Manageable inflation the only way to clear debt

NAMA has indicated it will take a “practical approach” to recovering payment from builders and developers. This is code for “we will do a deal with them and write off large portions of their debts rather than chase them”.

Thus, the remaining debt will be all the more. Ultimately, the big question is who pays and how much. Dr Peter Bacon was close to the mark when he said that ultimately the taxpayer will pay, either directly in taxes or bank interest and charges, or indirectly in the increased price of goods which themselves include an element of bank interest and charges.

So the question for Seán Citizen is how can this be reduced? The answer is inflation. NAMA will transfer the bad assets and debt from the banks to the Government, which cannot pay for it now and will instead take out loans (bonds) and repay these over approximately 35 years. The whole process is therefore a huge credit balloon. Correct me if I am wrong, but isn’t that what got us into this mess in the first place?

Yes – but now it is even worse because during a period of deflation, as we have now, the relative amount and price of that credit is increasing relative to Seán Citizen’s earnings. So 35 years could be 45 years. Inflation cures all debt and ultimately reduces it to next to nothing.

What we need is a short period of super-inflation, and what the Government and ECB should be doing therefore is printing money to create manageable inflation to reduce the debt. Is this not the opposite of what their policy is right now? God save us from government mismanagement.

Kevin T Finn

King’s Square


Co Cork

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