Thread: Coronavirus
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Old 16-10-2020, 07:27   #279
OLD BOY
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Re: Coronavirus
Quote:
Originally Posted by jfman View Post
I'll explain it simply.

I borrow £100 from Mick for 10 years. Interest is £1 a year (which I pay each year), however inflation reduces the real terms value of my debt by £2 a year.

In 2030 I borrow £100 (which is only worth £80 in 2020 prices) to repay Mick from Paul and carry out the same wheeze.

Rinse and repeat until by 2070 I'm looking around for the 2020 equivalent of about £25 to repay Maggy., Who I borrowed from in 2060. The debt has cost me £10 each decade to maintain. Total cost less than total borrowed in real terms.

Obviously interest rates and inflation are percentages but the principle applies where inflation exceeds interest rates - which is pretty much going to be forever now because we can't afford the house price crash bringing the whole pozni scheme down.
Yes, I get that, jfman. But we still have to pay back the instalments for those debts in the meantime, which have increased massively with the increased borrowing.
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