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Vocabulary: inflation, burden, consumers, profits, investors, income, bankruptcy, commodity, forecasters, curbing, consumption, resilience, era, tolerance, recession, sanguine, petroleum, fundamentally, crude, refinance, mortgages, scant, sustained, robust, surge, rally, hedge, surcharge, declining, threats Extension Activities: 1.
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Falling prices have added to the real, inflation-adjusted burden of the government's debt, which currently stands at 175% of GDP.
Inflation eases the burden of debt; deflation increases it.
Inflation distributes the burden of war costs in an arbitrary manner, penalizing persons with fixed incomes.
What matters for boosting demand is the real interest rate the nominal rate minus expected inflation since inflation reduces the burden of repaying debt.
This would let central banks cut effective borrowing costs despite the zero bound on interest rates, since inflation reduces the burden of repaying a given loan.
As for inflation and tax burden our a-priori expectations are ambiguous.
It is also a spur to borrow for investment, in a home if you are a household or in productive kit if you are a business, because if you think your earnings will at least rise in line with inflation, then the burden of your debt will diminish with passing years.
Deflation increases the real (inflation-adjusted) debt burden, as well as the real interest rate.
It is presumed that monetary and fiscal stimulus will not work or will give rise to inflation, impossible debt burdens and socialism.
If anything, history has shown us that by encouraging corruption, creating dependency, fueling inflation, creating debt burdens and disenfranchising Africans (to name a few), an aid-based strategy hurts more that it helps.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com