Saturday, October 17, 2009

What’s so bad about inflation?

David Blanchflower
Published 15 October 2009

In contrast to the tiny costs of inflation, the costs of unemployment are enormous

[...]

But to business. In his speech to the Tory conference, David Cameron discussed what he felt was the way out of the economic crisis. His three options were as follows, and I quote:

“Option one: we can just default on the debt. Not pay it. Other countries have done that in the past. But I don't think anyone in this country wants to go down that road.

“Option two: we could encourage inflation, which would wipe out the value of the debt, making it easier to pay off. But that's not just an economic disaster, it's a social disaster, too. It doesn't just wipe out debts, it wipes out people's hard-earned savings.

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