Credit System
A company too risky for any bank raised $100M in weeks from the bond market at 8%. The entire economy runs on a single mechanism: pricing risk accurately — and crashes happen when that mechanism breaks.
A company needs $100 million to build a factory. A bank says no, no operating history, too risky. But the company goes to the bond market instead. 8% yield, 7-year maturity backed by factory cash flows. Within weeks, bond investors commit $100 million. The bond market prices risk at 8%. Companies get capital, no banquet grant. Bond investors get 8% returns if the company succeeds or lose money if it fails. Capital gets allocated to risky ventures. This allocation isn't free. The company pays 8% annually regardless of success. But it got capital when banks wouldn't. Multiply across an economy. Thousands of companies issuing bonds. Millions of small businesses getting credit from credit card companies, equipment lenders, and receivables lenders.
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