4 ms·

If I understand money (who does?) then: if I borrow $500,000 to spend today (at low interest), and pay it back, as time goes by, with money worth only $300,000

If I understand money (who does?) then: if I borrow $500,000 to spend today (at low interest), and pay it back, as time goes by, with money worth only $300,000 (today) ... sounds like a net gain.

mhluongo 5y ago
It sounds like you understand money! For bonus points, at whose expense is this happening?
- voisin 5y ago
  At the expense of people with investments in fixed return assets (cash, bonds), and those whose income does not keep pace with inflation.
  - nradov 5y ago
    If investors expect inflation to increase they can hedge that risk with TIPS. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
    - voisin 5y ago
      These are adjusted based on CPI, which I think many intelligent observers believe to be a massively faulty metric for inflation.
- deleted 5y ago
  [deleted]
kukx 5y ago
It is a gamble. The interests can go up and then you could be cooked. And anyway you need to find a way to get ahead of the inflation with this money. Sure it is an opportunity but not without risks.
- klodolph 5y ago
  That’s backwards. The lender hopes interest rates don’t go higher (they could have invested in shorter-term investments and reinvested at higher rates), and the borrower hopes that interest rates do go higher (they have to pay less in real dollars, even though it’s the same in nominal dollars).
- xyzzyz 5y ago
  If you are borrowing mostly short term with intention to roll over (like US Gov does, for example), then yes, interest rate hike would fuck you over. A safer way of doing that is to get a large, long term, fixed rate loan, and use it to buy some real asset. You know, like, say, a house. With a long term fixed rate mortgage. Has that become more popular than usual recently?

4 ms·

If I understand money (who does?) then: if I borrow $500,000 to spend today (at low interest), and pay it back, as time goes by, with money worth only $300,000

by 8bitsrule 5y ago

If I understand money (who does?) then: if I borrow $500,000 to spend today (at low interest), and pay it back, as time goes by, with money worth only $300,000 (today) ... sounds like a net gain.

mhluongo 5y ago
It sounds like you understand money! For bonus points, at whose expense is this happening?
- voisin 5y ago
  At the expense of people with investments in fixed return assets (cash, bonds), and those whose income does not keep pace with inflation.
  - nradov 5y ago
    If investors expect inflation to increase they can hedge that risk with TIPS. https://www.treasurydirect.gov/indiv/products/prod_tips_glance.htm https://www.treasurydirect.gov/indiv/products/prod_tips_glan...
    - voisin 5y ago
      These are adjusted based on CPI, which I think many intelligent observers believe to be a massively faulty metric for inflation.
- deleted 5y ago
  [deleted]
kukx 5y ago
It is a gamble. The interests can go up and then you could be cooked. And anyway you need to find a way to get ahead of the inflation with this money. Sure it is an opportunity but not without risks.
- klodolph 5y ago
  That’s backwards. The lender hopes interest rates don’t go higher (they could have invested in shorter-term investments and reinvested at higher rates), and the borrower hopes that interest rates do go higher (they have to pay less in real dollars, even though it’s the same in nominal dollars).
- xyzzyz 5y ago
  If you are borrowing mostly short term with intention to roll over (like US Gov does, for example), then yes, interest rate hike would fuck you over. A safer way of doing that is to get a large, long term, fixed rate loan, and use it to buy some real asset. You know, like, say, a house. With a long term fixed rate mortgage. Has that become more popular than usual recently?