What the world needs is a good dose of inflation - Financial Times

From Prof Johan Lybeck.

Sir, "Austerity measures expected to pay off" (January 4) is the good news, while "less pleasing for the government and the central bank is rising concern over high UK inflation". Why cannot it be realised that the first is conditional on the second? Only by some increase in inflation can the debt and deficit problems be solved without undue social costs. Inflation increases tax revenues by pushing the average tax unnoticeably higher through the effect of marginal taxes. Inflation erodes the level of government debt in relation to gross domestic product.