East of Broken Bow | FuturesFarmer - 5/31/2024 12:43
I understand this doesn’t apply to the broader economy, but I believe by and large posters on this site are landowners. Likely with land that isn’t paid off. Shouldn’t most on here be cheering for inflation as then they will be using inflated dollars to pay off original loans? Plus rapidly increasing land values. It’s a win win for them. Really anyone with a mortgage too. Maybe I miss something, but the free market economy will balance wages with prices. Goods and services too. So in the end it’s a bank that is hurt during times of large inflation. And the elderly whose savings erode away. But on the whole how are brief (a few year) periods of inflation that bad? I’m missing something.
By and large, inflation will make fixed term loans easier to pay off due to the simple fact that they will have more dollars to pay it back with.
HOWEVER, that is a general rule and does not apply to everyone. I know a guy who refinanced about 5 years ago to a lower interest rate, but to get the low interest rate there was a stipulation in the (I think 20 year) loan that after 5 years, the bank can adjust the interest rate to the going rate at the time. That time is now, and his interest rate has about doubled. Interest on operating loans is up quite a bit, and things like repair parts are going up fast. I put a new bearing on the planter this spring that was in a bag that had the ticket in it. That bearing 2 years ago was $18. I got one this spring to have a spare on hand, and it was $38. Inflation is a double edged sword and if you are positioned wrong it can cut you both ways. However, if you are positioned right, you can benefit both ways as well. |
Inflation and recession.
