Inflation erodes the real cost of fixed-interest debt

Evidence

In theory, deferral programs make it easier for students with significant debt to pursue advanced degrees; in practice, however, as interest accumulates, borrowers end up with a balance higher than the original principal. Consider how black college graduates are more likely to enroll in graduate school compared with their white peers (47 percent versus 38 percent) and more likely to have graduate school debt (40 percent versus 22 percent). — Dorothy A. Brown, The Whiteness of Wealth, 309 (#exemplifies, via linked claim)

The Federal Reserve facilitated $7.7 trillion in liquidity for banks, but nothing for homeowners. Most importantly, according to Nick Srnicek’s account, is that key interest rates suddenly dropped around the world. This “easy money” era is visible in figure 1.10, which illustrates the long-term interest rate environment in the U.S. When interest rates at zero weren’t enough, central banks engaged in “quantitative easing,” in which central banks buy government debt and bonds, increasing the demand for other financial assets, easing credit, and raising asset prices, thereby stimulating the wider economy. … “While quantitative easing (QE) may have stabilised the financial system,” according to Ann Pettifor, “it inflated the value of assets like property—owned on the whole, by the more affluent. As such, QE contributed to rising inequality and to the political and social instability associated with it.” — Andrew deWaard, Derivative Media, 84 (#complicates, via linked claim)

Categorization

• XREF: connects to: Financial repression shrinks debt through negative real interest rates on captive bondholders — Mark Blyth, Austerity: The History of a Dangerous…, 651; Linear debt projections assume a future that other trends will upend — Mark Blyth, Austerity: The History of a Dangerous…, 685; Inflation acts as a class-specific tax benefiting debtors over creditors — Mark Blyth, Austerity: The History of a Dangerous…, 46 (+6 more)

Broader Connections

• Student-loan deferral programs compound debt by capitalizing unpaid interest #exemplifies (0.78) — Dorothy A. Brown, The Whiteness of Wealth, 309
• Quantitative easing stabilized banks while inflating asset values for the affluent #complicates (0.72) — Andrew deWaard, Derivative Media, 84