The debt is banks agreeing to loan Musk $3 billion because they know he's good for it. The second letter is banks agreeing to margin $12.5 billion against an unspecified amount of Musk's stock, and the last is Musk pledging the rest (or something like this).

You can promise all you want, but you have to get the bank to be willing to pony up the money - but what you're describing can and does happen - leveraged buyouts were common in the past. https://en.wikipedia.org/wiki/Leveraged_buyout

You find a company with no debt (say, TLSA) and you believe it is undervalued, so you convince banks to loan you enough money to buy TSLA and pledge TLSA itself as the collateral. If the purchase goes through, you now own TLSA and a TLSA sized debt. If it doesn't, nothing much happens.

It's not that weird if you think about it.

I don't have a million dollars, but I can buy a million dollar house. A bank promises to lend me a million dollars contingent on buying the house and then the loan will be collateralized by the house, which I don't own yet.

This is a good analogy, but for it to apply to this situation, the house would have to be on property that has oil or lithium deposits. Once you have the property, it pays for itself, like the profits from Twitter would in this case.

If it ends up not being profitable, the bank takes back the house (or Twitter, or more likely the TSLA stock Elon put up as collateral)

I don't know if its that meaningful of a distinction. The property does generate profits in that you could rent it out. But yeah, you can finance traditional businesses like that. Buying with debt is generally a good idea because you juice your returns with someone else's money. Of course you give up some fixed amount and take first loss but in general debt is absolutely necessary to make the economics work.

If you can buy a valuable asset for $1 and have a bank cover $9 and it yields 10% return, you're making $1 from $1 invested (minus interest) compared to someone that bought it outright (making $1 on $10 or 10% return). The bank has no upside. If you invest in something bad though or the rate is too high the math changes and you lose 100% if the asset ends up being worth <= $9. That's leverage

The biggest danger of leverage is the "margin call" or calling the loan - the most common form of leverage people are exposed to prohibit this calling - if you buy a house today on a normal 30 year fixed mortgage in the USA, the bank cannot call the loan if you continue to make payments, even if the house value drops way below the original amount collateralized.

In some states, such as California, a purchase loan is non-recourse, so you could walk away (and many did in the last housing downturn) and the bank can't do anything beyond take the house.

This means if you can weather the downturn you don't get wiped out, you borrowed 80% of the house to buy, put 20% down, it went down 30%, you were underwater, but continued to make payments, and now it's up 20% above where you started.

Margin loans against stocks, etc do not have this, so if you borrowed against $1k worth of stocks you had, and they dropped in value below what the bank wants you to keep as collateral, they can force you to sell at the lower price (or produce more cash/collateral). This means that with leverage you could be right in the long term but wiped out in the short term.

Yea this seems like a significant amount of unnecessary risk for an asset that is unlikely to get better. I wonder how much of a recession/downturn would trigger a margin call for that amount.

Yeah, fair enough. Musk could either "rent" Twitter and pay the money back with profits or "live in" Twitter and direct it toward some other purpose and use his other activities to pay back the debt. So my mineral rights addendum was unnecessary.

On a related note, I always find the loans where the borrower takes on personal liability are in a completely separate category of risk. Anytime you put yourself in a situation where you could possibly ruin your future prospects or mortgage your future labor to a financial institution is much different than your net worth (and your investors' principal) simply going to zero.

If you rent it out, then the house can pay for itself, theoretically

What about repayments?

You still have to pay off your debt to the lender according to the plan set out in the loan agreement, where will these come from?

You haven't crossed the finish line by securing the loan, you cross it by transferring the title to your name and repaying the loan (principal + interests) fully.

All the funds raised would become loans to Twitter -- So Twitter as a company would repay those loans.

Or a margin call, for Elon Musk if Tesla stock goes down in price, and he will be forced to sell billions in shares to pay for it.

I wonder what Tesla shareholders think about all this ;-)

They do. That's why they have a policy that you're not allowed to borrow more more than 25% the value of the stock

> Tesla has a policy in place of letting directors and officers only borrow up to 25% of the value of their stock. And Elon Musk has already pledged about 88 million shares against indebtedness, according to Tesla's 2021 proxy filing. That leaves him with only another 85 million shares to raise debt with.

https://www.barrons.com/articles/tesla-ceo-elon-musk-twitter...

Great find! Is this normal policy at other companies? On the surface, it seems like a good idea. If you pledge 100%, and the company share price takes a dive, you might be inclined to do crazy things with the company to try to recove the share price!

Something akin to it is common, and the SEC may even require "large shareholders" to file when they've encumbered their shares, but I don't know the details.

It's about the downward pressure on the stock if he has to sell, not only because of highly visible profile but the amount of shares pledged :-)

Is there anything TSLA shareholders might try to protect themselves from this eventuality?

Any sort of hedging strategies we can expect a lot of money to flow into?

Frank McCourt's tenure as owner of the Los Angeles Dodgers is a good illustration of this dynamic. He purchased the team with effectively no cash, he and his family proceeded to treat it as a collateral asset to take out lines of credit to buy themselves personal luxury goods, bankrupted the team, then when the league forced him out, he sold for a profit and made a few billion dollars anyway thanks to the value of MLB television contracts and that's just the way being rich works, I guess.

That is the way that betting correctly on the future value of an asset works. There are many people who have lost money the same way because the value of the asset went down and so they walk away with nothing.

If the downside is walking away with nothing on a bet that you put nothing on, then I think it’s always worth the risk

Sure, but those kinds of deals are rare, especially absent corruption.

A cursory Wikipedia search shows the baseball team owner referenced above put up significant real estate as collateral.

Yes, all the downside falls on the lenders because that's how investing money works. If you can get someone to loan you hundreds of millions, you should (in a purely economic sense) take it because all you can lose is everything you have.

He used effectively no cash but pledged his Boston parking lots as collateral for the debt. So if he had defaulted on the debt his lenders would have gained ownership of the Dodgers AND of the Boston parking lots.

Excellent explanation. To add to that - this is a typical example of an asymmetrical transaction for the lender(s). If Musk+Twitter are successful, lenders’ upside is limited by the debt interest and if Musk+Twitter fail - they are left with a huge underperforming asset on the books. This is nothing new for the banks - essentially it is a potential foreclosure on a defaulted mortgage, just on a different scale, so the risk will be priced into the loan conditions.

This is what I find funny about all those people shouting "No, Elon can't pay for taxes, it's all tied up in stocks!!1!"

If you are stock-rich and you can buy stuff on the collateral for that: normal people can't really do that. Ordinary people have a much harder time buying more stuff than they have the cash for. Or at least on worse terms when they do take out a loan.

