Generally when inflation is high it makes debts with a fixed interest less of a burden because the real value of that debt decreases over time. So if you’re heavily in debt inflation can be helpful in some regards.
That depends on if your wage increases to keep up with the inflation, because I assume getting the same wage (which will be used to pay back the debt) won’t make it any better, right?
Not really. If you have debts with a fixed interest rate your payments will remain mostly fixed too. That means even if your wage stagnates during a high inflation period the payments you’re making on that debt stay the same in nominal currency but the real value of that payment (and the total debt) are worth less because of inflation.
That being said your total cost of living will probably still go up and whether anyone is ‘coming out on top’ during high inflation depends on their circumstances. If your wages don’t increase and the cost of living goes up it may be harder to make debt payments even if the payment amount stays the same.
Imagine someone with a ton of debt from buying real estate. With a fixed interest rate high inflation can actually be really good for them. The value of their assets continue to go up and their debts deflate away because the money they’re paying back isn’t as valuable as it was when they borrowed it in the first place. The type of person befitting in this way probably isn’t making most of their money from a wage though.
If your net worth is negative, in 9 years it’s only half as negative.
Generally when inflation is high it makes debts with a fixed interest less of a burden because the real value of that debt decreases over time. So if you’re heavily in debt inflation can be helpful in some regards.
That depends on if your wage increases to keep up with the inflation, because I assume getting the same wage (which will be used to pay back the debt) won’t make it any better, right?
Not really. If you have debts with a fixed interest rate your payments will remain mostly fixed too. That means even if your wage stagnates during a high inflation period the payments you’re making on that debt stay the same in nominal currency but the real value of that payment (and the total debt) are worth less because of inflation.
That being said your total cost of living will probably still go up and whether anyone is ‘coming out on top’ during high inflation depends on their circumstances. If your wages don’t increase and the cost of living goes up it may be harder to make debt payments even if the payment amount stays the same.
Imagine someone with a ton of debt from buying real estate. With a fixed interest rate high inflation can actually be really good for them. The value of their assets continue to go up and their debts deflate away because the money they’re paying back isn’t as valuable as it was when they borrowed it in the first place. The type of person befitting in this way probably isn’t making most of their money from a wage though.
Ah I get it now, thanks :)