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> You may have ten grand in your bank account, but you also probably have a mortgage for another four hundred grand. Unless you are underwater on your mortgage

by ac29 5y ago

> You may have ten grand in your bank account, but you also probably have a mortgage for another four hundred grand. Unless you are underwater on your mortgage, you also have an asset worth at least $400k. "Savings minus debts" is not a (good) measure of net worth.

vkou 5y ago
Savings minus debts is an excellent measure of how much cash you have, which is what is destroyed by inflation. When your net cash balance is negative, you thereby benefit when the value of cash drops. If the home is worth 600k, and the dollar loses a third of it's value, the home is now worth ~900k in new dollars, but 600k in old dollars. Your 400k mortgage is still 400k, though - which makes it cost you ~266k in old dollars.
- mostertoaster 5y ago
  I don’t think you understand value. While the amount I owe on my mortgage is relatively less, the price I had to pay for those low interest rates was way higher than it would’ve been. The true value of something doesn’t magically go up because of inflation. Ultimately inflation still find people. Maybe that is worth it, to avoid deflation, but everything is ultimately in the exchange. If my house was worth 1 million bananas, printing more US dollars doesn’t make it worth more than 1 million bananas. Next thing you’re going to tell me is that wars are good for economies, because they cause an increase in spending.
  - vkou 5y ago
    I didn't say your house goes up in value because of inflation. I say that the debt that is attached to your house goes down in cost, which is a net improvement to your assets minus liabilities. > If my house was worth 1 million bananas, printing more US dollars doesn’t make it worth more than 1 million bananas. Correct. But if you owe the bank a million dollars, and the cost of a dollar goes down, you'll still own a house that is worth a million bananas, but will have a smaller debt burden.

by ac29 5y ago

vkou 5y ago

Savings minus debts is an excellent measure of how much cash you have, which is what is destroyed by inflation. When your net cash balance is negative, you thereby benefit when the value of cash drops. If the home is worth 600k, and the dollar loses a third of it's value, the home is now worth ~900k in new dollars, but 600k in old dollars. Your 400k mortgage is still 400k, though - which makes it cost you ~266k in old dollars.

mostertoaster 5y ago
I don’t think you understand value. While the amount I owe on my mortgage is relatively less, the price I had to pay for those low interest rates was way higher than it would’ve been. The true value of something doesn’t magically go up because of inflation. Ultimately inflation still find people. Maybe that is worth it, to avoid deflation, but everything is ultimately in the exchange. If my house was worth 1 million bananas, printing more US dollars doesn’t make it worth more than 1 million bananas. Next thing you’re going to tell me is that wars are good for economies, because they cause an increase in spending.
- vkou 5y ago
  I didn't say your house goes up in value because of inflation. I say that the debt that is attached to your house goes down in cost, which is a net improvement to your assets minus liabilities. > If my house was worth 1 million bananas, printing more US dollars doesn’t make it worth more than 1 million bananas. Correct. But if you owe the bank a million dollars, and the cost of a dollar goes down, you'll still own a house that is worth a million bananas, but will have a smaller debt burden.