How does inflation help? I know that some people liked it when inflation was higher because their investments earned more interest, but if the cost of everything goes up, how does the higher interst help (unless the interest on their particular investment went up higher than the inflation rate)?
I admit I am not an economist. Are inflation and interest rates tied together? I’ve always thought inflation was a negative.
Well, inflation is your enemy if you are a saver, but if you are in debt, like governments, then inflation is your friend.
You take out a loan, of $100 million in today’s dollars, but you get to pay back say $110 million in tomorrow’s dollars. If tomorrow’s dollars are worth less than today’s dollars, your debt burden shrinks.