Investors Benefit From Inflation
Today, most interest rates are lower than the rate of inflation.
Sure. That’s really good for real estate investors.
But it’s kinda backward. Why would banks keep making loans if their real yield is negative?
For example, banks are looking at 3% loan interest minus 5% inflation. This equals a -2% bank yield.
Yes, it’s more nuanced than that.
But you don’t have to get as wonky as a bespectacled professor to understand this stuff.
The simple fact is that savers and lenders are losers. Debtors and borrowers are winners.
The two primary tools that the Fed uses to cool high inflation are:
- First, they slow dollar printing (called ” tapering”)
- Second, they raise interest rates (called “lift off”)
The Catch-22 is that with everyone bursting at the seams with debt – including the US government itself – this economy cannot cope with higher rates.
Does this mean that inflation will run amok?
If so, the cost of everything explodes for consumers – vases, firewood, haircuts, coffee, furniture, soap, Philadelphia Phillies hats, carrots, blue cheese, and Star Wars action figures.
It’s the investor class that benefits – holders of gold, cryptocurrency, many stocks, and especially real estate investors.
Consumers lose. Investors win.
Be an investor. Build wealth. Own assets.