Being rich is cheaper than being poor. Is it really so awful to change that?

No one is saying Musk literally can't afford to pay taxes. He can borrow against his ownership. But if you have a company that goes from 0 -> 100, and you get taxed 35% on that, and then the company goes from 100 -> 50, you kind of got screwed. That $100 is a made-up number.

Suppose there is a company with 200 shares, half of which you own. The last trade price was $1 per share, meaning you have $100. But you can't necessarily dump your shares for $100 because the $1 was based off the last trade. So on the margin you can sell a share for $1, but you won't necessarily be able to sell all 100 shares for $100.

Imagine you own a home that went from being worth $1 million to $2 million. Did you MAKE $1 million? Should you pay taxes on that delta as soon as the home's value became $2 million? It makes more sense to wait until you sell it and pay taxes on the net you made. Otherwise it's more complicated and you could end up paying taxes on $1 million when you end up selling it for a lot less. You could have a tax credit I guess but you're unlikely to have the IRS cut you a check for the money you paid that turned out to never be actualized.

Yes, taxing unrealized gains as if they were income would be silly.

Most proposals to tax giant piles of wealth in the market look nothing like what you've described. A wealth tax is more like: pay 1% per year on the current market value of your portfolio, if that amount is over $100 million.

Money attracts money. Wealth taxes are an attempt for reverse that effect and force some of that money to trickle down.

That said, any attempt to implement a wealth tax will probably be struck down as unconstitutional because moneyed interests want it to be declared so.

> Most proposals to tax giant piles of wealth in the market look nothing like what you've described

Wealth tax is different and I think it makes more sense compared to unrealized capital gains. But its not true no one is proposing an unrealized capital gains tax

> Biden’s fiscal 2023 budget request released Monday would impose a 20% minimum tax on the unrealized capital gains for households worth at least $100 million.

https://www.bloomberg.com/news/articles/2022-03-28/manchin-p...

California famously insulates people from additional property tax burden on highly-appreciated real estate - and it's clearly still a popular policy among the people benefiting, but it gets a lot less defense from people who don't own those houses than the status quo here gets from people who aren't stock-based-billionaires.

Wealth is closely correlated enough to power that it's worth encouraging people to turn those on-paper gains into liquid forms - even if only to avoid "losing" if the stock then slides back from 100 -> 50. Especially since he can leverage it to spend in other ways!

Doesn’t this already happen to some extent with property taxes? You pay tax on the appraised value of the property. If it later goes down, you just pay less from that point onward. It doesn’t seem like a problem.

To me, taxing wealth and only wealth seems like the most straightforward route to a truly progressive tax system. That’s not to say it’s simple or straightforward in an absolute sense, but neither is taxing income, is it?

At a high level, taxing wealth instead of income or transactions ensures that rich people are paying their share, while maximizing upward mobility so that people can become rich more easily. Think about how much easier it would be to become wealthy without income taxes, sales taxes, property taxes, taxes on corporate profits, etc. etc.

This is what we should optimize for imho: making it as easy as possible to become wealthy. Sure, there details to figure out, as with any approach, and maybe some rich people will face some difficult choices or be forced to sell assets; I’m ok with that and it seems well worth the tradeoff.

Wealth taxes and land value taxes seem like the most sane way to fund social programs. Extract a bit of value from the people who have runaway wealth (but not so much that their wealth can't continue to grow), and use it to help the economically downtrodden become more upwardly mobile (education, healthcare, basic social safety nets.)

Pair it with a hefty pigeuvian carbon tax and you could probably do away with income taxes entirely.

(A nondistortionary VAT to replace sales taxes and corporate income taxes would be nice as well.)

Like Georgism? Which, by the way, imagines the land tax alone being enough to eliminate personal income taxes.

https://en.wikipedia.org/wiki/Georgism

Yes, I am a Georgist.

He has paid huge taxes ($11B worth, the highest tax payment ever) when he converted capital to income last year.

Nobody disputes that it’s a nice idea to make life easier for the poor. The mechanics of how you actually do it are the hard part.

As with anything, complaining is the easy part indeed. I don't have the answers either.

The funny thing is that hoards of people will come to defend a rich dude who really doesn't need it while poor people constantly get fucked over and could use a little bit of defending.

One improvement could be to just have a higher tax bracket (like the US had decades ago) and build more stuff for the common good. What doesn't help is that from my side of the big pond, the US sounds like a third world country if you are below middle-class. Can't judge if that is true for myself, but hey.

> hoards of people will come to defend a rich dude who really doesn't need it

I don’t know if that’s a fair characterization generally, but it’s not the case with me and it’s actually a frustration/lament I have when discussing this topic.

I’m not particularly a fan of Musk or any of the current crop of billionaires or their companies. But I care about the principles and the practicalities.

There’s this tendency to say “There are terrible problems in the world. We need to fix them with money. Where can we get money from? Billionaires!”

But when you do the maths, i.e., total up all the wealth that billionaires have and divide it by all the people/causes in the world who “need more money”, you end up with basically nothing.

And that’s before you consider what the billionaires’ companies are doing - which in many cases involves things like making phones/goods/software/knowledge cheaper/free, which benefits everyone including poor people, making electric cars affordable and ubiquitous, which will benefit all humanity and the environment long into the future if it leads to climate change abatement, and creating millions of jobs including many for low-skilled people, and also that these companies do generate vast amounts of tax in the form of sales taxes, income/payroll taxes, and capital gains taxes when shareholders liquidate their shares, and you find that it’s not necessarily true that taking money away from these companies/owners would be net beneficial for society anyway; it could easily make the problems worse.

And now for the obligatory disclaimer - yes I know there are plenty of valid concerns about the merits and ethics of what companies do, and worker pay/conditions and externalities and other issues; but these are matters for regulators and consumers to consider and are separate from the principle of how billionaires should be taxed or how beneficial it would be for billionaires to be taxed more.

I’m also not in the U.S., and I see plenty of dysfunction in that country as well as many others - though we also see many people, including some of the world’s poorest people desperate to move there for a better life.

For what it’s worth I devote a large number of my brain cycles to contemplating how life could be better for the worst-off; I’ve spent much of my adult life dealing with health challenges that caused great difficulty in achieving steady employment and financial security, which I’ve now largely overcome, and do I think a lot about how the principles that helped me could be applied more broadly, including for people far worse off that I ever was. At this stage I find myself thinking there are certain things that could work, but a lot of it is just really really hard.

How would you change it?

