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Didn't we just hear this whole story about how billionaires don't pay income or capital gains tax because all the dollars they keep on hand derive from low-inte

Didn't we just hear this whole story about how billionaires don't pay income or capital gains tax because all the dollars they keep on hand derive from low-interest fixed-rate loans taken out against their shares? When someone is poor, they're really limited in how much debt they can take on. Credit cards and payday loans have massive interest rates that make inflation irrelevant, and fairly low absolute limits anyway. (This can still be very hard to escape at a low income level but it's not likely inflation will help, because with a debt trap, that high-interest debt is being drawn to pay bills and buy consumer goods, not invested in assets). The majority of debt that people outside of the 1% are likely to hold is probably mortgage debt, and that only applies to homeowners, who are still likely the wealthier contingent and will benefit from inflation (as long as interest rates don't rise).

RC_ITR 5y ago
I cannot emphasize this enough. Mortgage debt is offset by equity and generally has a positive impact on peoples' net worth calculations (house prices are at an ATH). If you want to walk through the NY Fed's data on this happy to, but the bottom 50% are in student debt, credit card debt, and auto debt. Full stop.
- jbay808 5y ago
  I don't think that's inconsistent with what I said, so as much as you can emphasize it with a full stop, I think it's somewhat tangential to my point. I agree that homeowners will benefit (as long as rates stay low). But they're in the asset-owning class. The more hard assets you have, the more you'll benefit, and those who can draw low-rate lines of credit against their appreciating hard assets will benefit the most. But that does not describe the bottom 50%. Inflation is definitely not going to help anyone who is struggling with credit card debt, for reasons that should be obvious. It might help those who have student debt, but likely only for one contingent because tuition will probably continue to outpace wage growth as it has for years. It might help some people repay their old auto loans, but not today's buyers when automobile price growth is outpacing inflation.
  - RC_ITR 5y ago
    >The majority of debt that people outside of the 1% are likely to hold is probably mortgage debt This is a demonstrably false statement [0] The bottom 50% hold 57% of the outstanding credit debt. [1] The bottom 50% hold 33% of all other liabilities. I don't know how to make it more clear to you that the average balance sheet of the bottom 50% is no assets, many liabilities. Sorry if the full stop hurt your feelings. [0]https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/#quarter:127;series:Consumer%20credit;demographic:networth;population:all;units:shares https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... [1] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/#quarter:127;series:Other%20liabilities;demographic:networth;population:all;units:shares https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... EDIT: Again as a reminder, mortgages aren't 'net debt.' when they are less than the house's worth.
    - jbay808 5y ago
      > I don't know how to make it more clear to you that the average balance sheet of the bottom 50% is no assets, many liabilities. ... Yes? Again, I think we agree on this fact. You're stating a lot of facts as though they were things that I argued against, when in fact, they support my thesis. > The bottom 50% hold 57% of the outstanding credit debt But that wasn't what I was disagreeing with. Your link also states that the bottom 50% hold only 32% of all liabilities. While the bottom 50% does have most of the credit debt (which I agreed with), a much larger overall liability is mortgage debt (2.6x larger), which they have very little of (22.5%). You say mortgages aren't "net debt" but that seems hardly relevant to the question of whether someone benefits or loses from inflation, because their debt is fixed while their assets float. Edit: maybe you think that I'm arguing that affluent individuals have negative net worth? I'm certainly not saying that. I'm saying that they have a large quantity of mostly fixed-rate debts, backed by an even larger quantity of assets that appreciate with inflation.
      - RC_ITR 5y ago
        Again, I can't emphasize this enough, the bottom 50% holds 32% of liabilities and nearly 100% of NET liabilities. We just are clearly at an impasse on that though. You can sell a house to pay off a mortgage so it's not harmful debt because it is OFFSET BY ASSETS THAT ALSO INFLATE (In fact, the brief period where that wasn't true caused the largest financial crisis of our lifetimes). What do you sell to pay off credit card loans/student loans/etc.?

RC_ITR 5y ago

I cannot emphasize this enough. Mortgage debt is offset by equity and generally has a positive impact on peoples' net worth calculations (house prices are at an ATH). If you want to walk through the NY Fed's data on this happy to, but the bottom 50% are in student debt, credit card debt, and auto debt. Full stop.

jbay808 5y ago
I don't think that's inconsistent with what I said, so as much as you can emphasize it with a full stop, I think it's somewhat tangential to my point. I agree that homeowners will benefit (as long as rates stay low). But they're in the asset-owning class. The more hard assets you have, the more you'll benefit, and those who can draw low-rate lines of credit against their appreciating hard assets will benefit the most. But that does not describe the bottom 50%. Inflation is definitely not going to help anyone who is struggling with credit card debt, for reasons that should be obvious. It might help those who have student debt, but likely only for one contingent because tuition will probably continue to outpace wage growth as it has for years. It might help some people repay their old auto loans, but not today's buyers when automobile price growth is outpacing inflation.
- RC_ITR 5y ago
  >The majority of debt that people outside of the 1% are likely to hold is probably mortgage debt This is a demonstrably false statement [0] The bottom 50% hold 57% of the outstanding credit debt. [1] The bottom 50% hold 33% of all other liabilities. I don't know how to make it more clear to you that the average balance sheet of the bottom 50% is no assets, many liabilities. Sorry if the full stop hurt your feelings. [0]https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/#quarter:127;series:Consumer%20credit;demographic:networth;population:all;units:shares https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... [1] https://www.federalreserve.gov/releases/z1/dataviz/dfa/distribute/table/#quarter:127;series:Other%20liabilities;demographic:networth;population:all;units:shares https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr... EDIT: Again as a reminder, mortgages aren't 'net debt.' when they are less than the house's worth.
  - jbay808 5y ago
    > I don't know how to make it more clear to you that the average balance sheet of the bottom 50% is no assets, many liabilities. ... Yes? Again, I think we agree on this fact. You're stating a lot of facts as though they were things that I argued against, when in fact, they support my thesis. > The bottom 50% hold 57% of the outstanding credit debt But that wasn't what I was disagreeing with. Your link also states that the bottom 50% hold only 32% of all liabilities. While the bottom 50% does have most of the credit debt (which I agreed with), a much larger overall liability is mortgage debt (2.6x larger), which they have very little of (22.5%). You say mortgages aren't "net debt" but that seems hardly relevant to the question of whether someone benefits or loses from inflation, because their debt is fixed while their assets float. Edit: maybe you think that I'm arguing that affluent individuals have negative net worth? I'm certainly not saying that. I'm saying that they have a large quantity of mostly fixed-rate debts, backed by an even larger quantity of assets that appreciate with inflation.
    - RC_ITR 5y ago
      Again, I can't emphasize this enough, the bottom 50% holds 32% of liabilities and nearly 100% of NET liabilities. We just are clearly at an impasse on that though. You can sell a house to pay off a mortgage so it's not harmful debt because it is OFFSET BY ASSETS THAT ALSO INFLATE (In fact, the brief period where that wasn't true caused the largest financial crisis of our lifetimes). What do you sell to pay off credit card loans/student loans/etc.?