| To me it sounds like you don't understand them either? What you seem to be talking about about is cashflow insolvency. You can have a wildly profitable contract that pays in 120 days, but have no cash on hand to pay debtors. The work you are doing is profitable, you just can't afford to pay your debtors right now. Profit != cashflow, that's why it's called cashflow insolvency instead of profit insolvency. You seem to be mixing up profit and cashflow. But you're also talking about the wrong thing. These banks are not in cashflow insolvency. As far as I can see, these banks are going through what is called balance sheet insolvency. Their assets are worth less than their liabilities. However, the assets are weird as the $100 bond they have is presently worth $78 even though in 10 years time it will be worth $100 again.This is because the interest the bonds pay is so low, no-one wants to buy it right now. So their balance sheet doesn't add up, and as people started taking money out, they couldn't cover their liabilities. It LOOKED like their balance sheet was fine as they were valuing them at $100, but then they were forced to sell them and suddenly they have a big hole in their balance sheet. So they're insolvent not because they've got a cashflow problem, but because their balance sheet doesn't balance. And the regulators stepped in to stop some creditors getting all their money out before that bank essentially went bust, leaving other creditors with nothing. And now the regulators seem to be saying "we're going to guarantee that $100 bond is worth $100 even if you can only sell it for $78". By loaning people money up to $100 against it if they have one. And they are claiming it won't cost the tax payer anything. But they're making 0% loans to banks when high inflation is happening, so the money they get back is going to be worth less than if they spent it on roads or healthcare, or whatever. Maybe I'm wrong, and happy to be corrected, but it does seem what you're saying is wrong. |
I can think of a few methods to turn a profit with a zero-interest loan. There is definately opportunity cost.