It still ende up in inflation. Arguably not very much inflation with interest rates effectively negative, but they are only there because the central banks are dictating such. It's not long ago they were providing unlimited liquidity for free to anyone who wanted it - there are real genuine market interventions required to hold the commercial banks to the interest rates dictated by the BoE, ECB, FED and so on.
Forgiving the interest on a loan is akin to saying capital has no cost - that it can be deployed with equal efficiency on any venture that will at least cover its costs. And as Japan teaches us, that might actually be the situation we find ourselves in, but that governments are always going to be a special case. It's hard to argue that the first chunk of spending on keeping a functional state, well, functioning, is not good value for money. It's far harder to argue that absolutely everything a kleptocratic western democracy does produces value equal to the cost.
The idea of essentially forgiving interest on debts is nothing new, and does nothing to address the fundamental problem of excessive govermnent indebtedness. Indeed, it only encourages more of the same problem. As a one-off in exceptional circumstances, it might be tolerable. It would be bad news for it to become the new normal.
"The rich have to pay their fair share!" "Warren Buffet's secretary pays a higher tax rate than her boss, that's not fair!"
Warren Buffet’s secretary is estimated to earn between $200,000 and $500,000. As this is regular income, she can’t really take the kinds of deductions her boss can. In any case, the income of Buffet’s secretary does not really place her in the non-rich class. In fact, the secretary is the exact person, whom Obama wants to target.