Is there a correlation between interest rates, inflation and the national debt?
The possible correlation between the national debt, inflation, and interest rates has been of interest to economists for a long time. As is typically the case when economists spend time pondering such questions, you get many different answers. There are many different models of how the economy operates, and many different predictions about how the national debt or national deficits can affect things such as inflation and interest rates. Ultimately, the empirical evidence is fairly mixed in terms of the actual observable relationship between the national debt, inflation and interest rates. To walk through a few of the possibilities, though, we need to define some terms. We often hear about federal budget deficits and the national debt. The budget deficit (or surplus) refers to the difference between current government revenues and government expenditures. Therefore, when U.S. Government spending exceeds tax revenues, we have a budget deficit. The accumulation of these deficits overtime
