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

Debt alone isn’t the problem – inflation builds on itself (hence the worry about have an inflationary spiral), reduces the value of savings, changes investment patterns, and causes people to lose confidence in the economy. So, inflation has to be kept in check – but doing can lead to job losses and even a recession.

Debt is a problem if and only it either causes investors to lose confidence in a nation’s ability to service that debt or it crowds out investment (and leads to interest rate increases). Neither of those are the case today – but the rate of growth of our debt is concerning and should be checked.

Ideally we would increase the debt in bad times and run surpluses during good times.

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