5 ms·

I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is goo

I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is good for the debt?

guyzero 4y ago
Yes, inflation is good for debt holders. Unfortunately higher inflation is usually accompanied by higher interest rates making for higher debt payments.
seibelj 4y ago
Unfortunately we are constantly issuing new debt to pay back the old debt because the government spends far beyond its means. So it doesn’t help.
- dkjaudyeqooe 4y ago
  To the contrary, while the US can issue debt and people are willing to buy it it is living within its means.
  - seibelj 4y ago
    Only a fool thinks the ability to get a loan is equivalent to living within one’s means
    - jeffbee 4y ago
      The United States is not a person and you can't translate folk economics from your kitchen table to the nation.
      - seibelj 4y ago
        That's what everyone says until the government defaults on its debt. The US is a special case because of our unique situation as the military superpower and reserve currency, but look at Argentina, Venezuela, and the UK for a counterpoint.
        rwmj 4y ago
        How do you imagine the US can default on its debt? It borrows in its own money.
    - dkjaudyeqooe 4y ago
      If you want to moralise, that's your trip, but borrowing power is an objective measure of your financial health.
    - lijogdfljk 4y ago
      I dunno, if you were willing to issue me unlimited borrowing i'm not sure i would care about repayment. Isn't that exactly the reason repayment matters?
dkjaudyeqooe 4y ago
Fun fact: the US has never (except for a short period during the Clinton admin) repaid any of its debt, it just made it insignificant through inflation and economic growth. Edit for the pedantic: I obviously mean total debt.
- maerF0x0 4y ago
  Sounds like something its lenders should consider.
  - noelsusman 4y ago
    Not really because it's not remotely true. The US has paid back every piece of debt it has ever issued that has come due.
    - adrian_b 4y ago
      Of course every debt has been paid, but by making a new greater debt. Any individual who has a debt would like very much to also be able to continue to borrow money indefinitely and pay the old debt without worries.
      - boppo1 4y ago
        If he's too big and scary for anyone in the neighborhood to beat up, he probably will.
      - Spivak 4y ago
        Oh good lord that's not how this works at all. Like it takes like 2 minutes to see that this couldn't possibly be the case. If the US was servicing its debt exclusively through taking out more debt what would graph of national debt look like over time -- exponential! The exact same as if the gov't wasn't servicing its debt at all because that's how compound variable rate interest works. Then just look at the graph of national debt both in nominal and real value.
        4y ago
bern4444 4y ago
That is correct. Inflation reduces existing debt. The problem is we continue to issue new and more debt at higher rates so the total amount still only goes up.
- CydeWeys 4y ago
  Yes, the total amount may go up in nominal terms, but it's not going up in real terms if inflation is eroding it faster than new debt is being issued. If the value of the dollar halves in a decade but the debt only goes up to, say, $50T, then the total national debt in real terms has gone down significantly.
  - bern4444 4y ago
    > if inflation is eroding it faster than new debt is being issued. I would be interested to know of a time when inflation was higher than the rate of new debt being issues in the US. Maybe in the 70s when inflation hit record highs but interest rates also hit record highs at that time.
- MuffinFlavored 4y ago
  Is there a way to calculate like... the debt but in "inflation adjusted" dollars?
  - bern4444 4y ago
    The debt level is reported accounting for inflation. https://www.usdebtclock.org/ https://www.usdebtclock.org/
    - MuffinFlavored 4y ago
      Which field? The $31t national debt dollar field? I thought that was un-inflation adjusted dollars?
      - bern4444 4y ago

I could be wrong but... if inflation was 8% year over year, doesn't that mean our national debt (nominated in dollars) got "eroded" by 8%? aka, inflation is good for the debt?

guyzero 4y ago

Yes, inflation is good for debt holders. Unfortunately higher inflation is usually accompanied by higher interest rates making for higher debt payments.

seibelj 4y ago

Unfortunately we are constantly issuing new debt to pay back the old debt because the government spends far beyond its means. So it doesn’t help.

dkjaudyeqooe 4y ago
To the contrary, while the US can issue debt and people are willing to buy it it is living within its means.
- seibelj 4y ago
  Only a fool thinks the ability to get a loan is equivalent to living within one’s means
  - jeffbee 4y ago
    The United States is not a person and you can't translate folk economics from your kitchen table to the nation.
    - seibelj 4y ago
      That's what everyone says until the government defaults on its debt. The US is a special case because of our unique situation as the military superpower and reserve currency, but look at Argentina, Venezuela, and the UK for a counterpoint.
      - rwmj 4y ago
        How do you imagine the US can default on its debt? It borrows in its own money.
  - dkjaudyeqooe 4y ago
    If you want to moralise, that's your trip, but borrowing power is an objective measure of your financial health.
  - lijogdfljk 4y ago
    I dunno, if you were willing to issue me unlimited borrowing i'm not sure i would care about repayment. Isn't that exactly the reason repayment matters?

dkjaudyeqooe 4y ago

Fun fact: the US has never (except for a short period during the Clinton admin) repaid any of its debt, it just made it insignificant through inflation and economic growth. Edit for the pedantic: I obviously mean total debt.

maerF0x0 4y ago
Sounds like something its lenders should consider.
- noelsusman 4y ago
  Not really because it's not remotely true. The US has paid back every piece of debt it has ever issued that has come due.
  - adrian_b 4y ago
    Of course every debt has been paid, but by making a new greater debt. Any individual who has a debt would like very much to also be able to continue to borrow money indefinitely and pay the old debt without worries.
    - boppo1 4y ago
      If he's too big and scary for anyone in the neighborhood to beat up, he probably will.
    - Spivak 4y ago
      Oh good lord that's not how this works at all. Like it takes like 2 minutes to see that this couldn't possibly be the case. If the US was servicing its debt exclusively through taking out more debt what would graph of national debt look like over time -- exponential! The exact same as if the gov't wasn't servicing its debt at all because that's how compound variable rate interest works. Then just look at the graph of national debt both in nominal and real value.
      - 4y ago

bern4444 4y ago

That is correct. Inflation reduces existing debt. The problem is we continue to issue new and more debt at higher rates so the total amount still only goes up.

CydeWeys 4y ago
Yes, the total amount may go up in nominal terms, but it's not going up in real terms if inflation is eroding it faster than new debt is being issued. If the value of the dollar halves in a decade but the debt only goes up to, say, $50T, then the total national debt in real terms has gone down significantly.
- bern4444 4y ago
  > if inflation is eroding it faster than new debt is being issued. I would be interested to know of a time when inflation was higher than the rate of new debt being issues in the US. Maybe in the 70s when inflation hit record highs but interest rates also hit record highs at that time.
MuffinFlavored 4y ago
Is there a way to calculate like... the debt but in "inflation adjusted" dollars?
- bern4444 4y ago
  The debt level is reported accounting for inflation. https://www.usdebtclock.org/ https://www.usdebtclock.org/
  - MuffinFlavored 4y ago
    Which field? The $31t national debt dollar field? I thought that was un-inflation adjusted dollars?
    - bern4444 4y ago