JWR,
I understand when you say that hyperinflation will make the price of things go up and up, like a ten dollar or hundred dollar loaf of bread. But what happens to a financed item, specifically the home [that is] mortgaged? Can the lender change the interest rate or the length of loan? What about other financed items like a car loan? If nothing changes then a person would be paying back the loan with inflated dollars, which might be a good thing? Please explain. Thank You, – RenoFlyBoy
JWR Replies: To begin: You had asked: ” Can the lender change the interest rate or the length of loan? What about other financed items like a car loan?” The short answer is no. But don’t underestimate the ability of politicians to monkey with market fundamentals. In the event of hyperinflation, there could conceivably be some sort of tiered inflation indexing of existing debts. This is very unlikely, but given the entrenched army of banking industry lobbyists in Washington, DC, it is not impossible.
You may have missed these five posts in SurvivalBlog from the past three years:
Letter Re: Is it Deflation or Inflation Ahead? Should I Pay Down My Debts? [1] (2009)
Letter Re: Does Future Inflation Justify a Higher Level of Indebtedness? [2] (2008)
Are Simultaneous Inflation and Deflation Possible? [3] (2008)
Letter Re: With Inflation Ahead, Why Be Debt Free? [4] (2007)
Letter Re: Fiscal Fitness [5] (2007)
Take the time to read all five of those posts.
Given the multi-trillion dollar overspending that is in now progress, I still believe that mass inflation of the US Dollar is inevitable. But we are in uncharted waters, at present. (We have just seen an unprecedented asset and debt bubble go “pop”.) Thus, nobody is sure how long it will take to put the economy back on track, and likewise nobody know how long deflation will persist To be safe, avoid debt for the next couple of years. Also, as I’ve mentioned before, it is not morally conscionable to take out a loan that you do not intend to pay back.