> IDK why you think banks can magically predict what inflation will be. They don't need to predict the exact number. They know what the long-term target rate i

> IDK why you think banks can magically predict what inflation will be. They don't need to predict the exact number. They know what the long-term target rate is (about 2%) and will tend to err on the high side. In a particularly bad year they might lose out with unexpectedly high inflation, but they don't consistently experience bad years. This is their core business and they're pretty good at ensuring that it comes out in their favor on average. They certainly wouldn't persist in making loans where they expected to receive less back in principle and interest (plus any subsidies, which just means someone else is paying back part of the loan) than what they loaned out after adjusting for inflation. Secured debt such as mortgages isn't as bad, though I have yet to see a mortgage were the interest payments were less than inflation over the full mortgage period. So instead of losing 2% purchasing power per year to inflation you lose 3-6% in interest to the bank (during a time of historically low mortgage rates). And as you pointed out, when it comes to unsecured debt at 12+% APR it hardly matters what the inflation rate might be; compounding interest payments will far outpace any devaluation of the principle. The problem there is that the inflation discourages saving, which would otherwise have allowed those affected to avoid interest payments altogether. In any case the main point was that the argument that inflation benefits debtors only applies to unexpected inflation. When it's systemic and predictable, like the 2% rate target the FED claims to be aiming for, and lenders are free to adjust their rates accordingly, there is no reason to think that debtors would have any inherent advantage.