Can inflation ... inflate away debt?

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 11 May 2022

⏱️ 9 minutes

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Summary

We often talk about inflation as a bad thing. But for countries in a lot of debt, inflation has an upside. But can a country try to inflate its way out of debt?

Transcript

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0:00.0	NPR.
0:11.8	Hot off the presses.
0:13.8	Inflation numbers for April are out.
0:15.5	Well, depending on when you listen to this episode, the news may be warm off the presses
0:20.2	or even cold off the presses.
0:22.3	Hey, I feel like our show is like cold pizza, right?
0:24.9	It's still good the day after.
0:26.4	Still delicious.
0:27.4	Okay, so the news is, last month, inflation was up 8.3% from a year ago.
0:34.4	That is according to the Labor Department's consumer price index.
0:37.9	And 8.3% is slightly lower than March's figure.
0:41.9	And yet, it's more data showing we're still near the highest levels of inflation in
0:46.3	four decades.
0:47.9	So with that in mind, we're going to kick this episode off with an idea that might
0:51.6	sound a little controversial.
0:58.9	And that is inflation can be good.
0:59.9	And now, most of the time in the show, we talk about inflation as a bad thing, how it erodes
1:03.2	the value of our wages and our savings.
1:06.0	But you know, inflation can be good for borrowers, for individuals with outstanding debts.
1:11.8	Ricardo Horatius, a professor at the London School of Economics, and he explains it like
1:15.6	this.
1:16.6	Imagine that you borrowed $1,000 from a friend of yours 20 years ago.
	...

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