Author: eric at voskuil.org 2022-05-04 04:04:10
Published on: 2022-05-04T04:04:10+00:00
The sender is discussing a scenario of lending, where the lender provides the use of the principal and gets paid interest in exchange. The borrower's use of the principal is overlooked and to generate income from capital, one must produce and sell something, which requires both capital and time. Borrowing the principle allows the borrower to produce goods, sell them, and return the "profit" as interest to the lender. The borrower trades the principle with others, and at maturity, the coin is returned to the lender by covenant. While the lack of usability is a cost to the lender, it is not a benefit to the borrower. The lender incurs no risk and will obtain no reward as the loan is of no value. Failure to deploy capital is an opportunity cost and locking it up is not deployment. Even if we accept that money must increase in price over any given period, we are still left with the observation that the presumed appreciation would accrue to the lender absent lending, making it pointless. The discussion is about the net present value of the loan, and the sender believes that the net present value of the loan is zero.
Updated on: 2023-06-15T20:11:21.822991+00:00