Inflation is not a word of four letters

If you read the financial news and listen to economic experts, we must believe inflation is a four-letter word in relation to our economy. Not a day passes in which an expert does not warn us that inflation is about to show its ugly head and destroy our fragile economy. However, apart from the hysteria, inflation is something to be feared to be taken into account the current state of our economy?

It 'a fact that inflation helps debtors at the expense ofprotector. If you are a pimp, inflation will certainly work against their interests. If a dollar saved today will be only worth 90 cents next year, saving money is a losing proposition in the interest rate they receive on their savings rarely exceed the general rate of inflation.

But the truth is that there is little net saving in our economy. Most of us, including the federal government, are burdened by debt and a dollar of debt todaywho will be 90 cents next year, the debt is not necessarily bad as feared. Paying this debt is easier when the economy is growing and the debt in real terms is declining.

We need to re-inflation of the mountain of debt that we created? Some economists do not believe, but there is a flaw in his reasoning. It is often said that you do not inflate our way out of debt because the current was not necessary in 1945, whenThe federal debt was a higher percentage of gross national product than it is today. While the federal debt in 1945 was 120% of GDP in 2008 compared to 45% of GDP, considering only the federal debt does not give an accurate picture of the debt problem.

This is the total debt of our economy, not just the debt of the federal government, which holds the wing economic. In 1945 came the total debt, is fed and not fed, were 192% of GDP, but in DecemberIn 2008, total debt was 235% of GDP.

The absence of federal debt (which includes local and state governments, businesses, companies and individuals not in debt) was only 72% of GDP in 1945. At the end of 2008, not the federal debt was 191% of GDP. In other words, the private sector has the capacity to borrow and spend, therefore, the economy in 1945. Which allowed the federal government to pay debts without inflation and without depression post-war. ThisThere, in 2009. Our economy is already much more indebted than it was at the end of the Second World War.

We are in a situation without precedent in our history. Without some borrowing and spending entity, can not escape recession. But he can no longer mountains of debt, if not diminish its value in real terms and the best way to decrease the value of our debt is to inflate the currency. So deeply in debt economy like ours should be thanked for inflation - is safeis preferable to a deflationary collapse of the economy.