> Floating rate debt holders can get burned pretty badly in an inflationary period.
So, it is the change in inflation, the raise, what makes it bad. If you ask for a loan when interest rates are at 15% your house price is going to be lower than when interest rates are at 1%.
So, you are right that "an inflationary period" as "increasing inflation" may be bad. But, maybe, the problem was that interest rates got to 1% . Such low interest make that just getting to a low 5% you are paying x5. Print more money, keep interest rates at 10% and unless they go up to 50% you are not so bad as people is nowadays.
> If you ask for a loan when interest rates are at 15% your house price is going to be lower than when interest rates are at 1%.
In a stationary scenario, yes. But in a scenario where interest rates just jumped up after being very low for decades, it's likely that prices haven't come down in reaction to IR up. How long it takes for prices to react depends on other factors.
Is it really a "nitpick", though? People always trot out the argument that inflation helps people who hold debt, but I would think that the era of lenders irrationally handing out long-term loans at low fixed interest rates would have been over many decades ago, no?
Those long term low fixed rate loans with no prepayment penalty are ultimately underwritten by people who use USD, and US voters implicitly like that policy because they like seeing the price of their assets go up.
Without the taxpayer subsidy, I doubt any lender would offer those terms.
Nitpick: It is not inflation itself, but unexpected change of inflation rate. Expected inflation rate is neutral, because everyone accounted for it in interest rates.
I don't see how inflation favors debt holders. That money you lent out us paying back at a fixed rate over time. Meanwhile, inflation means rates continue to rise, meaning your loan return looks worse and worse. Sure, it's better than doing nothing with your money, but I don't think debt holders are winning in a high inflation scenario.
I'm not sure which of you or the comment you replied to is using 'debt holder' correctly. But they meant inflation benefits the person who has to pay the debt back over time, not the person who issued the debt.