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Politics : Ask Michael Burke
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To: Broken_Clock who wrote (112061)3/11/2008 2:22:43 PM
From: TimF  Read Replies (1) of 132070
 
Inflation makes things worse in general, and is certainly something we don't want more than a minimal amount of; but if you have a certain specific nominal dollar figure of debt inflation means that debt is worth less, and when considered in very narrow isolation, the debt is less of a problem because of the inflation.

Of course the real world isn't just one factor in narrow isolation. Inflation generally causes harm, and even just in the context of federal debt it can be problematic. It lowers the real level of existing federal debt, but it also causes lenders to demand higher interest rates for any future debt. And then over time high inflation damages the economy, and reduces the real growth in the economy, that would otherwise make the federal government more able to pay the interest on (or if it chose to, even pay down) the debt.

I certainly wasn't cheering inflation in any way, I was just pointing out one reason why measuring the deficit in nominal dollars isn't very useful.
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