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Comment by klipt | Hacker News Reader

If you have a lot of debt (e.g. a big mortgage) inflation is actually good for you, because it means the amount you owe has gone down in real terms.

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Except most people's wages didn't keep up with inflation, and they're now paying more out of pocket for other necessities every month

Wages are up 6%, inflation up 7%

If you are earning and have debt that’s great news. Sure the cost of your weekly shops increased 1%, but your debt has dropped 7%.

Real wage growth is also positive for the last few months. Even in real terms basically everyone is better off than they were in ~2018.

Only if you live in a country with “long-term fixed rate pre-payable mortgages” - i.e. only the USA and maybe Denmark[1].

Inflation can also screw the equity value for home owners in the US because in the long term house equity value is very roughly inversely related to mortgageInterestRate -- that occurs because house prices are driven by how much people can loan for a mortgage, and maximum mortgage loan is limited by f(personalIncomeAfterOtherCosts, wholesaleInterestRate + bankMargin, futureIncomeStreamPrediction).

Living in New Zealand which all mortgages are variable rate (approximately), I can say inflation really screws large mortgage holders here.

[1] 2010 https://business.sdsu.edu/_resources/files/real-estate/resea...

It’s not inflation that’s the problem, it’s interest rates (or swap rates).

Raising interest rates are a great way to combat demand driven inflation (everyone borrows money to buy a set amount of goods/services so prices increase).

It’s not a good way to deal with supply driven inflation in essential goods (say prices go up because a harvest fails).

But it needs to happen to ensure the currency doesn’t fall relative to other currencies thus making imports more expensive.

Of course only inasmuch as your wages keep up with inflation.

In the UK at least, about a quarter of mortgages are on variable rates. Of those on fixed rates, all their other bills have gone up, and will continue to do so. In many cases this means people’s mortgages are no longer affordable even if they haven’t changed. It’s not a good situation, and telling people they’re technically incorrect in their complaints because some day in the future they might be able to heat their house again is standard economist fare.

And of the rest about 25% end their fixed deal every year

Only in so much as you own assests that have appreciated with it, and to be frank I can't eat with equity.

Maybe different in other countries, but in Australia your mortgage payments go up as interest rates rise. So over the life time of the loan you will likely pay more/the same in real terms. And this ignores the lack of wage growth.

"You will not crucify mankind upon a cross of gold!"

- William Jennings Bryan

Generally speaking, the ones hit hardest by inflation are the ones unable to afford such loans to begin with.

only if the rate is fixed. huge numbers of consumers in the developed world (e.g. UK) have short term or variable rate.

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