Governments can borrow across periods far longer than most private actors. When debt is fixed in nominal terms, inflation gradually reduces the real value of the amount that must be repaid. That is one reason a government can regard some inflation as useful in both short- and long-term fiscal planning. The argument concerns a limited, sustainable level rather than a claim that rapidly rising prices are harmless. The important distinction is between the face value of sovereign debt and its changing real burden over time.
Notable Point · 2:47:11-2:47:53
Why governments can benefit from moderate inflation
A public-finance aside explains why a government issuing sustainable long-term debt may see moderate inflation reduce the real burden of repayment.