I imagine there’s a reason people feel more comfortable lending to Elon than to people with a smaller amount of assets, and that it’s not “lol fuck poor people”.

Tax the proceeds at loan origination (1099-whatever filed by whomever is providing the cash based on pledged assets). How you pay the loan back if the collateral declines in value is your problem (or the bank’s problem, depending on the amount in question).

High level, it closes a financial engineering loophole (buy, borrow, die [1]). The taxable event is when you get liquid, and a loan is liquidity. The tax code requires a patch, that’s all.

[1] https://youtu.be/8pBPZMUcsh0

Would taxing the loan reset the cost basis, then? Or are you suggesting taxing the same gains twice (or more than twice if someone repeatedly takes out and pays back a loan against the same assets)?

I agree buy, borrow, die is a problem but the “weird” feature of tax law that makes that possible is the step up in basis. (Getting rid of that has its own challenges I’m sure.)

Given how fast heirs squander their wealth, it may not be worth the government fighting it too much, especially as the side-effects cause all sorts of howling (grandpa dies, dad inherits farm, has to sell it to pay the tax bill).

Shooting from the hip, sure, the broker could record this as a cost basis adjustment and report that attribute along with the rest of the form reported to the IRS.

Oh, sure, I thought GP meant the opposite (make it easier for non-rich people to take loans on assets) but this makes more sense.

Guess that is implied but not really what I meant. Poor people don't have much assets so it wouldn't do much.

My issue with the whole "Elon has to pay taxes" thing is that there are loads of people (fans?) fighting over why he shouldn't have to. It's the richest dude in the world, he really doesn't need defending for everyday people.

I also like the cool stuff he does, don't like the non-cool stuff he does, as I do with a lot of people really

One proposal could be to also allow taxes to be payed in stocks.

When those bits of stock bits are then transferred to ordinary people, they would be entitled to a bit of the dividends of eventually all companies.

Not thought this all the way through and I'm very much not an economist, so there are lots of impracticalities.

In a way, it's the opposite of 'cease the means of production': distribute the 'means' of capitalism.

> If you are stock-rich and you can buy stuff on the collateral for that: normal people can't really do that. Ordinary people have a much harder time buying more stuff than they have the cash for. Or at least on worse terms when they do take out a loan. Being rich is cheaper than being poor. Is it really so awful to change that?

What you are talking about is reputation and it will always be a part of the dynamic. It happens at the poverty level too. In any poor community there are people you trust and people you don't.

> If you are stock-rich and you can buy stuff on the collateral for that: normal people can't really do that

They do it with homes all of the time, what are you talking about?

Has it ever not been so? Is it really possible to change it?

https://en.wikipedia.org/wiki/Iron_law_of_oligarchy

The problem of the rich not paying taxes because they're stock-rich and use the stock as collateral to take out loans to buy a new yacht could be solved by taxing unrealized gains.

Of course, this tax increase could be offset by also allowing unrealized losses to act as a tax deduction.

The thing about an unrealised gain is … that is hasn't yet been realised. It doesn't exist yet. It could (and often does) vanish like smoke later on, and become a loss. When people propose to tax unrealised gains, do they also propose to reimburse those taxes when the gains become losses? Do they intend to continue taxing realised gains?

They usually propose some sort of mark-to-market and tax the value, but outside of markets like the stock market, and somewhat the housing market, it can be really really hard to determine the value of something.

Should the 1st tweet NFT be taxed at its last sale price? The recent failed bid price?

> When people propose to tax unrealised gains, do they also propose to reimburse those taxes when the gains become losses?

Did you only read the first line of my comment? I specifically said that unrealized losses should also be a tax deduction.

I … am a moron. Somehow completely missed that.

Hah it's great. We had a national scandal along these lines.

1- Saudi company borrows $7B from Turkish banks to buy 55% of Turkey's largest internet and telephone provider.

2- Drive the provider into $4B debt (it was debt free when bought)

3- Pay the new holding company $9B in dividends

4- Don't pay the initial money borrowed to purchase the company.

5- Somehow borrow another $4B from Turkish banks to pay the new debt, and pocket that money as well.

6- Government creates a consortium of banks to bail the provider because its too big to fail.

Outcome: Provider is in debt, banks lost all the money, banks needs to spend unknown amount to get the provider back into a functioning state.

Yeah, sadly private equity does the same frequently. Sometimes, I cannot belive it is legal!

What's the quote? If you owe the bank $1m the bank owns you, if you owe the bank $1 billion, you own the bank?

Toys'R'Us comes to mind.

This breaks down to:

a) $21 billion of Elon's ("Reporting Person"; see item #1) own money

b) $12.5 billion in margin loans arranged by Morgan Stanley

c) $13 billion in debt from Morgan Stanley

Can someone ELI5 margin loans? How is it different than using an asset as collateral?

As the other poster said, it's a special type of collateralized loan where since everything is known, it can be done automatically.

You can get approved for a margin account at TD Ameritrade right now, and then later decide to margin some shares for whatever reason. The bank doesn't need to check your collateral because it knows how much it is worth at any given moment when the market is open.

Mortgage loans are not nearly as formalized, and the bank will send out an appraiser to verify that the property is worth an amount that they're willing to loan against.

And once you get past that, it becomes very hand-wavy; banks making loans to governments, non-profits, private companies, etc will all have their internal departments that make decisions about how much the risk is and what premium they'd need to charge.

A margin loan is just a loan where securities are the collateral asset.

The major feature of a margin loan versus other types of loans collateralized by assets is that the value of the underlying security (collateral) is tracked and depending on the terms of the margin loan, the lender has the right to issue a "margin call" demanding additional collateral or cash if the underlying securities have declined in value. These rules, called "house requirements," vary from lender to lender.

Margin loans use commonly traded commodities, normally stocks. Because they are easy to value (compared to a house) and liquid they are easier to get. However, because they are easy to value, they get compared to the loan value constantly. You'll be allowed to borrow X% of the values of your shares. If they go up, you can borrow more money. If they go down, you have to immediately pay off part of that loan. Since X < 100%, you can do so by selling shares (but of course, that decreases the amount of the collateral you have again), but you could also just deposit cash or pay it another way. They normally are more than happy for you to not have to sell shares if you deposit money.

Ok that makes sense, but I thought his other loan from MS was also using his stock as collateral?

If you're MS, why would you want to treat stock as "normal" collateral instead of using a margin loan? Is that Elon only feels comfortable using so much of his stock for a margin loan, and wants to use the rest as "normal" collateral (but is then getting less favorable terms for it)?

I have no idea why MS would choose to mix-and-match. Maybe the margin department has a global limit and that's hit by giving most of it to Musk? Maybe the margin department only covers the amount of Musk's stock they think they can sell in a margin call without causing the stock to tank? Maybe the other loan was using SpaceX stock (margin would only apply to public stock)?

It's also possible that Elon is getting a lower rate for the non-margin loan, but at a much worse multiple (putting up far more shares as collateral).

But that's all making stuff up.

> (including, with respect to the Margin Loan Facility a condition which requires that the borrower thereunder satisfy a maximum loan to value ratio of 20%, which is expected be satisfied by the contributions of a portion of Mr. Musk’s unencumbered shares in Tesla, Inc. to such borrower)

Musk is putting up some of his Tesla stock as collateral on the loans. The effect of this is pretty similar to if Musk had sold his Tesla stock and used the money to buy Twitter, but avoids some of the tax and regulatory consequences of doing that.

Banks are chartered by the government, thus should be prohibited from giving loans against publicly traded stocks, at least at rates less than the applicable capital gains tax, otherwise these loans are nothing more than government sanctioned tax loopholes for the rich.

This sounds like an interesting point but I don't understand it. Why is it worse to give a loan against a building for less than the capital gains rate then it is to do so for a public stock. Can you explain or link to an explanation?

Thank you.

Although they are both subject to capital gains taxes there are many differences between real estate and publicly traded stock.

As a preliminary matter, as investment vehicles publicly traded stock is a liquid asset, whereas real estate is an illiquid asset. Generally one invests in liquid investments so that they can be readily converted into cash when needed.

From the tax perspective a building/building owner would at all times be subject to continue paying property taxes. If there were some equivalent wealth tax for stock holders then at least society wouldn’t lose out entirely on this kind of tax avoidance scheme designed for the rich, but I’d still probably prefer these billions in bank loans go to qualified home buyers before lending it to the world’s richest man to circumvent a taxable event.

Not really. The loan isn't really income: the borrower gets $X, but is also on the hook for $X plus interest. It costs him money.

It doesn't cost him anything, because the interest rate on the loan is virtually guaranteed to be less than the appreciation rate of the underlying asset.

This has only been true during our surprisingly low interest rate environment over the last 20+ years.

It could change rapidly and people can get wiped out quite quickly when it does.

Don't confuse consumer and central interest rates for discretionary loan interest rates. The ultra-rich have been taking out ultra-low interest stock-backed loans to cover their living costs and obligations for over a century, and no billionaire has ever been "wiped out" by interest loan.

That isn't how these mechanisms work from a legal standpoint and ignores many of with-strings-attached realities of this kind of financing.

On the flip side, selling the assets would have no strings attached to the cash.

Further, it is definitely not guaranteed as you assert.

> at least at rates less than the applicable capital gains tax

So if you don't sell the stock and thus have no applicable capital gains tax, then you can be loaned NaN dollars?

The big difference is the lending terms will surely require the borrower to do something such as sell assets or deposit more money if the value of the collateral (and/or the asset being purchased) falls below a certain amount.

Borrowing against your shares is like taking out a mortgage on your home. You still get to live in it (dividend + voting rights), and you are still exposed to swings in value. And you can end up underwater.

It's a little bit different.

Most of the ultra-wealthy live on debt. Here's the basic scheme:

- Let's say I own $10B in startup.com stock, but haven't sold it. My income tax burden is $0.

- If I sell the stock, and taxes are 40% in my country, I get $6B, and the government gets $4B.

- If I keep the stock, and borrow against it, I pay no taxes, but I do pay finance fees (e.g. interest). The finance fees work out to less than taxes.

The trick is to never realize gains or income. Debt lets you do that.

One more trick is that a lot of purchases are "investments." If I buy a mansion, yacht, and Picasso on debt I can use them. When I'm bored of them, I sell them, and pay off that debt. I've probably made money on the mansion and Picasso, and lost money on the yacht.

I've paid a little bit of interest and a little bit of tax, but much less than I would have otherwise.

What you describe sounds pretty much the same as “if I start with a paid off house and take out a mortgage on it…”

One big difference is that you are constantly paying property taxes on the house, levied as a proportion of its total value, making the mere ownership of it a financial burden. Stock ownership comes with no such burden.

Another is that, should the need arise, stock can be sold at the drop of a hat. It is liquid and fungible so a stock-collateralized loan is seen by banks to be a very safe investment. Houses are not.

You left out the portion where you get the money to pay the principal and interest. Either you actually sell some of that stock, or you work a job to get that money. Either way you that income will be taxed.

Or continually roll the debt over, borrowing more money and more money. Then, when you die, your estate can sell the assets to cover the debt, but that avoids taxes.

I'm no expert but in other parts of the thread people are saying that interest is tax deductible. So you sell just enough stock to cover the interest and the capital gains are not taxed because they are offset by the interest deduction.

You still have to pay down principal at some point.

In this case explicitly I suspect it has more to do with the uncertainty of the deal going through AND not wanting to incur the tax penalty ALONG with the share penalty (liquidating $30 billion in TSLA would affect its price for sure). If you sold the shares to raise the cash, paid the tax, and then the deal didn't go through and bought the shares back, you'd be out the tax (with a stepped-up cost basis to be sure).

> - If I keep the stock, and borrow against it, I pay no taxes, but I do pay finance fees (e.g. interest). The finance fees work out to less than taxes.

I'm not following the whole lifecycle. You borrow against your stock, spend that money, and then repay the loan using stock? Without having technically sold the stock?

You don't have to repay the loan (for a very loooong time).

Let's say you have 10 million in stock.

A typical margin account allows you to borrow up to, say, 40% of that. That's 4 million dollars.

Let's say you borrow $1 million and spend it. Currently interest rate on a margin loan is under %2. So every year the amount you need to repay grows by $20k (2% of $1 million, for simplicity I don't count compounding).

So in 10 years that would be $1.2 million to repay. But you're authorized for $4 million.

If in those 10 years the value of stock doubles to $20 million, then you're authorized to borrow $8 million - the amount you can borrow grows faster than the amount you need to repay.

To be clear: eventually you have to repay it but in the corner case it could be done when you die.

There are of course caveats. If interest rate increases dramatically, then the amount to repay will grow much faster etc. but you can see how e.g. if you have $10 million then you could borrow and spend $100k to live a good life and never have to sell your stock to fund your life (especially if stocks keep going up faster than interest rate, inflation and your spending habits)

Very interesting. And the total income works out to more than, say, an index fund?

