What is interesting is the different types of 'lender'. Banks are lending money they create by fractional reserve, and will pay a lower interest on those deposits than the lent money, so they don't really care about inflation.
A wealthy individual investing in bonds would be a different prospect. But bond prices go up and down based on how the yield compares to interest rates. If I understand correctly lowering interest rates makes the bond worth more.
Any long term debt for 100's years ago is eroded by inflation but by the same token the lender probably profited from all the interest years ago, so the diminishing returns now are just some left over pocket money.
In reverse it is like a mortgage where you can go interest only and have a more modest mortgage in 10 years time, but I don't think that means the bank is the loser.
If you are going to lend money rather than putting excessive terms just factor the inflation risk into the interest rate, and diversify into other assets. Owning some shares, real estate or gold, or foreign currency bonds.
What is interesting is the different types of 'lender'. Banks are lending money they create by fractional reserve, and will pay a lower interest on those deposits than the lent money, so they don't really care about inflation.
A wealthy individual investing in bonds would be a different prospect. But bond prices go up and down based on how the yield compares to interest rates. If I understand correctly lowering interest rates makes the bond worth more.
Any long term debt for 100's years ago is eroded by inflation but by the same token the lender probably profited from all the interest years ago, so the diminishing returns now are just some left over pocket money.
In reverse it is like a mortgage where you can go interest only and have a more modest mortgage in 10 years time, but I don't think that means the bank is the loser.
If you are going to lend money rather than putting excessive terms just factor the inflation risk into the interest rate, and diversify into other assets. Owning some shares, real estate or gold, or foreign currency bonds.