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Controlling US Inflation, Global Trade, and the Future of India and Japan
"Econ 102" with Noah Smith and Erik Torenberg
Growth and Inflation: A Winning Duo
Paying off post-war debt was largely achievable due to a combination of significant economic growth and inflation. Economic expansion resulted in increased tax revenues, as higher incomes naturally boosted tax collections, independent of changes in tax rates. This was coupled with inflation, which diminished the actual value of the dollars needed for repayment. The inflation rate during the 1950s, often romanticized, was comparable to present-day levels, illustrating that higher inflation can alleviate debt burdens alongside real income growth. Together, these factors enabled a more manageable approach to debt repayment that may seem like an alluring economic parallel to today's conditions.
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