Not sure what you mean by this: 'If inflation is higher than 4% (real inflation, not gov't figures) then you're actually earning a negative rate of return when you add debt and inflation'?
I wanted to answer this, and started writing a long post and then I remembered I had other things to do and it didn't get answered.
Interest is meant to be the price of capital (savings), in the case of almost everyone here, short term savings. It is meant to compensate you for deferring present compensation, the risk the bank won't be able to pay back, and to offset inflation (increases in the money supply, resulting in an increase in various general price levels)
When you use that interest, thinking it is 100% a premium for deferring present consumption, and you arbitrage the interest on your loan (paying a premium on past consumption) , you're possibly taking a net loss if inflation is larger than your spread (we'll ignore bank risk premiums for now).
Example.
You get 6% interest.
You pay 3% on loans.
You net 3% before inflation.
If inflation is 3.1% or higher, you're incurring a loss.
If you don't understand how money is created (fractional reserve) or how inflation happens, or what the concept of the time value of money is, it's dangerous to try to play spreads in a game that is stacked against you and any small profits you can try to squeeze from the game.
If you've got more questions about this, hit me up on skype.
