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

Mostly because the people that purchase the debt aren’t that ignorant. There have been situations where lenders are willing to accept negative real interest rates possibly in return for security/capital preservation. But that situation probably holds only for rather developed and stable countries.

Also remember that this punishes savers and might be something that politicians won’t want to risk.

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