When Hyper-Inflation occurs, will people who have house mortgages be able to easily pay them off?
If the currency devalues at a huge rate and you can now trade goods for massive amounts of currency, couldn't you trade simple goods to pay off your house mortgage? Or is it not that simple?
thanks
Not if you don't have a job because the economy is collapsing.
you could just pick up any banknotes someone has junked on the floor or garbage bin, no need for a job
limitgov: When Hyper-Inflation occurs, will people who have house mortgages be able to easily pay them off? If the currency devalues at a huge rate and you can now trade goods for massive amounts of currency, couldn't you trade simple goods to pay off your house mortgage? Or is it not that simple? thanks
What we are going to have, is not just hyper-inflation, but hyper-inflation with wage stagnation. Since wages will stagnate, no, you will not be able to pay off your home quicker. However, the price on all goods and services is going to sky-rocket.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
Your house would also be worth a couple trillion now, so you will have to be paying your "fair share" of property taxes as well.
Tex2002ans: Your house would also be worth a couple trillion now, so you will have to be paying your "fair share" of property taxes as well.
Which means tens of millions of people are going to be living in "homeless" tent cities and the cities will not be able to collect any property taxes, and they will go broke and have to cut all of their "services". Exciting times coming.
I think super massive blackhole inflation is the answer to the Government debt... though I may be wrong an it is adjustable to inflation
For anyone to wish for massive inflation to wipe out debt has a misunderstanding of inflation. If we get high or hyper inflation it will destroy the economy. Business and trade relies on a stable unit of account in order to perform accurate economic calculation to determine profit & loss. High inflation or hyper-inflation will destroy all that. There will be panic. Businesses will fail or turn its attention from producing goods to using its financial capital to speculate either through financial markets or other means in order to make their capital retain its value. There will be product, services and commodity shortages.
If you want a half decent reference on what happens to businesses during hyper-inflation you can buy this book:
http://www.amazon.com/Hyperinflation-Survival-Guide-Strategies-Businesses/dp/097411801X/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1239046370&sr=8-1
I think what he's asking is with interest rates so low and home prices down (although they've got more room to fall), would it be prudent to take on debt right now, considering that the debt might be nominally devalued?
I would still say avoid doing so. The potential for a severe depression is too high right now. You may end up unemployed. Then if you can't make a few payments, you lose "your" house. And because of hyperinflation, it is difficult to save liquidity, allowing you to anticipate and smooth over the rough patches.
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bearing01: For anyone to wish for massive inflation to wipe out debt has a misunderstanding of inflation. If we get high or hyper inflation it will destroy the economy.
For anyone to wish for massive inflation to wipe out debt has a misunderstanding of inflation. If we get high or hyper inflation it will destroy the economy.
Bearing is right, hyperinflation is nothing to joke with. Remember, Germany had its hyperinflation in the early 1920s and its impression is lasting until today: it has influenced the mentality around here in such a way that the word "inflation" alone is causing shivers. People generally are afraid of inflation, they do not flirt with it as a political option to increase prosperity.Past experiences with inflation are the reason why the German Bundesbank adopted Friedmanian monetary policy in the late 60s, thereby creating one of the most stable currencies in the world (despite being inflationary after all).80 years and the fear of massive inflation is still present. You don't want to live through any of it.
meambobbo: I think what he's asking is with interest rates so low and home prices down (although they've got more room to fall), would it be prudent to take on debt right now, considering that the debt might be nominally devalued? I would still say avoid doing so. The potential for a severe depression is too high right now. You may end up unemployed. Then if you can't make a few payments, you lose "your" house. And because of hyperinflation, it is difficult to save liquidity, allowing you to anticipate and smooth over the rough patches.
I can get into a home, and lock in the rate for thirty years, for the same price I my monthly rent is. When hyperinflation hits, the price of my rental unit can go way up in a year, as opposed to my home staying at the same price.
Right now is the time to get into a home. Deflation is about to end, and hyper-inflation is about to hit.
I would agree so long as you are sure you will definitely have a consistent source of income able to make the payments. Then, yes, it should be cheaper than renting. If you don't, it might be a lot riskier than it seems.
Keep in mind if your mortgage company fails and the mortgage banking system comes unwound you may have a hard time getting a clear title even if you can pay the note.
We haven't printed enough money to make hyperinflation, defined as 50% inflation per month, possible. We will have high annual inflation, perhaps 50% per year, which will make it easier for those who still have jobs to pay off their mortgages. On the other hand, increasing prices will make it much harder to pay off mortgages. It really depends on whether you're one of the people who gets the newly created money first or if you're one of the people who gets the newly created money last.
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