Yes, inflation, the last refuge of spendthrift governments. And to make matters worse we've actually got The Guardian praising the idea:
But the panic is plainly preposterous: living costs are rising at just shy of 3%, as opposed to just shy of 30% in the dog days of disco. The truth – although it is unthinkable for central bankers to say it – is that cheaper money can be a force for good. It was not (just) to be flippant that Keynes claimed Shakespeare's genius required inflation in order to flourish. At least until savers get wise and demand extra interest, it boosts enterprise by reducing the debts of people who borrow to do useful things, at the expense of those who squirrel their money away. It could also eat up the public borrowing that hangs over us all, just as it did with vast bills for the second world war. The downside? If prices rise steadily and in step, the costs are measured in the shoe leather worn out by extra trips to the cashpoint and in the endless reprinting of price tags – neither a truly crippling burden for UK plc.
Well, at least someone there has read at least one economics book to get the reference to shoe leather costs. But, umm, the rest of it smells like months old tripe really. "Saving" so that others can invest that money is squirrelling it away now, is it? 3% inflation over 25 years halves the value of money: not greatly helpful for those who would save for their retirement now is it?
But the truly gargantuan problem is the supposition that inflation would eat away at the debt burden. Firstly, of course, what this really means is a hidden default on that debt. You know, sort of a "Tee hee...we'll pay you your money back but it won't be worth anything by then. Aren't we clever!". Well, no actually, this isn't big and it's not clever. Those gilts largely exist in the pension funds of us out here in the general population so that suggestion is really that you'll steal from us in our old age in order to fund your fiscal incontinence now.
Worse than that though is that it won't actually work. For markets have been stung by that inflation ruse once already and so matters are now different. Some 25% (so I'm told) of long term gilts are now inflation linked. Inflation does nothing to reduce that burden then. Short term gilts will of course need to be refinanced at the new, higher, (nominal) interest rates that inflation will bring. And the largest parts of government debt, things like the PFI exposures and the public sector pension plans are all inflation indexed. So inflation would be both a default upon those who are not inflation protected and wouldn't solve the debt problem either.
Inflation simply won't cure the debt problem. We're back to either raising taxes so as to choke off new economic activity or firing some portion of the army of wastrels who consume the current tax take. Given my language choices there you can probably guess which course I regard as sensible....
