How do debtors and speculators benefit from inflation?

1 Answer | Add Yours

mkoren's profile pic

mkoren | Middle School Teacher | (Level 3) Senior Educator

Posted on

Debtors and speculators benefit from inflation. When a person is in debt, inflation helps them.  Usually with inflation, there is more money in the economy.  Thus, it is easier to repay a loan since more money is available in the economy. Also, since inflation erodes buying power, the debtor is repaying the loans with dollars that can purchase less than they did when the debtor took out the loan.  This was why farmers in the 1890s wanted a bimetallic money supply. With more money in the economy, this would benefit farmers, most of who were in debt, in various ways. Speculators also benefit from inflation. A speculator buys something at a low price and hopes to sell it at a higher price.  Thus, when inflation occurs, prices rise. This benefits the speculator who can sell whatever is being sold for a higher price.  This allows the speculator to make a profit. Both debtors and speculators benefit from inflation.

We’ve answered 318,914 questions. We can answer yours, too.

Ask a question