I see that US is keeping interest at zero, while keeping inflation at about 2% or more. Is it possible for them to inflate away the debt, that sits in banks balance sheet?
It could cause the savers to be unhappy and go on strike. but if they do it slowly over a decade, would there be any side effects? a lost decade?
Let's bring it closer to home.
Singapore inflation at around 5%.
Bank interest? Not even 1%...
CPF ordinary = 2.5% (OK plus 1% to sweeten the deal but still below 5% leh?)
CPF special = 4% (Plus 1% that means we lent money for free... Must take lesson from Ah long! We spoil market.)
But wait! I've got a bank HDB loan at 3.75% that I can pay up in full anytime. Why pay up in full when I can pay back the bank with money that's worth smaller and smaller?
Once in a while, the small guy (me!) can also play the "inflate away your debt" game
Please note that "sensible" debt is different from "leveraging to the hilt"!
http://singaporemanofleisure.blogspot.co...on-my.html
i have come across some readings somewhere that when you borrow from the Bank, you are actually borrowing from your own "Future Earnings" and not the Bank's. The problem is your "Future Earnings" may not be exactly as you think it would be. If you are quite sure, or willing to take an intelligent bet(business undertaking or equivalent), then proceed. i always admire those who dare, who are not afraid of failure. Respect, respect.