Hyperinflation and My Personal Finances: A Question on Negative Balances

[Fulanito de Tal]

I've heard this:
The US is headed for hyperinflation (Let's hold this as true for the purpose of this thread). The debt is going to be higher than what the GDP can be used to reverse; our debt is going to be too high to pay back. To fix this, the US Government is going to print out tons of its fiat money in order to pay the debt. This will result in a large amount of currency that is representing the total amount of money the US has. Therefore, each individual dollar will be worth less. So, people tell me that I should worry about this because one day I will go to the bank and my money will not hold much value in comparison to now.

Here is my question:
Since I owe more (student loans) than actual money that I have have (debt to cash ratio is 10:1), won't my debt be worth less as well? Hence, shouldn't I hope for hyperinflation since it will decrease the value of my debt?

READ THIS
This is not a thread for the discussion of the possibility of hyperinflation. This is a thread to discuss what would happen if hyperinflation were to occur.

[Tommy4ever]

I've heard this sort of hysteria over quantitative easing before - it just ain't going to happen any time soon.

You see, quantitative easing is a policy tool that is very different to simply printing money to pay off government debt. It involves creating money in order to purchase assets in firms and to provide them with funds in order to prevent their collapse and encourage them to lend money. Basically it is trying to lubricate the flow of money in the economy - QE also involves this money being destroyed afterwards in order to combat long term effects.

The worst you could hope for his high inflation (I'd consider high inflation to be anywhere between 4% and 8%, above that worrying, hyperinflation insinuates something like 3 or more didgets of inflation). But that wasn't your question.

Does inflation decrease the cost of your debt?

Yes.

There are some outlandish economists who even think that it is a good idea for governments to try to encourage inflation in order to help them manage their debt - although those people are the sort who totally ignore the effects inflation would have on the wider economy and on consumers.

Should you hope for high inflation?

No.

Whilst it might help you manage your student loans it will only be a minor help unless inflation is really high (and this assumes that the interest rate on your loans does not increase).

If you have any savings they will lose value. More importantly, the costs of living will increase relative to your income meaning you will be able to buy less with what money you have.

High inflation can really fuck up an economy and people's lives *cough* Zimbabwe *cough*.