25 sats \ 1 reply \ @k00b 4 Aug
I've always wondered why things are they way they are. No one says it out loud often enough for some reason. Saylor brought this to the attention of Bitcoiners at least.
So, if a company wants to build liquid savings in a way that doesn’t come with all sorts of complexity, that doesn’t add monetary energy to their competition, and that doesn’t require moving capital abroad to better performing equity markets, they have historically been out of luck. There have not been any great options, which is why they decapitalize themselves.
For example, both Coca Cola (KO) and Pepsico (PEP) have negative tangible equity. Their liabilities exceed their assets. Why do such successful and profitable companies run their treasury strategy like that? Because it’s better for them to be net short fiat currency, than to be net long fiat currency. And with their fairly consistent cash flows, they can get away with such a levered position. But many cyclical businesses have rather thin balance sheets as well, which can be quite dangerous.
*emphasis mine
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Fractional reserve banking is inherently inflationary because it encourages float and leverage
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"But in modern times, outside of certain circumstances, the balance sheet of an investment-grade company is treated as nearly irrelevant." What has our society come to? A metric of how good you were at your job used to be how much profit you could bring to the company. Now...even that isnt relevant.
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I think it is a great treasury strategy solution, but I think companies need to ease into it. I can understand why an entire treasury won't be put into it.
The companies level of understanding should go into how much they allocate.
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