Comment by Dylan16807
5 days ago
They can swing a few percent. So can gold. Either one could make a bank insolvent. In the long term treasury bonds are not volatile, especially if you hold them to maturity.
5 days ago
They can swing a few percent. So can gold. Either one could make a bank insolvent. In the long term treasury bonds are not volatile, especially if you hold them to maturity.
What does holding to maturity have to do with their current value?
It makes the current market price irrelevant because you're still owed the same amount on the same date.
The current market price is about what it is worth _currently_.
When your deposits are denominated in _current_ dollars, and that's what your customers can demand, then it doesn't matter that your expectation of how many dollars you are going to receive in 2035 is stable. It's about what our assets are worth right now, in case you need to liquidate them to satisfy withdrawal requests.
If you can contrive your deposits to be denominated in 2035 dollars, then long term treasury bonds are 'stable' in that sense.
Similarly, if your deposits are denominated in grams of gold, then gold is a stable backing for those.
If you have a mismatch between what you owe and what you own, then you need a thick equity cushion between your assets and fixed liabilities.
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