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(3,891 posts)
13. As with many issues, there are many truths to the situation.
Fri Oct 18, 2013, 01:19 PM
Oct 2013

First, it is true that inflation does reduce the buying power of money. If income does not keep pace with inflation, then your real money is less while the amount may be the same. Remember a million dollars in 1960 was a hell of a lot more money than the same amount now. So there is some truth to that.

Second, fiscal responsibility is what every family practices. We all budget ourselves to spend what we can actually afford. But in our families, much as in the nation, there are times when you have to do things on credit, like buying a house. Then we have our own individual servicing of the debt, which we do. But we still want Christmas for the kids, or braces for little sally, or baseball camp for Junior. So we put that on credit too. Now families know as the Government knows, that in thirty years, the payments on that house are going to be much easier to make. Because the amount you're paying, let's say $800 for the purposes of this discussion, may be the better part of a whole week's pay now, in thirty years with normal inflation, will be what you get for a day or two of work.

So inflation while bad in that it reduces the overall buying power, is also good for eliminating the long term cost of credit.

Then there is the last truth. A weak dollar in comparison to foreign money is not always a bad thing. Yes it makes foreign products more expensive, but it also means we will export more because our products are cheaper there. So a weak dollar reduces your buying power, for foreign made goods, it increases the buying power of those same nations in buying American. Suddenly, the American car looks pretty good by comparison.

As always the discussion can't be reduced to a talking point, because there are various nuances that are lost. Then the discussion is reduced to the kindergarten level with my dad can beat up your dad applicability.

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