CNN: Why inflation can actually be good for everyday Americans and bad for rich people

[DBoon]

https://www.cnn.com/2022/01/10/economy/inflation-good-bad-winners-losers-fixed-rate-debt/index.html

But on the whole, inflation can actually be a good thing for many working-class Americans — especially those with fixed-rate debt like a 30-year mortgage. That's because wages are going up, which not only empowers workers but also gives them more money to pay down debt. Plus, in the case of a mortgage, your monthly payment will be the same but your house will increase in value.
And many of the people taking a bath when prices rise are higher-net-worth people who hold the vast majority of government bonds.

The trouble is, you're not going to feel the upside immediately.

...

Mortgages, the vast majority of which are fixed-rate 30-year loans, make up nearly $11 trillion worth of America's current record-high $15 trillion in debt. Meanwhile, wages are rising along with prices, essentially shrinking the real value of that debt. The same inflation benefit applies to anyone paying off federal student loans, which also have a fixed interest rate. As your income increases, you're essentially getting a discount on what you have to repay.

Those who rent will obviously not benefit. The argument also assumes wages keep up with price increases, which has yet to occur.

[AndyS]

1. Absolutely! Not many people recognize the impact of inflation on old debt.

Thanks to Liz Warren lenders cannot increase interest rates on existing debt. Back in the day a credit card could lend you $10,000 at an introductory rate of 5% and then increase that rate to 29%! Payments would increase by 5X!

Now you borrow at current rates and pay with future rates. You're $1 current payment pays off $1.60 in debt incurred a year ago.

The Fed has known this all along . . . spend $$ at the current inflation rate ($ value) and pay back at future inflation rate (Decreased $ value).

Borrow $1 buying power and pay back with $.94 spending power!

Ah, the magic of finance . . .

[Doodley]

2. We don't have anything but a short-term inflation blip. Thanks CNN for making it look like it

is here to stay.

[JCMach1]

3. So that 50% rise in rent and 0% rise in salary is good for me...

Salaries are only rising in certain geographic areas and sectors...

Rent and housing prices are rising virtually everywhere.

Hell no.

[durablend]

6. Just another "head up their ass" article

[GregariousGroundhog]

9. Inflation helps people with large amounts of debt at a fixed interest rate

Middle class families who own a home benefit. Upper class people and companies that own investment properties also benefit (those benefits may not always "trickle down" to the renters though).

Whoever owns those mortgages get soaked. People and companies with variable rate interest loans are also harmed if they cannot raise income enough to cover the increased interest.

[RB TexLa]

4. There were a lot of people questioning some of trump's positions on inflation

and the strength of the dollar based on his amount of debt.

Yes everyone in real estate wants to borrow expensive dollars and pay it back with cheaper dollars but if you don't create capital gains it's the only way to keep a profit.

[Calista241]

5. Wages go up marginally unless people change jobs.

Changing jobs sounds like an easy thing to do for some people, but it's often very hard to convince people to do.

[KPN]

7. Lol. What else would you expect from MSM? Inflation is good for you, even though that house you

just bought with a 30 year mortgage could have been purchased for half the price you bought it for less than two years prior. Yay inflation!

Motherfuckers ...

[Turbineguy]

8. Dream on. It doesn't work that way.

They change the rules in their favor.

[inwiththenew]

10. This reads like something out of the Onion

Does anyone really believe that the average person is going to come out better than a rich person in this market when a rich person can afford to hire investment advisors and other money managers plus also have a diversified portfolio of investments?