‘As Serious as a Heart Attack’: Economist Warns of Economic Consequences of Spiraling Debt

New American Prophet ^ | March 6, 2024 | Dan Hart

[Bonemaker]

[T Ruth]

I’m going to try and get some debt paid off

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Smart move. Most interest rates right now are harmfully usurious

I must be dense. Seems to me that net of inflation, interest rates are negative. Meaning, it's a good time to borrow if you can get a reasonable fixed rate and if you have a productive use for the borrowed funds.

With the interest that the federal government is now paying and will have to pay as low-interest debt rolls over to higher interest debt, I do not see how the government can do it without printing money. If inflation increases even from its current rate, you will be paying off debt with debased money, i.e., cheap.

I suppose the main risk to borrowing now is the possibilty that the Democrats steal the next Presidential and Congressional election and then raise taxes, causing a recession.

[PeterPrinciple]

If inflation increases even from its current rate, you will be paying off debt with debased money, i.e., cheap.

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Assuming you might stil have a job and your other investments didn’t go down the crapper.

[Starboard]

You’re not dense at all. It just depends on the type of debt you have.

There’s merit to your argument that as inflation increases you will be paying off debt with debased money. I am doing exactly that kind of thing right now. When mortgage rates were exceedingly low I took out a mortgage with a 2% handle on a place in a rapidly appreciating area. Those payments will seem low over time, especially as the value of the property appreciates. It has the potential to be very productive, as you put it.

However, the 30 year fixed rate mortgage rate is presently north of 7% right. I would never do that deal now, especially considering all the carrying costs involved in holding real estate. (If you run a discounted cash flow analysis on real estate you’ll find that there are generally other far more attractive investment alternatives.)

Since the original poster was talking about paying down debts I assumed that he was talking about consumer debt. According to Lending Tree the average new card interest is 24.61%. Some cards are even higher, which to me is usurious, and inflation as we know it will never negate the effects of it IMO.

[T Ruth]

You are very correct that credit card rates are usurious.