Quote from: JoelKatz on September 08, 2012, 02:16:44 AM

Quote from: honest bob on September 07, 2012, 11:21:57 PM

However, I truly hate to see Patrick's name being drug through the mud. FWIW, I don't think for a second think he is scamming anybody. I know everybody said the same thing about Pirate, but I believe that 1% a week (R.I.P. Starfish Sad

), as outrageous an IRL rate as it may be, is very manageable given what I've gathered about the lending economy here. For now, at least. Of course it isn't (wasn't) risk-free, but Patrick seems intent on treating his depositors right, even when it costs him.

If he has some source of money that's so amazing that he can afford to pay 1% a week interest and still make money, why doesn't he use the money he is making to pay off his debt? Nobody has ever explained why such a scheme would require a constant flow of other people's money other than that it's a scam. Any rational businessman who was making a ton of money would make paying off his high-interest debt his number one priority. There is exactly one known explanation that perfectly explains all the observed facts -- it's a scam.

If the business is precisely the allocation of idle, unused capital to potentially profitable businesses who happens to need it to be developed to their maximum capacity, it does indeed make sense to get indebted. The profitability of the allocator comes from taking a cut from the maximized profitability of the capitalized business, and so he can share that cut with his lender, the capitalist.

I know, your concern is that this scheme has risks attached and you can't understand how they claim that the lender isn't at a risk. Yes, this is the weak point of their business as I can understand it (if his business really is what they say it is, because I don't have that as a fact, but I tend to believe that at least Patrick and Kluge are doing what they say they're doing). The lender is effectively taking a big risk, and all that jazz about some "guarantee" or "insurance" comes down as soon as anything goes wrong, and a lot of things can go wrong...

Quote from: JoelKatz on September 08, 2012, 02:16:44 AM

You seriously believe that Patrick is so smart that he is the first person to figure out a way to reliably make ultra-high profits at low risk and is simultaneously so dumb that he borrows more and more money at *way* above market rates? How do you manage to pull that off?

Maybe his profits aren't that great. Nor are those of his lenders, if you take into account all the risks attached... Maybe that's precisely the point that they are realizing now...

Edit: s/lendee/lender/ I confused the terms... Tongue