[adriand]

An under-appreciated benefit of inflation is that it reduces the value of debts. All things being equal (and of course they aren’t), inflation is good for debtors and bad for debt-holders. If you owe $500k on your mortgage, inflation at 5% annually is reducing your debt load substantially without you needing to do anything.

[mitthrowaway2]

But all things are not equal; lenders take expected inflation into account when evaluating the interest rate they'll demand on their loans. Only unexpected inflation is good for debt holders.

[IggleSniggle]

Another important distinction to make for those that might not be aware: in the US, mortgages mostly are a set-rate when the loan is issued, usually either at 15-years or 30-years. In most of the rest of the world, I'm told, mortgages are typically variable rate

[koolba]

> In most of the rest of the world, I'm told, mortgages are typically variable rate

They also tend to be shorter than the standardized USA 30-year fixed.

[b112]

Yes in Canada for example most people have 5 year renewals, which means a renegotiation, at that time, at existing rates.

[bjacokes]

This is a bit like saying earnings going up isn't good for stockholders, because they would have been charged a higher price to buy the stock if people had known the earnings were going to go up.

Once you've taken out a fixed-rate mortgage, inflation absolutely has the effect of reducing the value of the debt you owe. It's more if you're about to take out a mortgage that you're rooting against (expectations of) inflation, as lower inflation will also serve to decrease the prevailing interest rate.

[ponow]

Excessive debt is not good. Encouraging debt by the effective subsidy of inflation tends to be coupled with varying interest rates to control that inflation, and therefore there are periods of low interest rates. Savvy investors try to borrow heavily during these low interest periods creating a boom, even though the enterprises they might invest in are no more worthy of investment. This is malinvestment, because real physical capital (including skilled labor) becomes reallocated into more risky ventures because of the influx of easy money. When reality returns and it's clear that many of those risks don't pan out, there is upheaval, bankrupcy, layoffs, etc., a "bust". This is a bad thing for economic stability and human happiness.

Debt should not be encouraged nor discouraged. Interest rates should be natural, based on market forces about the time value of money.

Homeowners don't deserve a mortgage subsidy paid via inflation. If there is a subsidy, make it explicit through law.

[carlosjobim]

That's only true if wages keep up with inflation. Which they haven't done in decades.

[rpcope1]

Honestly, it wouldn't be surprising to see the US government manipulate inflation in such a way that once the debt load becomes unbearable, it just simply inflates away the debt rather than do austerity or a debt jubilee.