Friday, September 1, 2017
Paying down debt is a better way to fight inflation than raising interest rates
Why is paying down debt a better way to fight inflation than raising interest rates?
Paying down debt takes money out of circulation. Raising interest rates doesn't.
Paying down debt reduces financial costs. Raising interest rates increases them.
Paying down debt affects those who have borrowed. Raising rates affects everyone.
Paying down debt to fight inflation also reduces debt.
Reducing debt encourages growth. Raising rates discourages growth.
Paying down debt is a better way to fight inflation than raising interest rates.
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1 comment:
"Paying down debt affects those who have borrowed. Raising rates affects everyone."
These days of course, paying down debt affects everyone. But that's because we've been accumulating debt for a long time, and had no policy to encourage repayment of debt.
If "encouraged repayment" had been policy since the 1960s, we might today have no more debt than we had then. And some people would be paying down debt while others were borrowing more, helping the economy grow.
These days, encouraged repayment would affect everyone because we didn't have that policy in place all along.
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