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Comment by kardashev | Hacker News Reader

Inflation would be a way to get rid of debt, but it literally takes money from the poor and working class and gives it to the rich.

10% inflation is equivalent to a person's salary going down by 10%. Also, any savings you had would be eaten up by 10%. Inflation is the same as taking people's money to pay debt. It's not some magic thing that makes debt go poof.

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If you manage to combine a x% inflation with a x% rise in welfare payments and of worker's income, people with relatively little money in the bank will not suffer much. That includes the poor and the very rich (who likely will have invested a large fraction of their savings).

The clear winners will be those with relatively high debts, the losers those who have been saving, but not investing.

Is it fair to tax the ants while rescuing the grasshoppers? No, but if the country as a whole is a grasshopper, it may be the best one can do.

A side effect of this strategy is that it teaches ants to invest, rather than put money in the bank. That's another reason why many countries aim for inflation.

The unfortunate side effect is that it shafts pensioners who should not be investing in equities because of the time scales involved. The UK (though a hefty dose of electioneering is involved) is offering bonds to pensioners which pay a higher coupon to offset the low gilt returns available.

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