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When inflation is too high for a bank to determine the interest rate on a loan it can give you This cost of inflation is Shoe- leather cost .
What is Cost of inflation?
Inflation has various consequences; instability and uncertainty can lead to lower levels of investment and worse economic growth. Inflation can reduce the value of an individual's savings and shift income in society from savers to lenders and people with assets. Inflation may destabilize society and undermine trust in the economic system at severe levels.
Metaphorically, the cost of shoe leather is the cost of time and effort (or opportunity costs of time and effort) that people waste by retaining less currency in order to lower the inflation tax that they pay on cash holdings when inflation is high. These expenses include making multiple journeys to the bank, not having enough change, or being unable to make unexpected expenditures. The name derives from the fact that more walking is necessary (historically, though the emergence of the Internet has decreased it) to travel to the bank, collect cash, and spend it, causing shoes to wear out faster.
Therefore, when inflation is too high for a bank to determine the interest rate on a loan it can give you This cost of inflation is Shoe- leather cost .
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