4 ms·
This article is complete crap! At 3.6 Billion per quarter. Let say JP Morgain makes 10.8B a year. To make that with 2% yielding T-Bills the govt would of need t
by rebelvc 17y ago
This article is complete crap! At 3.6 Billion per quarter. Let say JP Morgain makes 10.8B a year. To make that with 2% yielding T-Bills the govt would of need to lend JP Morgan well more than 5.4 trillion.
- seldo 17y agoThat's where the "leverage" comes in. The exact mechanism is a little confusing to me, but I think it works like this: Say you have $100. You can invest that $100 at 2% interest and earn $2. You end up with $102. Leverage is complicated, and I'm not totally sure I understand how it work, but basically it allows you to amplify your money. Instead of just investing $100, you take out a loan of $10,000 at 1% interest: you know you'll have to pay back $10,100, but you've already got that much. Now you've take that $10,100 and invest it at 2%, and you get $202 interest -- you now have $10,302. You pay back the $10,100 you owe, and you end up with $202, having earned 100x more than if you'd just invested without leverage.
- Confusion 17y agoFirstly, you're a factor 10 off: 10.8B is 2% of 540 billion. Secondly, 3% already reduces that to 360 billion. Thirdly, you missed the important word 'leverage' in the article.
- rebelvc 17y agoYea I did get the factor off. Leverage means using borrowed money to make more money. Other than the government where are you going to borrow at less than 2% interest rate? The financial institution does a lot more than buying t-bills.