However, once you factor in inflation -- which runs at or around 2% depending on the country you live in -- you are making no money at the end of the year.
No, as a borrower, inflation works to your advantage.
i.e. I borrow $1k at 0% for one year. I put the money in a 1 year CD paying 1% interest. At the end of the year, I pay back the loan with the CD's principal, and put the $10 interest in my pocket.
Even if inflation were 2% (or 10%, or 100%), I am still making money - no matter how deflated the value of the dollar is, I still have more dollars in my pocket than when I started.
i.e. I borrow $1k at 0% for one year. I put the money in a 1 year CD paying 1% interest. At the end of the year, I pay back the loan with the CD's principal, and put the $10 interest in my pocket.
Even if inflation were 2% (or 10%, or 100%), I am still making money - no matter how deflated the value of the dollar is, I still have more dollars in my pocket than when I started.
(Inflation hurts lenders of money, not borrowers)