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Youre not accounting for inflation. The value of a dollar today is much more than the value of a dollar years later. Especially when inflation is 6%. The bai
by thomquaid 4y ago
Youre not accounting for inflation. The value of a dollar today is much more than the value of a dollar years later. Especially when inflation is 6%. The bailed out banks received $426B year 2008 dollars and the TARP dollars recovered are $442B 2014 dollars.
In real terms, the Treasury should have recovered $467B 2014 dollars for its investment to have a 0% real rate of return. In fact, $25B real 2008 dollars were given to banks and never recovered.
- H8crilA 4y agoThat does not matter because the Treasury funded it with their t-bonds and t-bills, not with CPI (with a small exception for the TIPS notes). The US government is running with a constant debt unlike say Saudi Arabia which has a massive fund. Though they also have bonds. Let me illustrate this with an example: 1. I borrow $1M at 5% p.a., for a year 2. I lend out this $1M to someone else at 7% p.a., for a year 3. A year passes 4. My debtor has not defaulted! Great, I collect my $1.07M 5. I pay back $1.05M 6. I am $20k ahead Nowhere in the above logic we need to know what happened to the CPI or any other inflation measure.