In my opinion it’s the oldest economic trick in the book. Borrow money, save your own; inflation overtime dilutes debt. Increases the face value of your financial products. Jump the interest rates later, which drops the inflation, and then pay off the loans with debtor coming out on top with surplus. It’s has never worked. Or has it?

Well right now that’s what we are doing. What is some proof that it’s working. Well for one example, the banks want to stop offering 30 year mortgages, because this model would cause them to actually lose money and or take severe cuts in profit. So for this news to come about is proof that something is going on.

For example.
$100,000 loan at 4.5% interest rate
15 year average inflation 3.5% with zero bank interest rates
$110,092.91 <1% won

Than banks actually only make <1% profit. And with future inflation rate looking to hit double digits, this model could seriously put a huge dent into their loan interest rate profits. That is going to happen because you can see all the scramble in home foreclosures, and etc. to gather as much liquidity as possible, by the bank…

But for the government debt, this is a good thing. Even if we have just a couple of years of super high inflation rate of, say 12%+. That would raise the 15 years average rate to a level significantly enough to dilute debt further; and actually cause the creditor to take loss and debtor walk on profit.

Well we all know that the reality of this situation is 1000 times more complex , but at the end of the day this model is where it all comes down to.

Why don’t the people do this? Two things, no knowledge of basic economic math, and or no stable job with enough income to last! [no offense to anyone]. Government certainly has myriad of diverse way to make insane amount of money annually! But now because of technology so do we.

So people can now do something understanding and using this model. You can use this model to properly plan the future of your finances and investments.

So what are the relative variables to look after to make sure this works; on the government side. Keep the average household income rise at a slower pace for a certain time until you being to pay back the debt [how they do that is a another topic]. Fix up real-estate issues and make it more affordable for the future generation; to re-insure the banks of super long term, profits. That way the banks remain calm and don’t start asking for money too fast, and same goes for everyone else. Raise commodity prices to inflation adjusted record highs. And my favorite, increasing the financial assets, mainly of the stocks; which in this capitalism benefits everyone who is sufficiently on board.

You can accept this for whatever they mean to you. but at the end of the day if you want to move the only fuel is cash, and you can’t have credit without it. Or can you?

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