Reply #75: No it isn't. [View All]

[Statistical]

Say someone has $200K in debt but the annual servicing of that debt is $15,000.

Now if someone is unemployed for 2 years then to avoid going into default they don't need $200K they just need $30K.

By using cash to pay down the debt they are not trapped.

If inflation rises they are trapped because they have no debt to pay down (only way to stay ahead of inflation in high inflation environment).

If doesn't rise but they lose their job sure the $200K debt is paid off however what about other bills and debts? Cash gives them the ability to continue to service debts and pay expenses.
Even worse if someone with say $100K they can liquidate and $200K in debt. If they followed your advise they would cut their debt to $100K however that wouldn't keep them from losing it if they were unemployed. Instead if they had kept the $100K in assets and slowly liquidated them while unemployed that would produce cashflow and allow them to pay debt & expenses without defaulting.

If inflation doesn't happen and they aren't unemployed and we have an economic expansion they have liquidated their assets to pay down debt and while they won't lose anything they will miss that economic expansion.

Paying down debt low interest fixed income debt (like a home) is a trap.
Instead continue to service the debt. Don't sell assets/investments simply hedge them by buying investments that rise in high inflation environment. At worst case scenario over a long time horizon (say 5 to 10 years) you should break even. That would allow you to use that to continue to service the debt in the event of unemployment, medical crisis, or some other issue that disrupts normal cashflow.

You run the risk of destroying someone financially by making claims not supported by ANY economic theory. I doubt you want to live with that.