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> Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households. Maybe. The policy responses to inflation are to
by throwawaygh 5y ago
> Inflation reduces the value of debt and an era of increased inflation stands to benefit a lot of households.
Maybe. The policy responses to inflation are to increase supply and/or raise interest rates. Both of those put downward pressure on housing prices. So, inflation devalues the debt you owe (good for household) but also devalues the underlying asset (bad for household).
- fleventynine 5y agoIn order for young people to have any chance at the same quality of life of their parents, the "real" value of housing needs to come down to at least 50% of the current value. The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. It's painful, but likely necessary.
- throwawaygh 5y ago> The only way to accomplish this without wiping out those with mortgages is to have a large spike of inflation. This doesn't make much sense when rent/imputed rent are primary drivers of inflation.
- fleventynine 5y agoWe've had significant house price inflation for years due to insufficient supply. I want CPI to increase similarly, along with wages. If housing prices stay the same as today (in dollars) the house buying power of a young person will be much higher after the wage inflation. And because the dollar price of the house doesn't drop, today's mortgage holders won't find themselves underwater. Seems to me like the best we can do for both groups given the circumstances. To make this happen we'd have to build new homes like crazy while keeping the interest rates low.