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When there is high rate of inflation the value of financial asset such as debt fall.
(1) How?
(2) How is debt an asset as we are taking money from someone. Shouldn’t it be liability?They mean that you have lent money to someone and are receiving interest on it. You own the debt and hope it will become cash when paid.
Nowadays, we use the term accounts receivable (customers owe you money). The term used to be debtors.
You lose because of inflation as follows. Lend someone 1000 at 2% interest. Inflation is 4%.
After a year you receive 1020, but goods that cost 1000 now will cost 1040….so they are no longer affordable.
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