Sean King

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Knoxville, Tennessee, United States

Sunday, November 21, 2010

Mogambo Guru makes a point...

...that I've made previously:
You can tell that I am scornfully dismissive of anybody who says that “inflation reduces the burden of debt,” because such a scheme only works for a debtor whose income keeps up with inflation AND who pays down the old debts with cash.

Otherwise, I can’t imagine how it would work, and nobody has ever explained it to me, as I would really, really, really like to know how I can borrow money at 5%, and then “reduce the burden of my debt” by borrowing money at 10% (interest rates having gone up in response to the inflation) to pay off the 5% debt just because inflation is high! Wow! Must be part of the “new math”!

Fortunately though, unlike Mogambo Guru, I don't think inflation is in the offing anytime soon, the Fed's best efforts notwithstanding.

Read more: The Madness of Inflating Away the Debt Burden

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