YouTube disallowing adblockers, Reddit charging for API usage, Twitter blocking non-registered users. These events happen almost at the same time. Is this one of the effects of the tech bubble burst?

  • @dragontamerEnglish
    2•1 year ago

    The opposite. Inflation makes debt cheaper. If you borrow at 10%, and inflation is 10%, its like you borrowed money for free.

    The issue is that central banks increased interest rates significantly. If you need to borrow more money, its at 14%, 16%, or higher now.

    • @[email protected]English
      1•1 year ago

      I was having trouble wrapping my head around this at first but if the example below is correct I think I get it now.

      Suppose you borrow $10,000 from a lender at an interest rate of 5% per year, and you have to repay the loan in one year. Now, let’s assume that there is an inflation rate of 3% during that year.

      Without inflation:

      Loan amount: $10,000
      Annual interest rate: 5%.
      Interest payment: $10,000 * 5% = $500.
      Total repayment: $10,000 (loan amount) + $500. (interest payment) = $10,500.

      With inflation:

      Loan amount: $10,000
      Annual interest rate: 5%.
      Inflation rate: 3%.
      Interest payment: $10,000 * 5% = $500.
      Total repayment adjusted for inflation: $10,000 (loan amount) + $500 (interest payment) = $10,500.
      Inflation-adjusted value of repayment: $10,500 / (1 + 3%) = $10,145.63.

      In this example, the inflation rate of 3% effectively reduced the real value of the debt repayment to $10,145.63, making it cheaper in real terms. This is because the value of money decreased due to inflation, allowing you to repay the debt with dollars that have a lower purchasing power.`