Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by icebraining on Tuesday February 18, 2014 @12:56PM (#7259686)

How does (steady, predictable) inflation help you as a debtor? If the banks expect to lose, say, 3% to inflation, isn't the logical action to increase the nominal interest rate to maintain the same real rate?

I can understand why unexpected inflation would help debtors, but that's not what people argue for.

[ Parent | on HN ]

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by dragontamer on Tuesday February 18, 2014 @01:39PM (#7260047)

Logical, yes. But in practice, no. Interest rates have fallen while inflation has remained steady.

Consider that 20 years ago in 1994, the Mortgage rate was 9.17%, while today Mortgage rates are roughly 3.9%... it is clear that the market for interest rates is rather more complicated than you mention.

http://www.freddiemac.com/pmms/pmms30.htm

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Second, you're right. It really doesn't matter how high or low inflation is, if it is consistent... then it is something the market will easily take into account.

So a steady rate of inflation is perfectly fair to both sides. Which is why the Federal Reserve wants to peg inflation at 3%.

[ Parent | on HN ]

Re:Bizarre Shadowy Paper-Based Payment System Being Rolled O... by icebraining on Wednesday February 19, 2014 @05:59AM (#7262999)

Well, of course inflation is not the only thing they take into account, so it's no wonder that rates don't match up to it, but that wasn't my point.

So a steady rate of inflation is perfectly fair to both sides.

But it wasn't claimed that it was fair, it was claimed that it was good for debtors, which is what I find hard to believe.

[ Parent | on HN ]