You repay the loan with the next loan because you have $10b in stock but only took out a $10m loan. In the meantime the stock appreciates some more or you have more vested stock.

I guess the risk here would be that the stock goes to 0, you get margin called AND you are now on the hook to pay taxes.

> You borrow against your stock, spend that money, and then repay the loan using stock? Without having technically sold the stock?

I know Ken Lay did that exact chain of events a lot to cash money out of Enron before it's bankruptcy.

You don't repay the loan using stock. You repay it with cash from other sources (possibly thrown off by the new investment) or you keep the loan open and continue to pay interest on it.

Unlike a home a publicly traded stock is supposed to be immediately liquid. I really don’t think the banks should be giving rich people loans against publicly traded stock to facilitate a tax avoidance scheme, these billions of dollars would have been better of being loaned to home buyers.

You know how you only work for companies who pay you salary instead of companies who don't?

Aligned self interest is the engine of capitalism.

You don't care if society would be better of if you donate your time and skill to company X for free. You care that company Y will pay your for your time and skill and that's why you work company Y.

The good of society doesn't enter your calculus. Only the good of throwawaycities

Similarly the banks don't care what is optimal way to allocate capital for the good of society (apparently as decided by you).

They care about their self interest. Their business is providing loans so they provide loans to people most likely to repay those loans.

From the perspective of the bank, margin loans are the safest loans they can give because the collateral is fully liquid and under the control of the bank i.e. the moment the borrower crosses margin loan threshold, he gets margin call and the bank sells his stock to ensure the loan gets repaid.

Study the wildly successful economies of communist countries to see what happens when people think they know better that free market what should or should not be allowed in the economy.

So far good intentions have vastly inferior economical results than lightly regulated free market where, for example, participants decide what kind of loans they want to make.

In a certain central european country they had 5% yield govermnent bonds, combined with 1-2% lombard loans for private banking clients they invented a financial perpetuum mobile.

His approach has been to leverage and leverage and leverage forever. Wonder where he would be in a parallel scenario with a recession in, say, 2018

I assume he also retains the voting rights associated to the Tesla shares.

That's literally what people do when they buy a house, except in that case, that debt is probably backed by Elon's Tesla stock.

Yes, but the hoi-polloi don't get to write off their mortgage interest as a tax deduction.

"The rich have all of the money and pay none of the taxes. The middle class pay all of the taxes and have none of the money. The poor are there just to scare the shit out of the middle class so they keep going to those jobs."

—George Carlin, 1937-2008

UPDATE:

As some replies have pointed out mortgage interest on a primary residence is permitted in some form in six countries: The Netherlands, Switzerland, the United States, Belgium, Denmark, and Ireland. If you live in one of these six countries, my comment does not apply to you. If you live in any of the nearly 200 other countries in the world, it does.

YMMV: "Your Mortgage-interest-deductiblity May Vary."

> Yes, but the hoi-polloi don't get to write off their mortgage interest as a tax deduction.

What a strange example to pick. That's, like, THE major write-off that most people have. It just gets obfuscated by the fact that most people don't go over the standard deduction.

I think this varies between jurisdictions. I believe it is deductible in the USA, but not here in the People's Republic of Kanuckistan, although there are ways around the limitation, depending on your appetite for the risk of a drawn-out battle with the Canada Revenue Agency.

Up here, home mortgage interest is only deductible if the home is used to generate income, so it does not apply to people who use a home as their primary residence. But what if you have a home office? What if you use it as an AirBnB some of the time?

If you ask a tax accountant whether Canadian home mortage interest is deductible, they will answer "a definite maybe." But it's actually "no" for most people who don't structure their home ownership around qualifying for a deduction.

That second part is huge and people don't account for it correctly. It really hasn't mattered much in the era of super-low loan rates, but the amount that your mortgage is deductible is only the difference between the standard deduction and the itemized deduction.

My mortgage interest became "worthless" for that when the standard deduction was raised. I'm still better off than before, but that particular part of the benefit is gone.

The standard deduction for California did not change, unlike the temporary change on the federal side enacted for 8 years beginning with 2018. Also CA did not change the limits on the amount and type of loan interest that is deductible.

Since California by many measures is large enough to equate to a "country", It would be fair to add it to the list of places where primary residence (and a second home too) mortgage interest is largely deductible.

> The rich have all of the money and pay none of the taxes.

This is demonstrably false. But then again, you don't expect factual accuracy from a comedian.

> As some replies have pointed out mortgage interest on a primary residence is permitted in some form in six countries: The Netherlands, Switzerland, the United States, Belgium, Denmark, and Ireland.

This Wikipedia sourced list is obviously not exhaustive. And interest deduction is allowed in the US which is the relevant case here.

> mortgage interest on a primary residence is permitted in some form in six countries

And China[1]. And India[2]. (Although I don't know either country's housing market and therefore don't know how to interpret upper limits).

Between the US, China and India, it seems like most people and the biggest economies do that.

[1] https://www.chinadaily.com.cn/a/201812/23/WS5c1e2dc0a3107d4c... [2] https://www.bankbazaar.com/tax/mortgage-tax.html

According to the link:

> The Netherlands, Switzerland, the United States, Belgium, Denmark, and Ireland allow some form of the deduction.

That's six out of roughly 195 countries in the world. Perhaps you live in one of them, but billions don't.

The origin of this conversation is a US citizen who is purchasing a US company.

Elon Musk lives in one of them though, si that's not very relevant. You should take it up to your own government if you want to make it happen wherever you live, not be against Musk doing the same

Elon has a lot of equity in ownership of tsla, spacex, etc, no doubt plenty of other things. Instead of selling for cash and buying Twitter with cash, he’s taking out loans based on assets he owns.

On top of that there will probably be “imaginary money” where a bank will give him money to buy Twitter with Twitter as collateral, but not the whole thing, just part. I.e. loans against his personal capital will provide a kind of down payment for loans against the value of Twitter.

In this scale it’s called leverage, banks loaning you a multiple of assets you’re willing to risk.

It is quite common for people with extreme net worth to take loans out against assets instead of selling them.

> It is quite common for people with extreme net worth to take loans out against assets instead of selling them.

Especially when selling those assets would require paying capital gains taxes.

Doubly so when the interest on these loans is tax deductible. This is why he and most other wealthy people pay 0 taxes - he never has a taxable event, like selling stock. He just uses his stock as collateral to take out loans and writes off the interest.

Musk paid the largest tax bill in history last year.

Facts are not needed, sir. Feelings matter most.

We know that no companies pay tax (ignore the billions paid in tax), and no rich people pay tax (ignore the billions paid in tax), so therefor all taxes must be paid by me personally.

