Can The Fed Inflate Government Debt Away?
Inflationists make two mistakes when it comes to government debt. The first is in assuming government debt is more important than consumer debt. (It will be after consumer debt is defaulted away, but it’s not right now.) The second is that it’s not so easy to inflate government debt away either. Those who think it’s easy, need to answer a few questions: • What would a “successful” inflation campaign do to future costs on unfunded medical liabilities? • What would a “successful” inflation campaign do to future social security payments? • What would a “successful” inflation campaign do to mortgage rates and cash strapped consumers already struggling to make mortgage payments? • What would a “successful” inflation campaign do to energy costs? • And most of all, what would increased inflation do to interest on the national debt? By “successful” I mean produce a meaningful rise in inflation. Inflationists act as if unfunded liability costs and interest on the national debt stay constant. Al
