bureaucrats who know nothing about business. What could go wrong? Sure, there is no accountability. If a loan goes bad, the bureaucrat doesn’t get fired or demoted.

Sure, the taxpayer is on the hook if the business fails, but if it succeeds, the borrow gets to keep all profit. What’s wrong with that?

After all, if a bank won’t give away their money, what’s a person to do? Come up with a better idea? Make a realistic business plan? Work extra hard and save?

Methinks1776 November 30, 2011 at 12:27 pm

I wonder if I can pass for a “young person” and get one of these loans for my totally excellent shit-on-a-brick restaurant idea. I’m also pretty sure the geniuses in congress will happily fund my hydrochloric acid toothpaste enterprise too. Since it’s not their money, nobody is going to check what I actually do with it. Investors can be sticklers for insisting you actually do something productive with the capital they invest. what a bother. Congresscritters are much more easy going.

hmmm….maybe I can just use one of these actually young people as a front. These youngsters shouldn’t be too difficult to bribe.

Jon Murphy November 30, 2011 at 12:28 pm

I’d buy hydrochloric acid toothpaste. Can’t have tooth decay without teeth! And I’d save a ton on dental care

jjoxman November 30, 2011 at 12:33 pm

I dunno… solids generally taste better than the liquid equivalent. Except milkshakes.

Methinks1776 November 30, 2011 at 12:33 pm

Excellent! You’re my target market. May I quote you in the market research I present to the vetting committee for one of these loans?

The more I think about this, the better the deal gets. If I’m too lazy to deal with hydrochloric acid, I can just buy x-boxes and 65″ Sony TV’s for my new young friends, take a cruise and tell the government the business failed. Oh well. Better luck next time.

Jon Murphy November 30, 2011 at 12:35 pm

You don’t even have to quote me! Just write whatever you want and sign my name!

Methinks1776 November 30, 2011 at 12:39 pm

I love the way your mind works. Say….you’re a young person, aren’t you? We should talk…..

Greg Webb November 30, 2011 at 12:40 pm

For a new 65 inch Sony TV, you may quote me as well!

Methinks1776 November 30, 2011 at 1:06 pm

You’re on the list. You don’t care what I say you said as long as you’re in line for the new telly do you? And by “what I say” I mean what “Jon Murphy” will say because he’s 22 and I’m 102, so I doubt I qualify for one of those young person loans. He’ll have to be our front.

Although, I’m sure if I grease a few palms on Capitol Hill I could get the loan even though I’m 8x older than the group these loans are meant for. I mean, who’s gonna check, right? It’s not as if anyone will get fired if it comes out that a 140 year old woman got a loan meant to stimulate a teenager away from his parents’ basement couch.

Jon Murphy November 30, 2011 at 1:36 pm

I know a senator’s aide. They are a close friend of mine. That should help us, too

Jon Murphy November 30, 2011 at 1:37 pm

And Scott Brown owes me, anyway.

Greg Webb November 30, 2011 at 5:19 pm

No, just as long as I get my new TV, you can say that I said anything that you want. We are gonna get ours this time! After all, we are the people!

Methinks1776 November 30, 2011 at 5:38 pm

We’re not just “the people”, Greg Webb. We’re the right people.

Methinks1776 November 30, 2011 at 5:47 pm

We may even be the one’s we’ve been waiting for.

Seth November 30, 2011 at 2:09 pm

Vetting committee?

Jon Murphy November 30, 2011 at 2:23 pm

Yeah. They vet out those who cannot bribe or who don’t have connections.

Methinks1776 November 30, 2011 at 4:35 pm

Dude….they have to give it a veneer of respectability. This is the United States Congress we’re talking about. Shellacking and veneering is what they do best.

Greg Webb November 30, 2011 at 5:22 pm

And, we definitely want to call on both Democrats and Republicans, liberals and conservatives…I know just who we can call from both sides. This will be easy money! But, we may have to cut some family members of the Congresscritters in on this deal. I will let you know how much their take…er, investment return will be.

brotio November 30, 2011 at 5:02 pm

This may have been the funniest sub-thread of the year. Congrats to all!
:D

Methinks1776 November 30, 2011 at 5:43 pm

You want in. You want in, don’t you? Okay. You’re with us. More is better. With more people, we can form a powerful special interest cabal that can grasp for rents beyond our initial modest quest for subsidy of our entremanurial efforts.

PrometheeFeu November 30, 2011 at 2:01 pm

This is awesome! Where do I get one of these loans? Here I was trying to flesh out ideas and build prototypes in order to be able to instill in potential investors the confidence that I can succeed, but having the feds be a backstop sounds a heck of a lot easier. New VC pitch: “Don’t worry. If I fail, the feds will pick up the tab…”

Methinks1776 November 30, 2011 at 2:35 pm

You can join our group, my friend! We’ve got Greg Webb, Jon Murphy (our required politically connected young person) and I bet I we could persuade JJoxman to abandon all decency and join us as well.

My shit-in-on-a-brick idea is green(ish), sustainable, renewable, organic and totally shovel ready. In other words, it meets all the buzzwords for a government loan.

So, you know, no need to agonize over inventing anything useful (to anyone except our cabal).

Jon Murphy November 30, 2011 at 2:37 pm

We should seriously try this just to see if we can get the money. If they hand us a check, then we can write an expose for some magazine and win a joint Pulitzer Prize for our undercover work.

Then, of course, we can turn on one another for the prize money like the pack of ravenous dogs we are.

Methinks1776 November 30, 2011 at 4:53 pm

Laughed so hard I teared up.

Look, I don’t need the money. Krugman berating our efforts as “anti-stimulus” counterrevolutionary activities and issuing a fatwa for our heads in his NYT column is enough for me.

PrometheeFeu November 30, 2011 at 3:21 pm

OK. I’m also young. Furthermore, I’m a foreigner. That puts me in the same category as Sergei Brin who was pretty successful. I think we should put that on the application.

Methinks1776 November 30, 2011 at 4:49 pm

Do you happen to be a brown immigrant by any chance? I’m hoping you are because it’ll help us obtain more dough under some minority lending programs. Although, hopefully you’re not Indian or East Asian because congress generally frowns on you people. You are perceived as too smart and too successful and undeserving of H1-B visas, let alone handouts….I mean loans.

brotio November 30, 2011 at 5:07 pm

Hey,

Murphy’s a Polack with a Mick last name! Surely there has to be some kind of loan available to keep him afloat. Think of all the booze companies that will go under with him if he goes bankrupt!

:P

Greg Webb November 30, 2011 at 5:25 pm

My Latin American girlfriend would qualify. Female and an immigrant…and young too!

PrometheeFeu December 1, 2011 at 1:06 pm

I am a white immigrant unfortunately. I could go and get a tan. My wife however is part Native American. I think that could come in handy.

Ryan Vann November 30, 2011 at 2:34 pm

“I disagree with your assessment. Bankruptcy is a political system, and it therefore has the potential to override analytical calculations of risk. To my mind that does make it effectively a subsidy”

I’m not sure how you arrive at this conclussion. Bankruptcy itself can and is assessed as a risk factor in all loans, and is consequently reflected in interest rates charged. I’m just not seeing how bankruptcy can be construed as a subsidy under any definition.

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