No. of Recommendations: 1
He writes about how the 1970's inflation was worse than the deflation of the 1930's
"Nominal company profits looked good, and workers got raises, even me, a university teacher, but I pointed out to a boastful colleague who was very happy to have a 4% raise that he was only about 5% in the red after considering that year's inflation."
I'd like to use these numbers to illustrate the inflation-protection power of a US mortgage over renting. Assume the writer's friend was a homeowner, with a mortgage payment slightly lower than the maximum 28% of gross income. Let's say the colleague had the following:
$4,000 a month income
$1,000 a month mortgage
$3,000 a month expenses subject to inflation of the day
after the 4% raise, the colleague has:
$4,160 a month income
$1,000 a month mortgage
$3,160 a month for expenses subject to inflation of the day.
The colleague's 4% raise provided a 5.33% raise on expenses subject to inflation.
