http://www.telegraph.co.uk/finance/...to-look-like-a-cure-for-our-current-ills.html "The usual candidates for leading us out of recession government and consumers are weighed down by debt. Their response has been to try to cut spending. But that merely reduces someone else's income and so pushes the debt problem around the system. Better to get the less indebted to spend more, if you can. Higher inflation appears to offer a credible alternative. Since most debt is fixed in nominal terms, as pay and prices (and therefore money GDP and tax receipts) go up, the ratio of debt to income falls. Accordingly, inflation is the classic way to wipe out debt." The MSM in England is now championing inflation as a way to get out of debt!! Once the inflation genie is out of the bottle its hard to get back in. Still, if you look at the comments most people seem aware that inflation is a hidden tax and theft of savers money. Won't stop the government though.
If they are talking about price inflation it will destroy their economy. Wages will not climb to match inflation simply because the only things people will spend most of their money on in a high inflation scenario are essentials such as food and energy and transport. Most of the retail and wholesale economy is not for essential goods and services, which means that the largest part of the economy will simply shut down and lay off staff as most businesses cannot put up wages if they have no paying customers to supply those wages.
Inflation is their way of (trying to) avoiding the solution to the problem. The solution is a depression, like it or not. In the boom/bust cycle, if you avoid the bust for long enough, you end up with a bust so big you can't avoid it. The fun part is that we may get to learn this lesson again in 80yrs or so.
I agree totally with ^^^^^. However. I can't see any way for the USA government can repay it's $15 trillion debt out of tax revenues.. Each year they have to borrow another $1trillion+ to keep the country operational. Inflation is the only answer as it appears to me .. Remember, the inflation that swept all the western countries in the seventy and eighties..Wage rises of 16 to 30%, prices rises to match, home prices rising at astronomical rates. Up goes the governments tax revenues and then it is much easier to pay the debt. Thats the way I see it unfolding. By the way Jonesy, I don't think it will make any difference in the USA, who is in power, be it red or blue. At least in Australia our government debt is manageable at this stage except for the states and local governments. Now I know you will say that this is due to the former liberal government and in that you are right.. we did have our debt reduced to zero..Then along comes the GFC of 2008..The governments of the western world agree that the only way to avoid a depression at this stage is to bail out the banks and stimulate the economy by extra spending. So that is what happened. Spend and spend some more was the order of the day.. Next time it will be different, we have no assets left to sell..Raise the taxes will only slow the economy...If China, Japan and South Korea economies collapse then Australia will suffer as a result.. Will it make any difference in who will be Australia's nomination for the world's fourth straight greatest treasurer. The world bankers will tell Australia what must be done! Unemployment to rise to double digit figures. Will that matter to the blue or red party, I don't think they will give a damn. Regards Errol 43
