🚀 go-pugleaf

In article <1993Jan18.030536.27897@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
>In article <1993Jan18.004128.5655@midway.uchicago.edu> thf2@midway.uchicago.edu writes:
>>>still? it was over $250B in '91, and will be over $300B in '92.
>>
>>Are you including the $160 billion or so of debt that was monetized
>>away due to inflation?  If not, you're double-counting.
>
>please explain what you mean by this.
>
>thanks

Say that there's a $1 trillion debt, $100 billion deficit, and 5% inflation.

In year 0, the debt is $1 trillion.
In year 1, the debt is $1.1 trillion, but the *real* debt is only $1.05
   trillion, because a Year 1 dollar is worth less than a Year 0 dollar.

Or, if you prefer, you can rephrase the Year 0 debt as $1.05 trillion,
because $1 trillion in Year 0 = $1.05 trillion in Year 1.  The real
difference between the Year 0 deficit and the Year 1 deficit is approx.
equal to $50 billion, not $100 billion.

The "deficit" figure will include the interest for this inflation, but
it's not a real expense.  Hence, deficit figures will always look larger
than they really are.

In an era with 4% inflation and $4 trillion, inflation shrinks our national
debt by $160 billion every year.  Not including this shrinkage overstates
the actual harm done by the deficit.
-- 
ted frank                     | thf2@ellis.uchicago.edu 
standard disclaimers          | void where prohibited
the university of chicago law school, chicago, illinois 60637