I make plenty of money off of speculation. Daytrading/swingtrading on the exchanges is easy as long as you don't let emotion get in the way and set clear entrance and exit points.

Still risky, but way less so than throwing money away with ponzi schemes.

You should check again, and factor in all the defaulted loans that ended up in pirate accounts, pirate passthroughs, insurance companies insuring pirate debt and other lending pyramids that ultimately usually ended up with pirate, or some other soon to default ponzi scam.

The reality is that there is very little real economic growth going on that could produce these returns. People are borrowing far more to gamble or scam. They may accept high %, but a far higher % will never pay back.

So its easy to get these returns on paper as long as you naively assume almost everyone will pay you back, but the reality is likely a whole lot different. I will be very curious to see how much of his loans Patrick will be able to recover, considering how many of the people he totally trusted have already defaulted and/or are now branded as scammers.

Depends. If he pays his creditors out of his own pocket for the losses Im sure he will suffer, then yes. Otherwise, not really.

Lending however no real business is going to take loans at 200%+ APR. 

We have borrowed a line of Credit at 0.5% per week.  Our creditors have enjoyed a return on their capital.  Even 0.5% per week is kinda unrealistic but given all the Pirate nonsesne and unrealistic demands of creditors we had to go that high to compete.  When we renegotiate it likely will be lower.

In our business we can use the LoC to allow instant trades without tying up our capital or being long huge amount of BTC.  The cost we pay in interest is worth the utility we gain.  At "asinine" interest rates the utility isn't worth the interest.

That wasn't my point.  My point is that even if you use your own money and lend @ 1.5% per week you aren't going to NET 1.5% per week.  The higher the interest rate the worse the customer you will attract.  At 1.5% per week you are essentially only attracting bums, scammers, and people very bad at math.  You would be lucky to have a positive net return at all. 

Way to miss the point.

ANY LENDER ON ANY CURRENCY DOESN'T REALISTICLY EXPECT TO PROFIT 100% OF THE INTEREST CHARGED.

So just because there are loans @ 1.5% per week and just because some of them pay back on time doesn't mean 1.5% per week on capital loaned is sustainable or realistic.  
Any lender will experience default losses and those losses will reduce the net return.

Taditional banks.
Finance companies.
Payday lenders.
Bail Bondsman.
Bitcoin lender.

It doesn't really matter.  

Looking at the gross rate on the lending forum is naive.  Take a look at all the defaults.  Take all the amounts loaned, and all the repayments.  Be sure to factor in late/defaulted loans repaid over longer period sometimes without interest.   The net return for all lenders collectively isn't 217% APR.  Hell it probably isn't even a positive number.

spend it like a normal currency

Instantly, the answer appears.

jbreher, I will answer your question and then leave you to your delusions.

You cited the interest rates in the lending forum as "proof" that 1.5% per week NET is achievable.  It isn't.  Hell credit card companies or PayDay loan companies don't make that kind of return on capital.  I was just pointing out that just because there are loans in the lending forum at x% per week doesn't mean one can borrow at 1.5% per week and issue loan in excess of that, cover costs, defaults, and still be profitable.

Even if that was possible under normal circumstances (which it isn't according to free market theory) the Pirate situation will destroy any chance of profitability.   What is better than 7% return per week?  How about infinite return per week.  Borrow at x% and deposit it with Pirate @ 7%.  As long as Pirate pays collect the difference.  If/when Pirate defaults just walk away.

Even if a court recognized bitcoin debts they certainly wouldn't recognize usurious bitcoin debts.  If anything they would strike them dawn as unlawful and noncollectable.  A business model built around charging people 300%+ APR on an uncollectable debt is doomed to failure.

Patrick may make his depositors whole, but will only be because he eats the loss himself.

I think that's right.

My thoughts (not that anyone asked):

1. WifeOfStarfish reads like a sockpuppet to me. If I were Patrick, I'd not want to show this to anyone.

2. Joel offered the choice that Patrick is a scammer himself or an idiot, but I'd like to offer a marginally kinder alternative, which I think is the truth: he was duped.

If one really believed in Pirate, one would invest almost every scrap of liquidity in him. That doesn't make him an idiot so much as a mark--very smart people can fall for scams. Cult members have higher than average intelligence. It just happens that some people fall for certain stories. Patrick is also a believer in Bitcoin, and he perhaps he wanted to do his best to foster the supposed bitcoin economy. Given the apparent demand for lending and the apparent market for deposits that were supposedly safe from Pirate exposure, perhaps Patrick can up with the idea for Starfish BS. He might have even done what he thought was the honorable thing by putting his own faith in Pirate, and giving the alleged depositors a pure "non-Pirate" opportunity.

If my theory is right, he's a double victim--first from Pirate, and second from many of the borrowers who were unsurprisingly only paying high rates to scam/gamble/invest in Pirate (same difference). The only question to my mind is whether he coughs up the loses himself or passes some of the pain to his usurious creditors. If he does the former latter, especially if he tries to spread the loses evenly, I'm not sure I could fault him.