Yes, the key is knowing what Treasuries are going to do. If I knew that I would have my own island somewhere, and be farming coconuts. But take farmground at 10,000 an acre. Let’s say they can borrow $6,000 against it. At 3% interest that is $180 in interest and assuming 30 year payments, another $126. So payment is approx $306. Which is probably where cash rents are. Which are year to year, or maybe a 5 year lease. Also with credit risk of tenant. Interest rates go to 5%. Ouch, payment goes to $390 per year per acre.
Then Willie Nelson comes out and starts playing Farm Aid again. I guess my point is that 1) I wouldn’t bank or model in a 7% capital appreciation of the asset to underwrite it which really only helps if you liquidate the collateral. and 2) due to the less liquid nature of the asset and friction costs associated with disposal, the only way this works is if MKRDAO also has a long term commitment to keeping the stability fee low. But I don’t really understand the explicit guarantees that are provided by the Tinlake system. Maybe there is additional recourse to those assets drop/tin that I am not understanding. Or maybe this is just a year to year revolver.