[Schiendelman]

That requires their investments to keep going up in value. That doesn't last forever, the assets that people borrow against eventually need to be sold to pay back that loan. When they sell to make payments, those are taxable events.

[saghm]

If investments didn't grow at a faster rate than interest, why would anyone ever invest money at all instead of putting into a savings account? I don't know why it''s hard to imagine that a large loan with a relatively low interest rate might be able to be invested for more than enough profits to pay off the taxes and the loan with some to spare

[Schiendelman]

Yes, and that's fine. That's still paying taxes…

[jagged-chisel]

How does it work if the loan defaults and those assets were used as collateral?

[Schiendelman]

I'm not a tax lawyer, but I think if you default on a loan, the collateral changes hands, which is a taxable event for you as if you sold the asset, at whatever value the unpaid portion of the loan was. So you pay tax.