From any lender’s point of view, being able to have interest earn an after-tax yield that is in excess of the long term inflation rate can create significant compounded profits over time. Sellers often carry back financing in order to be able to sell faster; with greater after-tax profit either from higher rates of interest or from higher than market prices. Conversely, borrowers seek to avoid the ruinous effects of compounding interest and to shelter income – whether in the form of rent or gain – to the maximum extent possible from being taxed.

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