Hey, you're <insert billionaire here>!

Just a reminder for those not in-the-know: https://www.propublica.org/article/billionaires-tax-avoidanc...

I didn't see the word 'inflation' in there once.

I do think we should tax borrowing on securities though.

The ultra-wealthy can borrow phenomenal amounts of money at low interest rates, which has two effects. First, as you said, is that during times of great inflation they come out ahead (also because they manipulate the broader economy to inflate). Second, is that borrowing doesn't count as earned income and therefore is not subject to income taxes.

I think we should outlaw billionaires. The idea that a sole individual could hold so much economic, societal, and political power is totally fucking insane.

I've heard that the ultra-rich borrow a lot against potentially illiquid assets to avoid realizing gains and taxes, but I'm confused how it works long term. Do you just keep taking out new debt to pay back your old debt, and continue doing that until you die? It seems like eventually you would need to sell something to pay back your older creditors.

You don’t even need to do it for illiquid assets, the important bit is to have appreciating assets.

You avoid taxes by not getting cash in a tax inefficient way (income, capital gains) and instead you get it in loans (which can be tax deductible!)

Then when an event happens that allows you to pull cash efficiently (capital losses, inheritance asset step up etc) you service the loan.

Your lender is happy to do this both because the loans are fully backed by real assets and they want to sell you or your businesses other services.

I guess if you have, say, $50 billion in assets, you can take out a new $5 million loan each and every year, and by the time you die, and never have to pay yourself back. You've barely leveraged 1% of your assets. Their reality is unfathomable to us little people.

$5 million, to someone that rich, is like $50 dollars to us. It's chump change you might find laying around your house.

Furthermore borrowed money increases the money supply, and at that scale, the money you're borrowing can even be used to increase the price of the assets that you're using as collateral, allowing you to borrow even more.

It can also unwind just as quickly if you need to pay those debts back in a hurry, causing your asset prices to tumble on the way down. But if you're big and have borrowed enough money, whole jobs and industries will be dependent on your continued solvency, and so you can sometimes maneuver to put the public on the hook.

Do you think that slow, subtle inflation won't be priced into the interest rate on your debt?

Based on prior experience? No, I dont think so - interest rates go up, and they go down. I look at all the folks who bought houses in the early 80's between appreciation and inflation they won in the end.

This also works out for unsecured debt too largely.

But surely you notice that when interest rates go up and down, that movement is tied to changes in expectations of inflation?

The '80s homebuyer did great on their purchase, but not because borrowing at 20% was such a steal. They profited because their home subsequently went up in price faster than inflation did.

Everything else being equal, you almost always win when buying a house in inflationary times. Even if you pay a high initial rate you can always refinance to a lower one later. If rates stay higher for longer than anticipated your income is most likely rising as well. In either scenario your debt service expense is trending down as a percentage of your nominal income, and your asset is trending up with inflation.