Pretty sure many in the middle class do the exact same thing. That's the whole idea behind mortgages, auto loans, etc -- to fund consumption on credit and pay the interest with income.

For the middle-class, the closest would be a home equity line of credit (HELOC). Reverse mortgages are also a variant of this.

Generally though, most 'middle-class loans' have an end date.

I think a lot of middle class people roll over their debt, too, no? Say buying a new car when the warranty expires on the old car. Or buying a new house every 10 years (US average).

But I don't feel like digging around SCF data, so this is just a hunch. Having said that, my hunch is that middle class households are much more indebted than wealthy households.

I think an easy argument can be made that the standard home and car loans are the same. In spirit, payday loans are exactly the same.

Difference is just the volume of money and when the term is due.

> What a lot of high wealthy individuals are doing is using their portfolios as collateral against lines of credit. The LOCs give them cash to fund their lifestyle, and they don't have to liquidate their portfolios and take the capital gains charges (at least in the short-term).

> Someone can have both holdings and cash in this situation.

Ya, I understand this. This is exactly my point, though. If he's taken out loans against his shares, he is even more incentivized by the value of those shares than if he had not done so.

To the extent that he has pure (unencumbered) cash positions, he's paid taxes. To the extent that he has unrealized gains or loans against unrealized gains, he is incentivized by share price appreciation.

This was in response to the a comment suggesting that because Bezos had already cashed out, he didn't care about the value of his shares anymore.

For a billionaire it's not about the absolute dollar value of their wealth.

It's about the fraction of global wealth that they control.

That's how they benefit from crisis and catastrophe.

Maybe the dollar value of their pile declines, but the percentage of global wealth they control increases, as the poor and less wealthy get hurt proportionately more.

Don't they have to payback the loans at some point? And at that point do they not liquidate some assets to do so and pay taxes on that? (Serious question.)

You don't use all your assets as a collateral – you loan out, say, 1%, for the needs you have. If the creditor demands a repayment for some reason – and if you're still solvent, it's not like your IOU can't be treated as money in itself – then you can get a loan on some other 1% of your now-appreciated assets, use that to repay the first loan. All without liquidating any assets and accruing any “income”. Then pass the bucket to whoever inherits your assets.

You can presumably go a layer deeper and use the loaned cash to build an investment portfolio with a rate of return sufficient to fund your lifestyle, pay the interest on the original loan, and pay for the management of the whole thing.

> Don't they have to payback the loans at some point?

LOCs are often open-ended, so as long as they're at minimum paying the interest, the lender doesn't care. Presumably it will be cleared up eventually on death with the estate.

Not just holdings and cash in hand, but $0 tax liability as a result.