If you work for the govenment and you get COLA then you will get a benefit, if you are on SSA you get a benefit. This the main issue with government debt, as it is impossible for the government to reduce their spending in the US by inflation, as most of their costs are adjusted by inflation.

So if we have a lot of inflation, the private sector will be forced to bear the burded of inflation for all. Inflations is the result of a country demanding more goods than they produce, like the US has a 650B trade deficit so we should seem inflation. But as much countries will except our money in trade, it has not happened, yet.

But if it does it means that our goods would get cheaper and imports are more expense. This means we will export more, and import less. As it takes time to change the amount of production of any good, this means we will have less goods for each person, so our standard of living will drop.

As government employees will get a COLA, they will maintain their standard of living while private sector employees standard of living will drop about 45 percent greater than they should to make up for the steady standard of living for the government.

So get a job inthe government and debt works, work in private industry, you better stay out of debt.

I do remember Carter and the double digit inflation. About the only good thing about it was that it ended, and that some smart people (not me, I was a poor refugee then) managed to lock in 18% rate on government bonds for 30 years.

Rick – it depends on which historians you read. Many economists believe Reagan benefited the economy tremendously. As to the mess we are in, pray tell me was it Reagan who repealed Glass-Steagall? Was it Reagan who decided to promote home ownership by stimulating borrowing? Was it Reagan who invented mortgage-backed securities, CDOs, or credit default swaps? Was it Reagan who decided to gave home loans to anybody with a pulse who is competent enough to be able to sign at the dotted line? Was it Reagan who exempted 5 major firms from leveraging limits?

Incidentally, until 1999 most of the US debt was owned by Americans. It’s only after 1999 long time after Reagan that Americans changed from mostly lenders to mostly borrowers.

Back on topic. I do agree that variable interest loans is not a hedge against inflation as the rates go up with inflation. I do believe that longer term fixed interest loans can be. One thing I think which is missing from the discussion is investment opportunities for the money you have on hand. Higher inflation leads to higher interest rates including rates banks pay you on your CDs. Let’s say you have 200K and 200K mortgage at tax deductible 4.5%. At this point banks are only paying 2-3% (on which you have to pay taxes) so you cannot get safe investment with the same return. But what if 2 years from now, you get a Carter-like inflation with a bank CD paying you 13%. If you paid off your mortgage, you now have no cash. If you still have a mortgage, you can put your money in a bank and earn a lot more money than you have to pay.

Imagine locking 9% before Carter, then investing your money in some municipal bonds paying you 18% or more. You could just take some of this income and pay your mortgage with it.

ps- Who would have thought the leaders of France, Germany and other Europeans would be telling an American President not to spend like water?!

No, double digits interest rates were not a good thing, however the solutions provided by Reagan did far more long term damage than the short term discomfort we were suffering under.

Please note, I am terribly biased. IMHO anyone who uses his political power to keep hostages held in Iran until minutes after his inauguration is inherently evil and corrupt. You and your family might have done well, but look at where we are now. And yes, he was the devil that set us up for this fine fall.

As for “evidence”, do a freaking google. Heck, even historians credit his social and economic policies as doing more harm for the long term of this country than perhaps any president in history. Of course, that was before the second Bush….

Peace.

Exactly what “evidence” is there?!

Me and my family did a heck of a lot better under Reagan then under Carter!

Consider the later years:
1) I don’t recall…..
vs.
2) Here is your (insert prestigious award here) Mr. Carter.

Funny how the right still think he had it wrong, despite all evidence to the contrary.

Peace.

But don’t under estimate the myth coming out of DC these days of needing to put inflation on the back burner to get the economy going. Fears of inflation will derail any recovery because the markets and business know the only cure for inflation is a rise in interest rates.

Wait until we have those lovely double-digit interest rates like in the Carter years. Funny how things come around again.

Buy gold.