Welcome to a bad time for big debts
The simplicity of the message won Mr Piketty widespread acclaim. It also spawned a resurgence in the popularity of economic expressions. An influential one, i > g, is a variation on the Piketty rule. It applies when nominal interest rates exceed nominal growth. The troubling conclusion from this expression applies to debt.
The precise impact depends on the extent to which debt reprices as interest rates rise. The vast majority of American homeowners have 30-year fixed-rate mortgages. This generous financing will protect them against a pincer-like combo of slowing wage growth and rising interest expenses. Nevertheless, consumers carrying other kinds of debt—including revolving credit-card balances and private student loans—will feel the pinch.
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