How does inflation affect national debt

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If we have lower federal rates, that causes an inflation right?

Currently we have massive national debt. And we pay interest on that.

Why not try to maintain inflation just slightly above the interest rate of our debt, so that eventually our debt is irrelevant (the “buying power” of the 30ish trillion dollars would be reduced faster than the interest we pay on it).

In: Economics

11 Answers

Anonymous 0 Comments

That’s effectively what governments do. However, they also do it through growth of the economy. There’s also the fact that a good chunk of the debt is effectively owed to the government anyway so costs basically zero to maintain since interest payments are returned to the ‘shareholder’ of the central bank in the form of a dividend… the shareholder being the government. (Depending on your particular country). So the concern may be less about the cost of ‘carrying’ the debt and more about a central bank deciding to use paying back some of the debt to moderate the amount of money in the economy.

Basically, government has a radically different relationship to money and debt than you or your business has. Trying to pretend otherwise by relating to your household to try an terrify the population into voting a certain way is effective, but wrong.

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