To: Johnny Canuck who wrote (70626 ) 2/9/2026 12:05:50 PM From: Johnny Canuck Read Replies (1) | Respond to Conversation with Geminim.youtube.com The Shift from Commitment to Flexibility Historically, banks existed to lend long-term (mortgages, infrastructure, business expansion). However, the video argues this model is outdated because long-term lending has become dangerous in an era of permanent uncertainty [ 00:22 ]. Banks now prioritize liquidity, optionality, and adaptability over duration [ 00:33 ].Why Banks Avoid Long-Term Lending Existential Risk Management: Long-term loans lock in assumptions about inflation, interest rates, and regulation. If these change, the risk stays trapped on the balance sheet [ 01:03 ].Rate Volatility: In a stable world, long-term lending works. Today, policy cycles are compressed and rates move faster than loan books can adjust [ 03:24 ].Regulatory Pressure: Capital rules penalize illiquid, long-dated assets, while short-term assets keep ratios healthy and regulators comfortable [ 02:02 ].The "Originate and Distribute" Model: Banks now act as middlemen—they originate mortgages or project loans, package them, and sell them off to keep the fees while shedding the duration risk [ 04:11 ].Economic Consequences The preference for short-term money creates a "starvation of time" in the broader economy:Stalled Infrastructure & Housing: These sectors require decades of certainty. Without bank commitment, they rely on government backing or suffer from chronic shortages [ 04:41 ], [ 06:38 ].Short-Term Corporate Behavior: When banks signal that the future is hard to price, businesses respond by optimizing for quarterly cash flow and share buybacks instead of long-term expansion [ 09:35 ], [ 12:07 ].The Rise of the State: Because private finance avoids duration, the government has become the primary "anchor of time," providing guarantees for mortgages, energy, and student loans [ 07:29 ], [ 12:42 ].The Final Paradox The video concludes that this behavior is rational for individual banks but brittle for the system [ 07:43 ]. Banks remain profitable and resilient through volatility, but the economy faces a "slow compression of ambition" where progress is deferred because no one wants to make a bet on a future they no longer trust [ 13:32 ], [ 14:07 ].Watch the full video here: m.youtube.com Gemini is AI and can make mistakes.
