How the Government Controls the Economy with Debt

During the current crisis the US government (and other governments) is pumping trillions into the economy to avoid deflation. The government is more afraid of deflation than inflation. Deflation is harder to control than inflation.

In order to fight deflation the government lowers interest rates. Now they are near 0 percent. If you have money saved this means you are earning virtually nothing in interest in your savings account and as the government prints more money, the money you do have loses value. So as a saver you’re losing bug time right now.

When inflation gets too high then the government will raise interest rates to try to control it. In the 80’s rates were raised to 20%! This means if you had a $100,000 in the bank you could almost live of the $20,000 in interest you were paid on your savings. So when rates are high it makes sense to save to get a good return on your money.