Inflation as solace for student debt holders ?

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se7en
Posts: 10
Joined: Thu Mar 15, 2012 6:39 pm

Inflation as solace for student debt holders ?

Postby se7en » Tue Mar 19, 2013 8:35 pm

I originally posted this in off-topic, but I think its more appropriate in here, so I deleted my prior post. I am no pro on the economy, so I would be very glad to hear people's views on this, and poke holes in my argument.

I am of the opinion that the massive debt holdings and uncontrolled money printing activities that the U.S. gov has recently been engaging in will sooner than later force inflation here through the roof and student debt will become meaningless, or at least significantly much more manageable. (If you are locked in at a %)

Why I think so: Real unemployment is actually going up, and economic growth is slowing. Meanwhile - a majority of the cash that is being printed by the FED is going directly into banks which are buying up stock equities (rather than going to the citizens). The stock market is climbing to new highs as a direct result of these investments, but the majority of these corporations are expanding abroad rather than in the US, so jobs are not really being created domestically. No jobs = less demand to afford products. Money Printing = fail ?
Another reason the stock market is through the roof right now is because, simultaneously, as the dollar is losing more and more strength due to the massive "quantitative easing" aka money printing operation, foreign investors are able to buy U.S. equities cheaper (they can buy more $$ before investing) thus further fueling the stock market to reach new heights.
The reason that we don't actually see the manifestation of inflation on the price of goods here in the US (which aren't growing - "inflation is at an all time low") is because the demand is not there - if prices went any higher manufacturers would not be making profit, because people cannot afford to pay So, my conclusion is that the inflation is there, it just not visible yet.

When sh*t will hit fan : As the actual value of the dollar drops, people (especially foreign investors) will stop buying up U.S. treasuries and U.S. debt because the returns on this debt will be lower than the rate of inflation. If new U.S. debt stops being bought, the US will not be able to pay off present debt loads. The U.S. cannot default on its debt - this would literally stop the world. The only alternative that the U.S. has at that point is to inflate its way out of those debt obligations - to print massive tons of money. The amount of money which needs to be printed does not exist anywhere in the world. Printing is the only option. Printing this much money = hyper or very high inflation.

Conclusion: The US will inflate away your student debt along with its own debt.

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hung jury
Posts: 159
Joined: Tue Dec 27, 2011 1:52 am

Re: Inflation as solace for student debt holders ?

Postby hung jury » Tue Mar 19, 2013 8:39 pm

se7en wrote:I originally posted this in off-topic, but I think its more appropriate in here, so I deleted my prior post. I am no pro on the economy, so I would be very glad to hear people's views on this, and poke holes in my argument.

I am of the opinion that the massive debt holdings and uncontrolled money printing activities that the U.S. gov has recently been engaging in will sooner than later force inflation here through the roof and student debt will become meaningless, or at least significantly much more manageable. (If you are locked in at a %)

Why I think so: Real unemployment is actually going up, and economic growth is slowing. Meanwhile - a majority of the cash that is being printed by the FED is going directly into banks which are buying up stock equities (rather than going to the citizens). The stock market is climbing to new highs as a direct result of these investments, but the majority of these corporations are expanding abroad rather than in the US, so jobs are not really being created domestically. No jobs = less demand to afford products. Money Printing = fail ?
Another reason the stock market is through the roof right now is because, simultaneously, as the dollar is losing more and more strength due to the massive "quantitative easing" aka money printing operation, foreign investors are able to buy U.S. equities cheaper (they can buy more $$ before investing) thus further fueling the stock market to reach new heights.
The reason that we don't actually see the manifestation of inflation on the price of goods here in the US (which aren't growing - "inflation is at an all time low") is because the demand is not there - if prices went any higher manufacturers would not be making profit, because people cannot afford to pay So, my conclusion is that the inflation is there, it just not visible yet.

When sh*t will hit fan : As the actual value of the dollar drops, people (especially foreign investors) will stop buying up U.S. treasuries and U.S. debt because the returns on this debt will be lower than the rate of inflation. If new U.S. debt stops being bought, the US will not be able to pay off present debt loads. The U.S. cannot default on its debt - this would literally stop the world. The only alternative that the U.S. has at that point is to inflate its way out of those debt obligations - to print massive tons of money. The amount of money which needs to be printed does not exist anywhere in the world. Printing is the only option. Printing this much money = hyper or very high inflation.

Conclusion: The US will inflate away your student debt along with its own debt.


(Law school dean)

se7en
Posts: 10
Joined: Thu Mar 15, 2012 6:39 pm

Re: Inflation as solace for student debt holders ?

