Inflation does not diminish debt and it does not destroy wealth!
It is not possible to ‘inflate our way out of debt’. It does not destroy wealth either. It transfers wealth.
Here’s Mark Faber spouting this annoying spin, but it is quite commonplace and especially the Austrians are famous for it. They use it to sell their specie.
It’s an annoying lie: as a society we can ‘inflate our way out of debt’. Nonsense: inflation is a growing money supply. Our money supply is debt based. Every new dollar in circulation is a new debt. Yes, it debases the original stock of money, but the value of the money supply (and thus the debt) in real terms remains the same.
All we can say is that by printing press inflation the Federal Reserve and the Government are taking on the debt, while diminishing the value of the debts of other players in the economy.
Likewise, inflation does not destroy wealth. It diminishes wealth of people holding dollars, but increases wealth of people spending the new dollars into circulation. The net asset position of society does not change. The value of the total money supply does not change. The value of the total debt (in real terms) does not change. It is just different people holding the bag.
So while it is true inflation can become a (easily manageable) threat for the individual, it solves nothing for society.
What could happen, is that the US Government goes broke and prints a few trillion to satisfy foreign creditors. These dollars would then be repatriated (there is no use for them overseas) and the US population would pay through rising prices. In this case too the total net asset position of the US economy would remain the same. Foreign debt would be replaced with domestic debt.
For the time being, however, M1 is contracting at a excruciating 11% per year in Europe’s periphery and growing at a paltry 1,5% in the US. This is depression, not inflation. Prices are rising not so much because of inflation, but because the Money Power’s speculators are buying up Oil and other commodities and that’s what’s driving up prices in the primary sector. These price rises must be passed on to the rest of the economy. In short: stagflation.