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

Inflation makes the debt feel smaller over time. If prices go up, wages go up, taxes paid go up and the repayment of the debt gets easier… just like a mortgage or car loan may feel easier to pay over time as wages increase.

Lower fed rates don’t cause inflation — we had over a decade of minimal inflation despite Fed rate around 0%. But raising rates is a key tool to reign in inflation by reducing demand.

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