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Help me out here, the man claims that debt can't be compared to GDP because one is a stock and one is a flow and GDP is recalculated each year. Is there a flaw in that argument? GDP may be calculated each year but it is still inflated each year. And then he says that debt hasn't increased because of inflation and old debt is simply inflated debt, but interest rates are higher than inflation and sometimes by a considerable amount. When have we had 29%inflation? I'm not an economics but this doesn't sound correct. What do you say?
I say he doesn't get it and never has....
GLH,Suppose I borrow $100 when the price index is 100, and pay back the $100 when the price index is 400. To return the same purchasing power to the lender, I would have to pay $400 to the lender (because the price index is 400). But I only paid back $100, or one quarter of the original purchasing power. I stiffed the lender pretty good. (He made it up on interest probably, but that is a different calculation.)Now, suppose I borrowed $100 when the price index was 100. And suppose I borrowed another $100 when the price index was 200. And then I paid it all back when the price index was 400. How much of the original purchasing power did I pay back?
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