Postby se7en » Tue Mar 19, 2013 8:42 pm

hung jury wrote:
se7en wrote:I originally posted this in off-topic, but I think its more appropriate in here, so I deleted my prior post. I am no pro on the economy, so I would be very glad to hear people's views on this, and poke holes in my argument.

I am of the opinion that the massive debt holdings and uncontrolled money printing activities that the U.S. gov has recently been engaging in will sooner than later force inflation here through the roof and student debt will become meaningless, or at least significantly much more manageable. (If you are locked in at a %)

Why I think so: Real unemployment is actually going up, and economic growth is slowing. Meanwhile - a majority of the cash that is being printed by the FED is going directly into banks which are buying up stock equities (rather than going to the citizens). The stock market is climbing to new highs as a direct result of these investments, but the majority of these corporations are expanding abroad rather than in the US, so jobs are not really being created domestically. No jobs = less demand to afford products. Money Printing = fail ?
Another reason the stock market is through the roof right now is because, simultaneously, as the dollar is losing more and more strength due to the massive "quantitative easing" aka money printing operation, foreign investors are able to buy U.S. equities cheaper (they can buy more $$ before investing) thus further fueling the stock market to reach new heights.
The reason that we don't actually see the manifestation of inflation on the price of goods here in the US (which aren't growing - "inflation is at an all time low") is because the demand is not there - if prices went any higher manufacturers would not be making profit, because people cannot afford to pay So, my conclusion is that the inflation is there, it just not visible yet.

When sh*t will hit fan : As the actual value of the dollar drops, people (especially foreign investors) will stop buying up U.S. treasuries and U.S. debt because the returns on this debt will be lower than the rate of inflation. If new U.S. debt stops being bought, the US will not be able to pay off present debt loads. The U.S. cannot default on its debt - this would literally stop the world. The only alternative that the U.S. has at that point is to inflate its way out of those debt obligations - to print massive tons of money. The amount of money which needs to be printed does not exist anywhere in the world. Printing is the only option. Printing this much money = hyper or very high inflation.

Conclusion: The US will inflate away your student debt along with its own debt.


(Law school dean)


?

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Gatriel
Posts: 2015
Joined: Tue Sep 22, 2009 11:30 pm

Re: Inflation as solace for student debt holders ?

Postby Gatriel » Wed Mar 20, 2013 12:07 pm

Image

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guano
Posts: 2268
Joined: Mon Feb 18, 2013 9:49 am

Re: Inflation as solace for student debt holders ?

Postby guano » Wed Mar 20, 2013 12:15 pm

There's only one problem with your reasoning. Inflation would have to be at 6.8% just to keep up with interest. That kind of inflation hasn't been seen here since the 70s. Additionally, it also means that when you're working, you better be getting big raises every year, or your real income will be steadily dropping. Not sure how this would be a win

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Danger Zone
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Re: Inflation as solace for student debt holders ?

Postby Danger Zone » Wed Mar 20, 2013 12:29 pm

Hilarious considering the levels of inflation we've had for five years now.

Gat, if you bring up how chained CPI is flawed, I will jump through this computer screen and smack a bitch.

EdgarWinter
Posts: 160
Joined: Tue Oct 25, 2011 7:47 pm

Re: Inflation as solace for student debt holders ?

Postby EdgarWinter » Wed Mar 20, 2013 2:23 pm

Inflation does not happen in advanced industrial economies when there is a huge "output gap", IE there is a lot of unused crap/people/potential lying around because the economy is slow. Why would prices go up when capital can be obtained for pathetic rates of return or when workers can be obtained for a small and stagnating wage? There will not be any significant inflation ("significant" meaning greater than 2 or 3 percent/year) until output is back to a normal level and unemployment dips below 5% or so. IE, no dramatic inflation for a long time at this rate.

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guano
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Re: Inflation as solace for student debt holders ?

Postby guano » Wed Mar 20, 2013 2:50 pm

EdgarWinter wrote:Inflation does not happen in advanced industrial economies when there is a huge "output gap", IE there is a lot of unused crap/people/potential lying around because the economy is slow. Why would prices go up when capital can be obtained for pathetic rates of return or when workers can be obtained for a small and stagnating wage? There will not be any significant inflation ("significant" meaning greater than 2 or 3 percent/year) until output is back to a normal level and unemployment dips below 5% or so. IE, no dramatic inflation for a long time at this rate.

This isn't actually correct, if for no other reason because increasing worldwide demand for natural resources (from the developing world) is causing prices of base goods to rise.
A good example is the price of gas at the pump which has increased during the recession because of increasing demand in places like China and India (yes, this is grossly oversimplified; that doesn't make it less true)

But, the main message here is correct, we're not going to see any significant inflation until the economy picks up




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