Friday, March 12, 2010
Why we can't inflate our way out of debt
Iiiiiiinteresting... We Can’t Inflate Our Way Out of the Debt Crisis. Basically, "[C]reating currency isn’t like, say, diluting shareholders in a company. You’re always rolling your debt, and the market’s response to an inflationary strategy is (not surprisingly) higher interest rates." And inflation has negative side effects, including, "reduced economic growth, increased social and political stress and added strain on the poor — whose incomes aren’t likely to keep pace with the increase in food prices and other basics. That, in turn, could increase pressure on the government to provide aid — aid which would need to keep pace with inflation."