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What does "net lenders" mean? The rich use debt extensively to invest in assets. They're not lending the money out. They borrow way more than the poor, and buy
by llimos 5y ago
What does "net lenders" mean? The rich use debt extensively to invest in assets. They're not lending the money out. They borrow way more than the poor, and buy assets.
- aeternum 5y agoA loan is an asset to the person that made the loan. Yes some of the rich use leverage to increase the amounts they can put towards assets / lend out. In general though they are still net lenders. For example it is very unlikely that a rich person with 100mil would take out additional leverage for another 50mil and let that 150mil just sit in cash. Doing that would make them a net borrower (of 50mil). Instead, they will invest that 150mil, suppose they decide to buy a bundle of mortgage-backed securities. They now have an asset worth 150mil, and via the txn they are effectively lending 150mil worth of value to homeowners. Even with the 50mil loan, they are still a 100mil net lender.