[Gllug] OT: Debt

[salsaman at xs4all.nl]

On Thu, March 4, 2010 16:20, Bernard Peek wrote:
> On 04/03/10 11:19, John Edwards wrote:
>> On Thu, Mar 04, 2010 at 10:36:44AM +0000, Peter Childs wrote:
>>
>>>
>>> Does that work with personal debt too?
>>>
>> Yes.
>>
>> Inflation reduces the value of the currency and hence the value
>> of the debt. But it erodes both debt and savings, and has strong
>> feedback effects.
>>
>>
>
> Surely that's only if the debt value remains static? Personal loans are
> usually made at interest rates greater than inflation, so the value of a
> debt increases faster than inflation. Are sovereign debts made at lower
> rates?
>

That is true. Also the value of debt only decreases relatively if wages
increase in line with inflation. This worked in the '70s, but is unlikely
to work now as the UK is competing with wage levels in the likes of India
and China.

Salsaman.
http://lives.sourceforge.net



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