[seanhunter]

The thing you missed is that although inflation makes the nominal of the debt less valuable in real terms the associated cost of living increase means the cost of servicing the debt can go up both in real and nominal terms. You have less left over from your paycheck to pay the interest and the interest rates go up.

[mrep]

For most Americans, the biggest debt we have is our mortgage and 90% of mortgages in the US are fixed for the entire duration of the loan so nominal cost stays the same and the real cost goes down.

[seanhunter]

Aah interesting. Here in the UK most “fixed rate mortgages” are actually only fixed for a few years. Fixed for the full term does exist but is definitely less common.