Posted on: 10th Mar, 2010 10:58 pm
This may sound a bit strange...
With all the trillions of $ that government is printing now, there are widespread fears that an inflation will set in shortly.
We are currently underwater on our house. I was wondering if it would make sense to wait for the inflation to decrease the value of dollar so we could pay off the house with "cheaper" money?
With all the trillions of $ that government is printing now, there are widespread fears that an inflation will set in shortly.
We are currently underwater on our house. I was wondering if it would make sense to wait for the inflation to decrease the value of dollar so we could pay off the house with "cheaper" money?
This is a nebulous topic that I've thought about more than once.
Theoretically, you have a fixed debt based on a currency that was worth a particular amount at the time you took it on.
If inflation does begun to get extreme, and we enter a period of hyper-inflation, you may wind up in a situation where your income, or even your other current assets are being issued in denominations much higher than before. For example, today you can sell an ounce of gold for approximately $1,100. Hyper inflation may allow you to sell that ounce of gold for $20,000 at some point.
This could allow you to pay previous debts with inflated currency more easily. Conversely, you may be able to sell the home for an extremely inflated value, pay off the loan, and pocket the difference (in inflated dollars).
In the current environment, I'm a big fan of reasonable leverage (car loans, home loans, etc). It allows you to buy something and possibly pay it off with a devaluted currency later.
Theoretically, you have a fixed debt based on a currency that was worth a particular amount at the time you took it on.
If inflation does begun to get extreme, and we enter a period of hyper-inflation, you may wind up in a situation where your income, or even your other current assets are being issued in denominations much higher than before. For example, today you can sell an ounce of gold for approximately $1,100. Hyper inflation may allow you to sell that ounce of gold for $20,000 at some point.
This could allow you to pay previous debts with inflated currency more easily. Conversely, you may be able to sell the home for an extremely inflated value, pay off the loan, and pocket the difference (in inflated dollars).
In the current environment, I'm a big fan of reasonable leverage (car loans, home loans, etc). It allows you to buy something and possibly pay it off with a devaluted currency later.