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| User Info | Gov's next reaction to this mess; entered at 2007-12-02 03:39:24 | |||
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Euphoria96 Posts: 1396 Registered: 2007-09-19 
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"Hyperinflation is ruinous to banks, and anyone else holding capital." Wrong! What planet did you come from? Say a bank gives out a 30 year mortgage at 7% and issues a 30 year bond for 4% to pay for the mortgage. That's a 3% spread. Say inflation goes to 20%. The bank still makes a 3% spread. Even better, say a bank sells you an adjustable rate mortgage that adjusts with inflation, and then you issue a 30 year bond at 4% to pay for the mortgage. Say inflation hits 20%, the adjustable rate kicks in to say 14%, and your spread is a whopping 10%. Leverage this up by 10x, and you have 30% and 100% annual returns in an inflationary environment. 2007-12-02 03:39:24
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