TheCountOfNowhere Posted January 13, 2015 Share Posted January 13, 2015 (edited) http://www.bbc.co.uk/news/business-30778491 Why should borrowers love inflation? "Anyone with a mortgage or a loan benefits from inflation, as it has the effect of eroding debt. In the 1960s my father bought a house for £11,000. But with inflation peaking at around 13% in the late 70s, his wages were rising fast too - meaning the mortgage repayments were taking an ever smaller share of his income. By contrast, deflation - or falling prices - increases the real value of debts. Not a good place to be." Errr......I think the person who wrote this is mistaking price inflation with wage inflation. Maybe they assume one follows the other and maybe it does if you work for the BBc. I knew they'd be on about housing. So what inflation rate is good? They say 2.5%. i say <= 0% "But whatever the precise level, most do agree that a little dose of inflation is absolutely essential." Could someone ask them for the details of the study that threw up this "fact" ? Enjoy your debt. Edited January 13, 2015 by TheCountOfNowhere Quote Link to comment Share on other sites More sharing options...
long time lurking Posted January 13, 2015 Share Posted January 13, 2015 NO comments section on the article i wonder why Carnage was the the news spouting similar shyte Quote Link to comment Share on other sites More sharing options...
Fully Detached Posted January 13, 2015 Share Posted January 13, 2015 Complete idiocy. Cost of living rises while wages fail to keep pace = debts harder to pay off. A 5 year old could figure that one out. Quote Link to comment Share on other sites More sharing options...
wonderpup Posted January 13, 2015 Share Posted January 13, 2015 Carnage was the the news spouting similar shyte I heard a BBC reporter's comments that began with the observation that deflation was a boost to the economy as it put money in consumers pockets- then ended with the apocalyptic scenario in which people stop buying almost anything while they wait for prices to come down- this conceptual journey took all of two minutes to play out. I knew that attention spans at the BBC were short- but this is ridiculous. Quote Link to comment Share on other sites More sharing options...
Riedquat Posted January 13, 2015 Share Posted January 13, 2015 If inflation erodes debt then either lenders are out of pocket or they have to charge higher interest rates (inflation + whatever profit they're getting), so no real meaningful debt erosion. Quote Link to comment Share on other sites More sharing options...
Riedquat Posted January 13, 2015 Share Posted January 13, 2015 (edited) I heard a BBC reporter's comments that began with the observation that deflation was a boost to the economy as it put money in consumers pockets- then ended with the apocalyptic scenario in which people stop buying almost anything while they wait for prices to come down- this conceptual journey took all of two minutes to play out.Like all the ever-cheaper electronics people are buying now because, erm, they'll be cheaper later? If there are things which people are completely happy about putting off then presumably they're not that important in the first place and their production is more about creating tat for the sake of creating tat, and a system that relies on that is gaga anyway. Edited January 13, 2015 by Riedquat Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted January 13, 2015 Author Share Posted January 13, 2015 If inflation erodes debt then either lenders CREDITORS ( i.e. SAVERS ) are out of pocket or they have to charge higher interest rates (inflation + whatever profit they're getting), so no real meaningful debt erosion. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted January 13, 2015 Share Posted January 13, 2015 If inflation erodes debt then either lenders are out of pocket or they have to charge higher interest rates (inflation + whatever profit they're getting), so no real meaningful debt erosion. Debt erosion makes room on the balance sheet for new debt to be created. The lenders are rarely out of pocket. Quote Link to comment Share on other sites More sharing options...
Riedquat Posted January 13, 2015 Share Posted January 13, 2015 Debt erosion makes room on the balance sheet for new debt to be created. The lenders are rarely out of pocket.That'll be keep raking it in with the interest without looking too carefully at the ever-growing house of cards then. Quote Link to comment Share on other sites More sharing options...
Ash4781 Posted January 13, 2015 Share Posted January 13, 2015 'Not a good place to be' Amazing that the editorial team gave the ok to this. It reads a bit of desperation. But my father got bailed out ! Quote Link to comment Share on other sites More sharing options...
ProleStore Posted January 13, 2015 Share Posted January 13, 2015 Deflation is bad, because the rising value of money makes holding money a better bet than productive investment. On the other hand, the rising value of houses is good because, er, oh, dunno. There's hypocrisy for you. Quote Link to comment Share on other sites More sharing options...
GinAndPlatonic Posted January 13, 2015 Share Posted January 13, 2015 But if the beeb journos seriously call out the experts everyone will go quiet in the room and look lost, because it will mean modern day economics is b olox Quote Link to comment Share on other sites More sharing options...
Ah-so Posted January 13, 2015 Share Posted January 13, 2015 The Radio four 6:15am slot actually had ecomists discussing deflation on this morning. The journalist who does that slot normally gives the idiotic reasoning about the risks of deflation (deferred expenditure) but both economists rejected this. One said it might be true in the case of companies making big investments. The other said that there was little evidence of any link. There was then a rational discussion about deflation caused by falling demand and that caused by increased supply. At last someone talking sense about deflation on the Today programme. Quote Link to comment Share on other sites More sharing options...
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