[ABeeSea]

Most of the commentary about the 2008 bank bailouts presumes all the money was spent or given to banks. Banks paid everything back. A couple billion dollars in opportunity cost because of inflation is definitely worth preventing a collapse of the financial system.

[boomlinde]

Yes, but you insisted that the loans were profitable, not that they had "a couple billion dollars in opportunity cost". There is a difference between profit and loss.

[ABeeSea]

They were profitable. They collected more money than they lent out on a dollar to dollar basis.

[sokoloff]

You’re describing as profitable lending by an entity funding itself by issuing Treasuries and then ignoring the cost of the interest paid on those Treasuries when deciding if the use of the money was profitable.

[ABeeSea]

Inflation is not a direct cost of interest. If we are going to included opportunity costs in the definition of profit and loss, then we should include the opportunity cost of tax revenue plummeting if the financial system collapsed.

[sokoloff]

It’s not inflation. It’s literal money paid out via the government paying interest on its debt obligations (which were higher as a result of the bailout money than they otherwise would have been).

I agree that they should have done what they did. I do not agree that it was net profitable.

[boomlinde]

"Guys, we would actually have been richer instead of poorer if six years worth of inflation hadn't happened! Let's celebrate!"

If I can buy n units of goods and services for the money before the investment and n-1 units of goods and services after the investment, I've lost. I don't see how the particular numbers you print on currency enter the equation. How is nominal profit at all interesting?