The size of the inflation tax

After the Second World War, the inflation tax (the taxation of cash balances through inflation) was widely used to reduce the public debt ratio. What could be the size of the inflation tax today (we look at the United States and the euro zone) in relation to the size of the public debt? The inflation tax can be levied: On banks, when their reserves at the central bank do not bear interest or bear a zero or negative interest rate; On non-bank economic agents and on the money (banknotes, deposits) they hold. The best that can be hoped for after the crisis is an inflation tax of 2 percentage points of GDP in the United States and 2.4 percentage points of GDP in the euro zone, which is not enough to rapidly reduce the public debt ratio.