This week I’m talking about inflation - are we in for higher inflation in the coming years? And if so, what does that mean for you and your retirement? 

To establish a good foundation for the rest of the week, I’m spending today and tomorrow talking about the national debt and inflation basics and how the national debt is unique from debt like you and I have. There are several drivers for higher inflation, but a soaring national debt is one of the biggest, if not the biggest driver of higher inflation. 

So what is the national debt? The national debt is simply how much the government owes its creditors. The national debt amount is over $26 trillion and it keeps going higher with no end in sight. 

But unlike you and I, the US government has printing presses. So they can just turn on those printing presses to print more dollars to pay down the debt. The problem with doing that though is that if the printing press is abused, the impact on higher inflation can be devastating. Examples of this happening in other countries abound - places like Germany and Venezuela have experienced hyper-inflation that has devastated the economy and their citizens. 

The other reason why a high national debt is problematic is because it causes lenders to lose confidence in the government’s ability to pay that debt back. In effect, it lowers our national credit score. New debt issued by the U.S. would then need to be issued at higher rates because of the increased risk of borrowing. Higher rates on government issued debt means that it’s more expensive for the US to pay interest to creditors every year, and these increased debt servicing costs mean that the government spends more of the tax revenue it takes in each year to pay interest on debt, and not on roads, schools, or programs like social security. 

As the national debt clock keeps ticking higher, higher inflation becomes an increasingly real possibility, so we’ll talk about the problems with higher inflation due to high government debt levels tomorrow. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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