Or so the arguments go.

At the end, where does he get money to pay interest?

Margin loan against your stock is more like a line of credit.

Once you upgrade your brokerage account to include margin loans you're allowed to borrow up to, say, 40% of the value of your stock (I simplify, the exact rate is dynamic).

Say you have $1 million in stock.

You're allowed to borrow up to $400k. You have a line of credit of $400k.

Say you borrow $100k. And in this context "borrowing" is simply transferring money from your brokerage account to your bank account. There's no additional paperwork as in most loans.

Let's say over 5 years you accumulate $10k interest (interest rates are really low, can be below 2% right now).

You don't have to "repay" that $10k or the principal. You now owe $110k which is well below $400k limit.

It's a line of credit, you can still borrow additional $290k.

In the limit that line of credit would only have to be settled when you die.

I'm assuming they sell just enough stock to pay the interest.

If the interest paid is tax deductible, then the selling of the stock won't result in a tax needing to be paid.

More loans. As long as the stock's value is going up he can pull more equity out

This is where the weird negativity around billionaires taking loans is odd, even as someone who doesn't particularly like Musk. Sure, if their stock holdings keeps increasing in value, they can handle the loans easily and come out ahead on the deal. But that isn't a given, so what is the issue?

Reed Hastings would currently being losing a lot under this scheme.

Personally, my issue is that taking loans against equity is the reason billionaires don't pay any income tax. Sure, they should be able to take loans in order to keep their voting share, but not as a tax loophole.

For a long time this always felt awkward to me but I was never able to pin-point exactly what was wrong. Then I found georgism, with its claims of not needing any income and capital gains taxes, and it was even harder to quantify.

But I think now I've been able to work it out. There's actually two different types of loans but we treat them equally. The first is the nice type, the 'I built a factory, used that factory to pay back the loan with interest', that loan is a positive sum loan, the company wins, the bank wins, and the community wins. The second are loans for land, loans for stock, and other similar loans - these are zero-sum loans. The company can win, the bank can win, but someone is losing, and as is the community.

And so the real problem with this if you track how the money flows - a possible scenario is that a company might take out a bond, use the money for that bond to buy its own stock. The people who sold that stock and got that money might then go out and buy a house, the people who sold that house - you betcha, put that stock into an index fund, which includes a larger and larger share of the companies buying their own shares. Now that their share price is raised, they have more equity, and can once again take out another bond to do it again. It's a positive feedback loop. Each cycle is inflating the bubble. Valuations end up not being based on actual productivity, but on assumptions as to how money will flow through the markets.

We're at a stage now that the stock market flows of funds is only positive because of the stock buybacks. Companies that aren't buying back their stocks are going out of business. The Russel 5000 is getting punished despite the s&p recovering. We're at a stage now where north of 40% of all money is being held behind passive flows. We're now seeing the consequences of that with things like Netflix - when the stock does drop, it drops quickly and massively. Average volatility might be down considerably, but peak volatility is up massively.

> Sure, they should be able to take loans in order to keep their voting share

Why is that?

The issue is that loans are ways of realizing gains on investments that aren’t taxed.

A proposal to correct this is to require that when you use an asset as collateral for a loan you have to reassess its value and pay capital gains taxes on the increased basis between when you acquired it and took out the loan.

Basically there needs to be friction and taxation with equity transactions like these loans.

> What follows seems like Elon is "paying" for Twitter with... imaginary money.

The vast majority of money is "imaginary" in the sense that it's just liabilities on some bank's balance sheet, AKA bank deposits.

> Why can't anyone do this? I'll promise you a bunch of debt and equity, too.

Anyone can do this. Nothing is stopping you from writing me a note for $1,000,000 and me writing you a note for $1,000,000. This leaves us both a million richer in assets and a million poorer in liabilities. At that point even hinkier stuff can happen like me using your note as collateral on a loan to further expand my balance sheet. The tricky part is getting third parties to accept our IOUs. US Banks have no such trouble thanks to their membership in the Federal Reserve system. This is one major reason why a banking license is such a huge deal.

Because the people who wrote those letters don't trust you to pay up if stonks go down by 100x your net worth. They trust Elon, though, because he has more net worth.

I'm taking a broad definition of "trust" that includes "we can sue you and recover the money."

80s Junk Bond King (and convicted felon*) Michael Milkin tells this story.

He was once talking to an ambitions entrepreneur about funding a buyout with junk, and the entrepreneur asked, "This is a lot of money. How do you know I'll replay it?"

Milkin says he replied, "Because if you miss even a single payment, I'll call your debt and take not just the company, but every single asset you own."

———

* That would be presidentially pardoned convicted felon Michael Milkin. The rules for "righting injustice through pardons" are very different for the rich than the comfortably well off, much less those living paycheque to paycheque.

Pardoned by Trump. We should name and shame each one until this stops.

>We should name and shame each one until this stops.

Why should it stop? Do you not believe in redemption? Milken has done (and continues to do) a lot of great charity work with his fortune.

Besides, if you look at what Milken was actually convicted of, it's pretty tame, especially by today's standards. And he spent two years in prison for it. What more do you want?

I actually like what you're saying, but there is a problem here that is larger than whether it is just that Mr. Milken deserves a pardon. The problem is that justice unequally applied is injustice.

So if we are saying, "Everyone convicted of a felony who serves their time and who then rehabilitates themselves should be pardoned," I'm all for it. And in my jurisdiction (Canada), people can apply for Federal pardons, and many receive them. There is a standard way to do it, a standard procedure to follow, and in theory, everyone is treated equally by the system.

The injustice comes in if there is a special fast-track for a pardon one gets by hob-nobbing with your fellow wealthy oligarchs, one of whom is elected President and gives you a personal pardon. That's a bad look that suggests that all felons are equal, but some felons are more equal than others.

Likewise, I am extremely leery of talking about "doing great charity work." Reputation laundering is my preferred term, and again this is not something available to all citizens. Nobody gives a crap if some felon donates $1,000 to a soup kitchen, but donate $1,000,000 and you get called a "philanthropist."

I'm all for charity and doing good works, but I'm not for giving philanthropists anything special in terms of justice that people who can't afford to be philanthropists get.

IMO, the answer is not to burn Milken's pardon, it's to pardon more convicted felons who do their time and then turn their backs on whatever criminal acts they used to commit.

Yeah we need more pardons not less, and we need blanket laws that forbid making hiring, etc decisions based on convictions (AND forbid lawsuits around hiring) more than X years ago.

