Someone watch this and lemme know how much is pure western c o p e.
According to neoclassical theory, the answer is yes, nothing has changed, because you can still get 10 units of the same item, which is completely absurd that doesn’t pass even the slightest bit of scrutiny with common sense.
I think you need to elaborate more here to help me understand why this would be “completely absurd”. In your example, the person still has the same buying power one year later (assuming everything else is inflating at the same rate). I think I know where you’re going with it, but it’s not exactly apparent as you’ve presented here.
When you double the income and prices, creditors can also change the interest rates (the price of the money), and increasing the interest rate (making money more expensive) hurts the debtors and benefits the creditors, and vice versa.
I know I’m late here but wanted to ask you, are you making a distinction between existing borrowers and new borrowers? if you already got the thing with the loan - the car, the house - and it’s a fixed interest rate, then the debtor benefits from inflation because the dollars they are paying back are worth less. Is that correct? In the other example you said borrow 200 but now is only worth 100, is that for more of a “liquid” loan, revolving credit kind of thing (not sure the terms) - but the kind of loan that backs biz- industry
I appreciate all your effort-comments on this topic.
Regarding 2008 housing
Obama could have bailed out the banks AND let homeowners stay in their homes by erasing the underwater portion, but nope that would send the wrong message. We were knocked out of out home with a short sale and some rando bought it for half what we paid. Literally zero economic difference. The amount was wiped out the same as if we had stayed. “Puritanical morality” for thee but not for me.
Yeah I’m also lost, if it takes me half an hour of work to buy an apple if doesn’t really matter if that’s $.10/hr and a 5¢ apple, or $100/hr and a $50 apple. I still worked half an hour.
But if you took out a loan for $100, suddenly your loan no longer buys 2000 apples, it only buys two. And since almost every industry in the U.S. is debt financed, that has some pretty large implications as to what the worth of that debt is, how much it can be traded for, and how much can be produced off of that debt. Which means that money shouldn’t be seen as a medium of exchange in-of-itself, but actually as a transformed form of debt that is basically created out of thin air.
It’s actually a very fundamental, but counter-intuitive concept, like time being a variable that slows down as you approach the speed of light. It’s a phenomenon that happens at a macro-level of the economy that has absolutely huge consequences on the behaviors of microeconomics.
Oh yes duh debt that’s what I was missing thank you it all clicks for me now
