UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next
Author: trptrade Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Hmm, The borrowing, saving inflation Dilemma Date: 12/9/2009 8:26 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
"If we accept that borrowers benefit more from inflation than the loaners than isn't it preferable to be the borrower during a significant run up in inflation?"

I'll stop here, since must of the post is reliant on this assertion, and I don't accept this as written.

Irving Fisher noted that because potential lenders can always convert their currency and financial assets into real asserts and earn the real rate of return, they must charge an interest rate above and beyond the real rate of return.

Therefore, anticipated inflation is marked into the loan rate. The point is that unanticipated inflation benefits those making payments under a nominal currency contract.

I could therefore state:

"If we accept that borrowers benefit more from inflation than the loaners than isn't it preferable to be the borrower during a significant unanticipated run up in inflation?"

I think this change makes it clear that the transaction you are proposing is really speculation on future inflation (because this also works in the other way - that unanticipated deflation hurts borrowers).

Tom
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (8) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Economic Implications of Cuba
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement