> Inflation helps the proletariat, you know. Most of them are net debtors, so inflation makes it easier to pay off their debts.
Not so fast. Lenders factor in expected inflation, so it's only unexpected inflation that benefits debtors.
And, making payments isn't the only way to handle debt - bankruptcy works too. You don't get any more "pay later" pizzas, but you get to keep the ones that you already ate.
However, inflation hurts folks whose income doesn't match inflation. After they stop paying their debts, they still need to buy food.
My cat's favorite food went up 25% last month. Since she was already on the cheap stuff....
It's unclear why/how though, as the vast majority of new US mortgages end up with a GSE that is heavily dependent on govt support, so the increase was a political decision.
Not so fast. Lenders factor in expected inflation, so it's only unexpected inflation that benefits debtors.
And, making payments isn't the only way to handle debt - bankruptcy works too. You don't get any more "pay later" pizzas, but you get to keep the ones that you already ate.
However, inflation hurts folks whose income doesn't match inflation. After they stop paying their debts, they still need to buy food.
My cat's favorite food went up 25% last month. Since she was already on the cheap stuff....