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No alternative to inflation
The nominal income or cash flow received by households determines how easily they can repay debt contracts fixed in nominal terms. In the same way, the nominal income or cash flow received by companies determines how easily they can repay debt contracts in fixed currency.At the most general level, nominal GDP is in some sense the "national cash flow" -- and determines how easily the economy as a whole can support an overall debt structure fixed in nominal terms. Nominal GDP growth becomes exceptionally important, especially at times when debts are at a high level. The attached charts show quarter-on-quarter and year-on-year growth in GDP in both nominal and real terms since 1947. Posted by: ed 2009-02-11 |
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