According to Reuters columnist James Saft, the case is strong for there to be personal bias of Bernanke towards hyperinflating the dollar – the faster it loses value, the faster he can pay it off. This isn’t at all shocking, but I found it interesting that a Reuters-sourced article would just point it out:
Bernanke, who turned 58 this week, refinanced his mortgage in September, less than two years after the last time he refinanced, according to a report in the Wall Street Journal, citing sources and public records.
Bernanke owes $672,000 on his house, about 80 percent of its appraised value. The mortgage has a 30-year term, implying that repayments are fixed and that it likely carries an interest rate of about 4 percent.
At least he’s eating his own dog food, as the saying goes. The great benefit of this type of economics is that people can exploit currency devaluation by getting debt in the form of mortgages, car payments, bank loans etc and as long as there is some guarantee of inflation, it arbitrages the finance charge and as long as there is consistent income, the debt will not be as… indebting as one might think.
Unfortunately, this hurts most working class people and most disabled and elderly who are on fixed incomes such as pensions and US Social Security, for example. I think I’m not mistaken by assuming that the large majority of Americans think that if they work hard and save their money, they can have a nice house, a retirement and some kind of financial legacy to pass on to their kids. If the money being saved in is constantly losing value, however, it’s like a self-defeating spiral. People are just spinning their wheels getting illusory salary raises working harder and harder to put money in a savings account that doesn’t come close to balancing out inflation. To quote the Lazarus Long character of Robert Heinlein’s work:
$100 invested at 7% interest for 100 years will become $100,000, at which time it will be worth absolutely nothing. — Lazarus Long, “Time Enough for Love”
Or to put in more contemporary terms, a dollar from 1950 will only buy 11 cents worth of goods today – i.e. it has lost 89% of its value (Michael Hodges, Grandfather Economic Report Series: Inflation)
I don’t know about you, but I feel like I’m being robbed. I don’t feel right accumulating a lot of debt then declaring bankruptcy. It seems implied, however, that if one is willing to take the risk of the credit hit and social stigma associated with it and still come out golden, then by all means that’s what one should do. This seems fundamentally wrong to me. Just because I know I can do something doesn’t mean I should.
I kind of feel sorry for Bernanke, too. $672,000 left to pay off? Is that a helicopter rotor I hear?