reply on: Anddddd With the Cut 2% Inflation Goal is Dead \ stacker news ~econ

120 sats \ 12 replies \ @Undisciplined 18 Sep \ parent \ on: Anddddd With the Cut 2% Inflation Goal is Dead econ

Inflation reduces the real value of fiat denominated debts. I've got a big ass mortgage that's about to evaporate.

Just curious in practical terms how much would you expect to save from a 50 bps cut over the life of your mortgage?

135 sats \ 1 reply \ @Undisciplined 18 Sep

I don't know. It's not an adjustable rate mortgage, so the savings will be entirely through inflation. Let's say we have 3.5% inflation going forward. That would be more than a 10% reduction in the real value of the mortgage, every three years.

21 sats \ 0 replies \ @gmd 18 Sep

ahhh gotcha makes sense

27 sats \ 8 replies \ @Catcher 18 Sep

Ah, that's what you mean. Well, they can evaporate only if there is a hyperinflation, couple of % won't do anything. You will only start noticing it in 5 years or more.

42 sats \ 7 replies \ @Undisciplined 18 Sep

Sure, but it's a 30 year mortgage, so it'll still be there in five years. Plus, we might be in a new inflation paradigm. The last four years had almost 30% cumulative inflation.

37 sats \ 3 replies \ @Catcher 18 Sep

No, long term you are absolutely right, just thought you are maybe saying your goodbyes too soon:) I had a mortgage in a country with 15% YoY official inflation and I think 30-40% YoY unofficial inflation. The problem is you don't get salary increase every year. So I really started feeling the difference on the 5th year or so, when salary finally caught up.

21 sats \ 2 replies \ @Undisciplined 18 Sep

just thought you are maybe saying your goodbyes too soon

I'm definitely jumping the gun, but that's reasonable because my time preference is incredibly low.

39 sats \ 1 reply \ @Catcher 18 Sep

In this case you should have said your goodbyes the moment you took the mortgage 😂

0 sats \ 0 replies \ @Undisciplined 18 Sep

We sorta did. It was the tail end of the historically low interest rates and we knew inflation was coming.