Quote:
Originally Posted by RiverFlows  - They are printing those pieces of paper like crazy. That's why a house that cost $27,000 back in the 50s now costs half a million.
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One of the other fun bits about inflation is it's effect on loan payments. The hypothetical house mentioned by the OP would have had a mortgage of perhaps $22k -$25k. Assuming a fixed interest rate, the payments would have been determined at the inception of the loan and then wouldn't change. The purchaser's salary, however, would have increased as inflation caused prices to rise. With each passing year, the homeowner would spend a smaller and smaller percentage of his salary on his mortgage. That's why homeowners who have been in the same house for decades have $100 mortgage payments.
