Page "Hyperinflation" Paragraph 33

Much attention on hyperinflation naturally centers on the effect on savers whose investment become worthless.

Academic economists seem not to have devoted much study on the ( positive ) effect on debtors.

This may be due to the widespread perception that consistently saving a portion of one's income in monetary investments such as bonds or interest-bearing accounts is almost always a wise policy, and usually beneficial to the society of the savers.

By contrast, incurring large or long-term debts ( though sometimes unavoidable ) is viewed as often resulting from irresponsibility or self-indulgence.

Interest rate changes often cannot keep up with hyperinflation or even high inflation, certainly with contractually fixed interest rates.

( For example, in the 1970s in the United Kingdom inflation reached 25 % per annum, yet interest rates did not rise above 15 % – and then only briefly – and many fixed interest rate loans existed ).

Contractually there is often no bar to a debtor clearing his long term debt with " hyperinflated-cash " nor could a lender simply somehow suspend the loan.

" Early redemption penalties " were ( and still are ) often based on a penalty of x months of interest / payment ; again no real bar to paying off what had been a large loan.

In interwar Germany, for example, much private and corporate debt was effectively wiped out ; certainly for those holding fixed interest rate loans.