HiveComb

This weekend we had a girls' get-together where we shared our lives and gossiped, as men say, but the truth is we talked about many things, some even serious. Sometimes we talk about economics. We even have an economist in the group. And this week the topic of inflation came up.

In recent years here in Europe, inflation has become a problem, especially with food and housing. It doesn't seem to be getting better; quite the opposite. This makes you wonder what's happening and why. It doesn't seem like many fundamental things have changed in our societies. Well, not many, but one thing has: debt. Governments are increasingly indebted. And that debt has reached a point of unsustainability.
Logic would tell us that if we have too much debt, we should stop spending and pay it off. After all, that's what we all do at home.

But there's another way to get rid of debt without stopping spending: increase your income. A citizen might find a second job, and the government would raise taxes. But what happens to a state that can no longer collect more taxes because it has also reached its limit?
In economics, there is one solution: inflation. Inflation reduces debt, or more precisely, diminishes its value. And that is what the ECB is doing with its monetary policy. Inflation is high, but they are keeping interest rates below it, making debts easier to repay. Now, this is a dangerous game that can go very wrong if it enters an inflationary spiral.