People are afraid to expose themselves to liability for hiring a felon, even if said felony is ages ago, because if something goes wrong everyone will say "well you shouldn't have hired a felon."

100% agree with you and the parent, but it should not be at the whim of a governor/president.

I believe in redemption, and I think US jail sentences are extremely excessive. That is an issue for voters.

I do not believe in random justice where connected people can be pardoned even if they deserve so when there are literally millions in jail who could be as deserving.

Sadly important today, pardons can be corrupt. Trump several times promised pardons for people willing to go to jail for him. And he delivered on those pardons.

So yes I believe in redemption, but not by executive decree. That belongs in a time when we had kings with real power.

Finally, the prison time is often from a plea bargain (I do not like those either but different story). So the time sentenced to does not always have a meaning.

None of which means he deserved a pardon.

Ah, so it's a reputation/wealth-based thing. That makes sense.

By that logic though -- if you're a billionaire, could you try to buy every profitable company on borrowed money?

Eventually you'd make the money back and since you don't have to pay anything out of pocket, you effectively have $INFINITY dollars to bargain with.

When he requests debt from the banks he needs to show that his current owned assets are worth more than his current debt _and_ the new requested debt. They wouldn't loan the hypothetical billionaire infinity dollars, unless the billionaire has infinity dollars in assets that aren't offset by previous debt.

It's not reputation based. Musk as requested secured enough loans to pay with cash. His ownership in SpaceX/Tesla is the collateral (as well as his Twitter shares if he buys them).

He has no "infinity" of anything. It's called leverage and it probably maxes out around 60-70% of everything he owns.

seems crazy to take that much leverage when you are worth $200B. the shorts must be salivating at a chance to force a margin call on him, just for fun. Would have been better to just do a tesla twitter merger for free.

The "make the money back" part is what prevents it.

Musk has 100 billion of TSLA say.

He mortgages it to buy TWTR. Now he has 100 billion of TSLA, -40 billion loan against it, and 40 billion of TWTR. He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing.

Or he'd have to make another $40 billion and pay off the first loan to mortgage it again.

Think of it as trying to use mortgage properties in monopoly to continue buying other properties.

>He could mortgage TWTR and buy something else, but it would have to be smaller, because the banks won't loan 100% of the value of the thing.

Unless you're on robinhood: https://www.bnnbloomberg.ca/robinhood-traders-discover-glitc...

Robinhood is the exception that proves all the rules.

Maybe we'll see a wallstreetbets post "Musk couldn't take TWTR private but I did via robin hood bug"

Banks don't like loaning multiple times with the same collateral

You could try but it'd probably work out for you about as well as when the hunt brothers tried to buy up all the silver on earth.

Each new loan would have increased scrutiny due to the other loans you carry.

Trump and Gordon Gekko did this

Do you think it's reasonable Elon could secure the funding if he wants to? I'm quite confident he can and I think most reasonable people would agree.

however, I'm not confident "anyone" could secure the funding, so they can't "do this"

I am not confident, no.

well, you are incorrect. Per TFA, Morgan Stanley has agreed to lend Musk the money.

That's so unreasonable you should go more into it or just leave it. It's literally the richest man of Earth, banks are falling over themselves to stuff him their money.

Matt Levine went into it yesterday why funding the Twitter purchase might be hard for Elon Musk.

https://www.bloomberg.com/opinion/articles/2022-04-20/elon-c...

The long and short of it is that the people who would lend him money may not trust him due to his previous (and erratic) statements.

He literally provided SEC a guarantee from Morgan Stanley to lend him the money. That's what OP posted.

Not all the money

Matt Levine is great but he's just an entertainer, and not even a day later we have evidence filed with the SEC that he is wrong.

say more.

he has a net worth over 200B, why couldnt he raise 40B?

Rich people generally get that way by learning how to effectively leverage other people’s money.

why not?

I feel Elon Musk could literally mint NFT of his face and sell them to raise the cash

about a dozen answers have been posted here, each one missing the point

people are conflating Musk's personal balance sheet with Twitter's. it's not clear to me whether any debt would be recourse to Musk—but in all likelihood, it wouldn't be. "recourse" is a term used to describe what collateralizes the loan. if the loan is recourse to Musk, he'll have to cover the cost if Twitter isn't spitting off enough cash flow to service the debt. if it's non-recourse, then the only collateral available to the creditors is Twitter and its assets (potentially subject to certain carve-outs). most rich people don't do recourse transactions as a risk mitigation measure. however, non-recourse debt is costlier because the universe of collateral available to the lender is slimmer

why can't anyone do this? because Musk has been deemed a better sponsor / steward of capital than your average joe

It means between himself, and a group of others, he has collected enough money to buy Twitter, as evidenced by the letters of intent.

Those are legit. Banks don't sign notes without some intent. They can back out, but they are not meaningless.

It's important so that the current shareholders and the board know that Musk's bid is legitimate, and not something he's just making up.

In order for the banks and others to back him in this bid, he will have had to provide with with a lot of info.

This could be a big PR move, but Musk will have had to hire very expensive bankers to actually go through this as if it were a real thing.

"Why can't you do this?"

Because Goldman and other Private Equity firms won't back you (well, assuming they won't). And they won't give you a letter to the board of Twitter saying they will.

Yeah, the costs to do this are running in the millions, even if nothing ever happens. It was basically a foregone conclusion that Musk can do this, but each bank has to do a bunch of work inside to make sure they're not exposing themselves in ways they don't want to.

Not a foregone conclusion. It's complicated. And banks definitely have to do their due diligence.

If it was Buffet then it would be 'almost a foregone conclusion'.

Not with musk.

Musk has gained $10-30M in free publicity thus far. He's made the front pages of the news everywhere in the world.

He can hardly lose here.

And I'm not a Musk fanboy or anything.

One difference is Buffet rarely if ever buys anything, Berkshire buys things. And I dare say Berkshire has everything ready to go.

In this case Musk is buying using TSLA (and SpaceX?) shares as collateral, not having TSLA buy.

I meant Berkshire.

Tesla nor SpaceX would have no reason to buy Twitter, so Musk has to do it himself.

He has Tesla shares, that's kind of a secondary thing.

It's a leveraged buy out - banks and other firms would be going in with him. A bit like you buy a house.

> Why can't anyone do this?

Everyone can do this. Just call your bank and get commitment from them to issue you a $40B loan! Those "commitment letters" are contracts. It's a known bank with known assets saying it's promised to issue a loan in the stated amount for the stated purpose.

