Inflation effect on the debt

Inflation with reduce the purchasing power of currency. Purchasing power of currency is also known as parity theory. Continue inflation reduce the market value of dollar.
If you borrow some amount today you need to pay less value if inflation arises .Bank will try to cover the loss by increasing the interest rate on the borrowed amount.

Inflation situation arises when the Govt. Debt or fiscal deficit increases .Govt. use fund more than actually they collect .Govt. need to print new currencies and issue the bonds in the market with the higher interest rate.

Us economy has caught in recession and the continue devaluation of the dollar value also badly affect the situation.

One thing that these situation will not remain same for whole time so when you go for debt plan as to get advantage of the inflation situation think twice.

There are some points which can help you to get the actual picture of the economy.

Oil price is influence economy of every country so closely watch the oil price to get actual picture of the economy. Every increase of oil price is negatively effect the value of dollar in the market which create inflation situation .

Issue of the govt. bonds will also indicate the inflation situation .If govt. issue new bonds in market menace there is deficit in the Govt. budget which need to issue new currency in the market and the current value of the dollar reduce.