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Does the debt adjust for inflation?

FREEDO
Posts: 21,057
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7/30/2011 6:37:32 PM
Posted: 5 years ago
It just occurred to me today that if the debt does not adjust for inflation then we could double the money supply(which I know would cause a shitload of problems) and our debt would suddenly be cut in half.
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fnord
Wnope
Posts: 6,924
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7/30/2011 6:46:17 PM
Posted: 5 years ago
At 7/30/2011 6:37:32 PM, FREEDO wrote:
It just occurred to me today that if the debt does not adjust for inflation then we could double the money supply(which I know would cause a shitload of problems) and our debt would suddenly be cut in half.

Right, but when you weaken the dollar then the stuff you print doesn't get rid of as much debt as if the dollar were stronger.
mongeese
Posts: 5,387
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7/30/2011 6:49:10 PM
Posted: 5 years ago
It's possible that some of our debt is based off of another currency so that inflating the dollar won't change it. If China actually loaned us its own currency, and we inflate our own, we'd weaken the exchange rate and owe the same amount of China's currency.
Ragnar_Rahl
Posts: 19,297
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7/30/2011 8:25:41 PM
Posted: 5 years ago
At 7/30/2011 6:46:17 PM, Wnope wrote:
At 7/30/2011 6:37:32 PM, FREEDO wrote:
It just occurred to me today that if the debt does not adjust for inflation then we could double the money supply(which I know would cause a shitload of problems) and our debt would suddenly be cut in half.

Right, but when you weaken the dollar then the stuff you print doesn't get rid of as much debt as if the dollar were stronger.

When you print s*** and give it to the creditor, the debt is gone.

And your country will on average have to sell its stuff where the money went, but that's true of any method of debt repayment.

Of course, you're much less likely to be a trusted debtor in the future.
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darkkermit
Posts: 11,204
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8/1/2011 11:25:53 PM
Posted: 5 years ago
That's pretty much what occurs If the FED buys treasury bonds. The american government gets most of the profits from the FED, so really If the FED holds treasury bonds, the government is just lending to itself. That's pretty much what the government is doing now:

http://theeconomiccollapseblog.com...

Just look at the money supply, look at the monetary base:
http://www.shadowstats.com...

Can you say hyperinflation?
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RoyLatham
Posts: 4,488
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8/2/2011 3:06:51 AM
Posted: 5 years ago
All the debt is in dollars.

Inflating the currency does diminish the value of the debt, along with all the other dollar assets. There was talk of floating the Greek currency independent of the euro, so that it could be inflated. However, all the bond holders would lose their investments just the same as default.