Paying off Debt Slowly

[TraderSmits69]

Hyper inflation could hit us in the next 18+ months, if it does people carrying debt will be thrashed.
Paydown debt before rates skyrocket.

[jpg7n16]

Technically, hyper inflation is actually beneficial to any holder of debt. Especially if the income adjusts to match the new expenses. Debt does not inflate.

Because when future dollars become worth less and less, if my debt owed remains the same dollar amount, it is also worth less and less.

Pretty simple with an example. Say I own a house I bought for $150k with a mortgage of $100k. In a high inflation scenario, next year the house would "inflate" in value to say $160k (about 7% inflation). The debt doesn't inflate though, so I still only owe $100k. Which would be even easier to pay down if my income went up 7%.

Inflation benefits borrowers.


You should pay down debt because its current interest rate is fairly high, not because of what may or may not happen with inflation. That should never really enter your mind.

[Snodog]

Inflation benefits borrowers.

Agreed.

If I thought hyperinflation was inevitable in the next year and a half I would borrow as much money as possible buying hard assets.

[EconoMutt]

It's really hard for me to see hyperinflation in the next 18 months.
5 to 10 years down the road?.... maybe.

[Snodog]

Well you can put me firmly in the deflation camp.

[EconoMutt]

Well you can put me firmly in the deflation camp.

I'm afraid a Japan style deflation is a likely scenario.
It will make it very hard for people with large amounts of debt to dig their way
out.