Monday, March 17, 2008

Inflation Doesn't Hurt Long Term Investors

It appears that we are going into a period of possible rampant inflation here. If you can ride out the storm, the value of your dollars that you earn from your employment or rents is going to get more and more powerful over time.

People who are looking long term and putting money away for retirement are benefiting in a “bad news” inflationary scenario. To get the compounding effect that long term investors are after, you want to acquire assets at the lowest valuation you can. So lower acquistion costs are good.

Inflation works against the lender not against the borrower.

That mortgage that was worth $100,000 or $200,000 with the value of those dollars is suddenly (say in 10 years) is going to be paid off with dollars that are worth a lot less to you at that time. Ultimately this creates a lot of value for you.

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