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You can't deduct inflation from the interest earning, so yes the interest rate has to be high enough to cover inflation after tax.
by ummonk 4y ago
You can't deduct inflation from the interest earning, so yes the interest rate has to be high enough to cover inflation after tax.
- taeric 4y agoBut if it is, let's say 7 million dollars, even earning 0 interest, it can be used as collateral for loans that they can then use in places that has something to beat inflation. Notably, this has a finite lifespan on how often you can do it. It is not some magical process that has no downside. But, to pretend the people that will buy yachts care about inflation loss on things is silly. Every single asset they buy will result in worse loss than inflation. Having safe assets that they know won't be taken is a very nice source of collateral. And note that I never envision them putting their billions away, in this manner. Just many millions. Because they have many many millions.