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Posted October 19. 2017 12:52PM

Hans Baumann: Why do we need inflation?

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First, one of the biggest beneficiaries of inflation is your government, including the Federal Reserve System. Inflation has two beneficial effects: First it steadily lowers the cost to repay billions of bonds issued by the government to cover the ever increasing public debt. For example: Assuming a 5 percent annual inflation, then the redemption price (in current dollars) at maturity for a 10 year bond amounts to only 60 cents for every original dollar the bond holder paid.