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Is inflation bad if you have debt (assuming non-usury rates like those of credit cards) ? From a let's say personal pov, let's say I have a mortgage and studen

Is inflation bad if you have debt (assuming non-usury rates like those of credit cards) ? From a let's say personal pov, let's say I have a mortgage and student loans and those are my only debts and their interest rate is fixed. If inflation is indeed rampant but wages track inflation (I assume) - isn't this an effective debt reduction as long as you don't incur new debt? Or do the down sides of inflation outweigh any of the benefits I assumed above?

briefcomment 5y ago
It's all relative, but if you have assets that are keeping up with inflation like land, real estate, crypto, or anything scarce really, you're better off. I think wages don't really keep up with rapid inflation in the short term.
deleted 5y ago
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ceh123 5y ago
If you consider debt in isolation (so assume your income increases with inflation or faster so your quality of life/buying power doesn't take a hit with inflation) then yes you are correct, inflation does away with debt. The concern comes in when your cash compensation doesn't keep pace with inflation and your effective buying power decreases. Also other general macro effects that may indirectly impact you, and I'm sure there's a whole lot more to it than that, but yeah simplistically: inflation make debt go bye bye.
throwkeep 5y ago
> isn't this an effective debt reduction as long as you don't incur new debt? That's right, debt gets inflated away.
tylerjaywood 5y ago
In normal inflation that’s exactly what happens. The problem is that inflation, if unchecked, can increase to a point that there are meaningful month over month, or week over week, or in some historical cases, minute over minute changes in value of the currency. How quickly can wages realistically keep up? The biggest winners during high inflation periods are those holding the largest debts.
milkytron 5y ago
Yes. Inflation generally favors debt holders because their debt isn't worth as much by the end of repayment as it was when the debt was first incurred.
dingaling 5y ago
> if inflation is indeed rampant but wages track inflation (I assume) There's no direct mechanism that ratchets wages as a result of inflation. Average wages increase when the labour market is tight and there is demand for workers. However that generally applies to new applicants, not people in existing posts. For them, static wages lead to purchasing-power reduction.

briefcomment 5y ago

It's all relative, but if you have assets that are keeping up with inflation like land, real estate, crypto, or anything scarce really, you're better off. I think wages don't really keep up with rapid inflation in the short term.

deleted 5y ago

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ceh123 5y ago

If you consider debt in isolation (so assume your income increases with inflation or faster so your quality of life/buying power doesn't take a hit with inflation) then yes you are correct, inflation does away with debt. The concern comes in when your cash compensation doesn't keep pace with inflation and your effective buying power decreases. Also other general macro effects that may indirectly impact you, and I'm sure there's a whole lot more to it than that, but yeah simplistically: inflation make debt go bye bye.

throwkeep 5y ago

> isn't this an effective debt reduction as long as you don't incur new debt? That's right, debt gets inflated away.

tylerjaywood 5y ago

In normal inflation that’s exactly what happens. The problem is that inflation, if unchecked, can increase to a point that there are meaningful month over month, or week over week, or in some historical cases, minute over minute changes in value of the currency. How quickly can wages realistically keep up? The biggest winners during high inflation periods are those holding the largest debts.

milkytron 5y ago

Yes. Inflation generally favors debt holders because their debt isn't worth as much by the end of repayment as it was when the debt was first incurred.

dingaling 5y ago

> if inflation is indeed rampant but wages track inflation (I assume) There's no direct mechanism that ratchets wages as a result of inflation. Average wages increase when the labour market is tight and there is demand for workers. However that generally applies to new applicants, not people in existing posts. For them, static wages lead to purchasing-power reduction.