Yeah the combination of the two is what made me have the reaction I did.
I don’t think interest rates being high are a net negative for all people with money. It’s great to be able to plop your money in a bank account and earn generally more than inflation in interest right now risk free.
Generally, high interest rates are going to be bad for borrowers. I think high inflation coinciding with high interest rates isn’t particularly geat for most, but it’s harder if you have no money because you need the ability to take on debt, and that debt is going to come at high interest rates.
Some credit cards are at 30% interest rates, in no way is that good for those who need to borrow.
Inflation is also a-ok for asset holders. It’s cash you don’t want to be holding in times of high inflation.
Lol, wut?
Inflation allows borrowers to pay lenders back with money worth less than when it was originally borrowed.
Inflation is in fact a massive transfer wealth from the lenders to the borrowers, measure in trillions.
Econ 101
https://www.khanacademy.org/economics-finance-domain/ap-macroeconomics/economic-iondicators-and-the-business-cycle/costs-of-inflation/a/lesson-summary-the-costs-of-inflation
https://www.investopedia.com/ask/answers/111414/does-inflation-favor-lenders-or-borrowers.asp
https://www.marketwatch.com/story/why-inflation-could-create-a-giant-wealth-transfer-from-lenders-to-borrowers-11623876205
I’m not saying runaway inflation is generally good. It’s not, especially if ongoing for long. I’m just talking about lenders and borrower.
The impact of interest rates is a lot less cut and dry.
Yeah the combination of the two is what made me have the reaction I did.
I don’t think interest rates being high are a net negative for all people with money. It’s great to be able to plop your money in a bank account and earn generally more than inflation in interest right now risk free.
Generally, high interest rates are going to be bad for borrowers. I think high inflation coinciding with high interest rates isn’t particularly geat for most, but it’s harder if you have no money because you need the ability to take on debt, and that debt is going to come at high interest rates.
Some credit cards are at 30% interest rates, in no way is that good for those who need to borrow.
Inflation is also a-ok for asset holders. It’s cash you don’t want to be holding in times of high inflation.