Yes, it reduces burden of debt, but it makes taking on new debt a lot more expensive, because interest rates are closely related to inflation.
And if you have to pay back a debt (as you normally have to after a predetermined time), and have to refinance it by taking up new debt, now you might not be able to pay the now higher interest.
So for the one who pays of his credit card debt, inflation is a good thing. For the company that used that credit to invest in something that will only bring revenue at a future point in time, this is a real fucking problem (this is what is happening in Russia currently btw. Bankruptcies are skyrocketing there because of the high inflation and the even higher interest rate - and stalling domestic spending - , and that rate is being artificially kept “low” to boot. There has been an intense power struggle between the russian central bank and the Kremlin this year. Look up Elvira Nabiullina’s “disappearance” this June)
Significant inflation leads to increased interest rates and this makes it more expensive to take on new debt.
Or, if a country has high inflation and does not increase interest rates, this can lead to money flowing out of the country.
Inflation can also affect consumer spending, and therefore, selling of future products. Whether the effect is positive or negative could depend on how much consumer spending is debt-financed.
if you are the one owing money, yes; if you are the one who is supposed to receive money, it is not so great. i would assume the ones worrying about this are the ones who are supposed to be receiving money? i am also an economics idiot
I’m an economics idiot. But doesn’t general inflation reduce the burden of debt?
Yes, it reduces burden of debt, but it makes taking on new debt a lot more expensive, because interest rates are closely related to inflation.
And if you have to pay back a debt (as you normally have to after a predetermined time), and have to refinance it by taking up new debt, now you might not be able to pay the now higher interest.
So for the one who pays of his credit card debt, inflation is a good thing. For the company that used that credit to invest in something that will only bring revenue at a future point in time, this is a real fucking problem (this is what is happening in Russia currently btw. Bankruptcies are skyrocketing there because of the high inflation and the even higher interest rate - and stalling domestic spending - , and that rate is being artificially kept “low” to boot. There has been an intense power struggle between the russian central bank and the Kremlin this year. Look up Elvira Nabiullina’s “disappearance” this June)
Significant inflation leads to increased interest rates and this makes it more expensive to take on new debt.
Or, if a country has high inflation and does not increase interest rates, this can lead to money flowing out of the country.
Inflation can also affect consumer spending, and therefore, selling of future products. Whether the effect is positive or negative could depend on how much consumer spending is debt-financed.
If your wages do not rise at the same rate as inflation, your debt burden does not shrink.
if you are the one owing money, yes; if you are the one who is supposed to receive money, it is not so great. i would assume the ones worrying about this are the ones who are supposed to be receiving money? i am also an economics idiot