Inflating away debt only works when the obligations are in fixed dollar amounts, like a mortgage. But essentially, all of our long-term fiscal problems are entitlement commitments that grow (are “indexed”) with inflation. When inflation rises, spending on Social Security and Medicare rise at the same rate. So the debt-inflation relationship is the opposite of the get-out-of-jail-free card some envision. Debt still goes up in real dollar terms, creating even more of a death spiral.
Why the U.S. Can’t Inflate Its Way Out of Debt
April 18th, 2010 at 9:39 pm
If the stated value, of “Federal” Reserve notes, declines enough with respect to copper and nickel, the 1946-2009 U.S. Mint nickels, composed of cupronickel alloy, could become somewhat rare in mass circulation.
The April 16th metal value of these nickels is “$0.0620726″ or 124.14% of face value, according to the “United States Circulating Coinage Intrinsic Value Table” available at Coinflation.com .