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China may use "nuclear option" on US economy by Illiad2007-08-08 09:16:50
  Cutting off your nose to spite your face? by RetiQlum22007-08-08 09:27:58
    I would be so sure the US and Canada would survive by DesertRat662007-08-08 09:38:32
      Same with Euros and Pounds. by RetiQlum22007-08-08 09:43:18
        The Euro is more stable than the dollar. by krikkert2007-08-08 09:44:58
          Nationally or Personally or both? by DesertRat662007-08-08 09:48:42
            Actually a drop in the value of the dollar by SaylorA 2007-08-08 11:02:29
can be good for the average consumer with a fair amount of debt.

For example: John Q. Public gets a $100,000 mortgage with a fixed APR of 8%, for a 30 year loan he will be paying about $750 a month. The contract specifies how much he has to pay back in interest figured over time. If the value of the dollar drops, more dollars will have to enter the economy and this will cause significant inflation. John should now (presumably) have more dollars in his hands and he can pay more each month on the principle of his mortgage and therefore pay off his house sooner since the loan amount is fixed. If John pays back the principle early, he will pay less in interest. (This assumes there is no early pay-off penalty as most mortgages do not have them.) John could also choose not to pay off his loan early, leaving him with more money to pay for other things. The mortgage company in this case is hurt by the drop in the dollar but it helps John.

Now obviously a long-term drop in the dollar will seriously hurt our economy as lenders will be forced to charge higher interest rates to John on new loans, plus they will be even more reluctant to lend to riskier people.

Depending on what your current financial position is, inflation can either hurt or help you.
[ Reply ]
              That's a big assumption... by esbita2007-08-08 11:17:52

 

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