alt Hacker NewsThere are two ways out of debt, you either pay it down or you inflate away the value of old debt. It seems like we are hurtling towards 2.
Replies
throw-the-towel • today at 5:09 PM
But there's also new debt being taken out, at inflated price levels.
ericd • today at 5:04 PM
Yeah, I think we've tacitly chosen to take door #2, and I've placed my bets accordingly. I wish we wouldn't, though.
The thing is that "inflating it away" isn't a serious long-term proposal. Suppose we were do something drastic, like target 6% intentional inflation, obviously nobody would buy bonds at 6% anymore, they'd demand at minimum 12% (because they'd lose 6% of it due to inflation). Once they demanded 12% the interest payments [on the gov debt] would shoot up well above 1t, and then the amount we'd need to inflate would again spiral up. The spiral runs away, there's no secret cheat to a free lunch.