The federal budget deficit is on track to hit a record $3.3 trillion this year, and Democrats and Republicans are trying to work out the details on a second stimulus bill that could drive that number even higher.
Historically, large deficits can lead to increased inflation, according to Sahil Bloom, a financial educator and vice president at Altamont Capital Partners.
With greater inflation, the purchasing power of your dollar goes down, and that can happen when a government “prints” too much money, Bloom said.
The biggest risk now is that the buying power of the dollar is too high, according to Bloom. Such “deflation” would lead to less spending and more saving, which would actually be bad for the economy, he said.
Check out this video to learn why the value of your currency fluctuates, what it means for you and to see how the Fed plans to keep the dollar steady.
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