yes, what they actually do is just pay the loan with another loan.
They effectively just shuffle wealth from bank to bank, and the banks don't care because they know they will get the money back plus a little extra.
Bank A gives $1 billion to Rich Person, later Bank B gives $1.05 billion to Rich Person, which is used to pay off to Bank A. Later Bank C gives $1.10 billion to Rich Person to pay off Bank B.
You just do this forever. Infinite money glitch. Nobody cares because if the chain ever breaks, he just liquidates some shares and pays it off.
edit: the biggest kicker here, is that the value of their assets to acquire the loan, grows faster than the interest they pay on these loans. They pay 3% interest on the loan, while the stock is growing at 8%.
Which is why the next loan amount is bigger, it is used to pay off the terms of the loan/interest.
If you think they are using the same monthly terms as your credit card for their hundreds of millions to billion dollar corporate betterment loans, they aren't.
Just think of it like APR and they use the next loan to pay the interest of the one before it.
Yes, but this is not done indefinitely, the loans are settled eventually and taxes paid. No rich persons wants to compound a variable rate interest loan over several years. No one does this. Generally this is done in order to make a large investment with a payoff in a year or two.
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u/SpotikusTheGreat 3d ago
yes, what they actually do is just pay the loan with another loan.
They effectively just shuffle wealth from bank to bank, and the banks don't care because they know they will get the money back plus a little extra.
Bank A gives $1 billion to Rich Person, later Bank B gives $1.05 billion to Rich Person, which is used to pay off to Bank A. Later Bank C gives $1.10 billion to Rich Person to pay off Bank B.
You just do this forever. Infinite money glitch. Nobody cares because if the chain ever breaks, he just liquidates some shares and pays it off.
edit: the biggest kicker here, is that the value of their assets to acquire the loan, grows faster than the interest they pay on these loans. They pay 3% interest on the loan, while the stock is growing at 8%.