It's the same thing that happens when you make an offer on a house. You don't generally come to them with the money "out of pocket", you show them documentation from your bank that details your mortgage contract. But the mortgage doesn't actually exist yet because you don't own the home. It will execute at the same time as the purchase, generally through some kind of escrow process.

Things aren't any different, fundamentally, even five orders of magnitudes higher.

You can. If you have a stock portfolio and your broker allows you to do margin loans you could just withdraw say $12k from your account as a loan without selling any shares and go buy a jet ski.

But if you don’t have sufficient collateral your broker will just tell you to get fucked.

Why contact you? Because you are insightful unlike most and there is agreement on some of the insights you wrote. Do you have an email address or a contact method?

Old thread could not be replied to, probably because too many days past.

Way more people than Musk can do this. You just need a bank that trusts your ability to pay and who thinks the size of the transaction is worth their time.

1. banks loan elon money

2. elon uses this money to buy twitter

3. Elon pays banks interest each month for said loan money

4. Interest is cheaper than tax Elon would pay if he sold those shares instead of borrowing against them.

4 is true but doesn’t show how insane of a diff it is. The interest is going to be tiny. It isn’t going to be 3% like what Robinhood charges for any one with at least $2K in Robinhood and $5/mo membership. If Elon is getting sub 1% interest rate. AND he gets to tax deduct that interest. It’s near nothing.

With 4, the more significant factor is not tax avoidance, but the fact that selling 21B$ of shares in a short period would really tank the stock price. the negative effect of that would be more significant than capital gains tax

Re 4: Musk doesn't avoid the tax, merely delays it.

By the time he has to pay it he'll also have to pay tax on the accumulated interest.

He'll pay the interest AND the tax on the principal AND the interest.

If you had a signed letter that GS was willing to loan you $43 billion, you'd get taken seriously too. If you want to bid on a house, you'll need a signed letter promising a loan of (house price) on it from a bank to be taken seriously (or cash reserves)

Not to be that guy, but anyone actually can do this with DeFi exchanges using a flash loan. You can borrow infinite capital with no collateral, as long as you can pay it back (plus fees) before the end of the current transaction.

> Why can't anyone do this?

The dude does own 200B + worth of publicly traded equities.

It's very similar to buying a house - you don't get the mortgage first, you get a letter of pre-approval that says the bank is ready to give you a mortgage when you actually buy the thing.

It's even technically more amusing (a pre-approval letter is just the bank saying eh probably we can do this; it's not even required) - the seller will say "We will sell if you have the money", the bank will say "we will give the money if the house is worth X and you have Y downpayment, you will say "I have Y down payment if the bank will give me the money" and the appraiser will say "I think the house is worth X+1-5% (it is always just above the amount needed)".

Then you get a form of a financial standoff where each party checks that they're getting what they want, and you escrow/sign everything.

It's like buying a house with a mortgage. You wouldn't say you're buying a $1MM house for $200k just because you had a 20% down payment.

Exhibit D looks like he's borrowing some money (12.5B USD) with TSLA as collateral, unless I'm misreading it.

Do you provably own quarter of trillion USD of equities? This is exactly what the very stupid people never seem to understand about wealth - net worth is not cash under the mattress (nor on a "Savings" account). Musk (as well as Bezos, Dorsey, etc for that matter) probably has less than a hundredth of a promile of his wealth in cash.

One of the main reasons is that today's cash is in essence a rave-club bracelet - you need it for every day transacitons but as a store of value it is useless to harmful. The whole idea of today's currencies is for the financially illiterate people to get robbed of their savings. You don't become that wealthy by being that stupid.

Edit: I used billion instead of trillion, apologies

> The whole idea of today's currencies is for the financially illiterate people to get robbed of their savings.

No it isn’t, the financially illiterate don’t tend to have much savings anyway. The point of controlled inflation is to prevent the financially literate from hoarding cash as an appreciating asset and provide tooling to alleviate economic crisis. Considering your quote I’d question just how financially literate you yourself is.

Yes. I know very well that this is the justification (and a justification can be invented for anything). Now it is your turn to explain to me how does this fact contradict my statement that the drawback of such paradigm is that it makes it useless as a store of value?

Hint: It doesn't - you just stated a completely separate fact as if it is logically incompatible with the original argument.

That's not a drawback, it's basically the whole point. Cash is designed to be a bad store of value in the long run because the government wants you to spend it or invest it. Cash is a good store of value in the short and medium run so that people accept it in return for goods and services but a bad one in the long run so that it doesn't make sense to hoard it.

> Now it is your turn to explain to me how does this fact contradict my statement that the drawback of such paradigm is that it makes it useless as a store of value?

Well, nobody contradicted that statement, as that is generally accepted. The contradicted statement is "The whole idea of today's currencies is for the financially illiterate people to get robbed of their savings.", which as (i parse it) is a statement about purpose of such properties of today currencies, so it is contradicted by a different statement about purpose of these properties: "The point of controlled inflation is to prevent the financially literate from hoarding cash as ..."

Cash is not a store of value, it's a mechanism of exchange. It never has been a store of value.

It's supposed to be safe but if it has zero risk, then it has zero return.

Inflation is a bit like maintaining the pressure in the pipe of the flow of money.

Inflation also has the effect of discounting debt, which means it is good for borrowers, not lenders. Most people are borrowers, in terms of things like house mortgages and other debts. That's a good thing, but you also don't want wages to have to grow too fast with prices.

Also inflation isn’t linear. It is very possible for controlled inflation to be high one year and then low for the next two to make up for it. This idea that once we’ve inflated the dollar by a percent there’s no going back is false.

I rebutted against the idea that our economic policy is designed to rob the poor or financially illiterate. The exact opposite is true, inflation forces the rich to put their capital to work. Financially illiterate people don’t tend to have enough savings to lose out to inflation, so that point seems moot. The working class, however, overwhelmingly stores it’s capital in retirement accounts (56% of US workers own stocks or bonds[1]) so they aren’t losing their savings to inflation.

Your rhetoric is using lies to pull at peoples emotions, it’s the same thing all right-leaning libertarians spout. It has and will continue to be bullshit.

1. https://news.gallup.com/poll/266807/percentage-americans-own...

Being uninformed does not make one "very stupid".

Not being aware of it and not admitting being uninformed does make you 'very stupid' though.

Watch how fast his numbers fall if he tried to sell a fraction of it.

Watch how fast it falls when people realize how absurd it is for Tesla to be the sixth largest company in the world by market cap, with a trillion dollar valuation. The meme voting era of stocks is coming to a close. The weighing portion of the cycle is coming and it will not be kind.