People who own 'equity' versus People who owe debt

[Jinky04]

0-3

The only credible/likely policy response to current crisis is print loads of money, hence inflation, hence people who owe money end up owing a lot less in real terms.

Discuss.

Oh oh, additional thought....sterling versus dollar....hold onto poker site cash assets (denominated in dollars) or move into interest paying sterling deposits. Discuss. Or toss a coin.....

[Ironside]

The only credible/likely policy response to current crisis is print loads of money, hence inflation, hence people who owe money end up owing a lot less in real terms.


would only work if your debt was at a fixed rate of intrest

normally inflation goes up so will intrest rates and thus your debt will keep up with inflation

[Jinky04]

I'm sorry ironside, should have made explicit the fact that the printing of money will go hand in hand with either a hold on the base interest rate at 4.5 or further cuts.

Not that the base rate is particularly important, most credit is based on the LIBOR rates (in fact $300 trillion of various financial contracts are anchored to the various LIBOR rates) which continue to rise apace, irrespective of policy responses. Nevertheless, assuming the real interest rate will remain a positive constant is an assumption totally unjustified by past events, just look at Japan over the last decade...real interest rates have barely pushed above zero.
 
However my long run perspective is, that if you increase the supply of money, like any other good, its per unit value will decrease (esp relative to other stores of value) , hence my argument about debt.

THe political coda to this economic argument is that both the US and UK are running up debt at historicallly unprecedented levels; they are not allowed to default, but by allowing an inflationary 'binge' they both avoid the trap of the Great Depression (ultimately deflation in developed financial markets)  plus reduce the real value of the nominal national debt.