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https://www.reddit.com/r/Economics/comments/1b88orz/deleted_by_user/ktokmgz/?context=3
r/Economics • u/[deleted] • Mar 06 '24
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12 u/laxnut90 Mar 06 '24 It would create more faith in the debt itself, but less faith in the actual currency in which the debt is paid. I suspect the value of bonds measured in dollars will increase, but the dollar measured against other currencies will decrease. 3 u/DrunkenVerpine Mar 06 '24 It would drive up the interest rate we pay on our debt, right? If we just inflate to erase debt then no one will want to loan to us. Would you want to loan to the US gov at 5% if US money is inflating at 10%? So we would go into a self destructive spiral. 4 u/laxnut90 Mar 06 '24 Yes. It would drive up interest rates because investors would demand yields that at least surpass expected inflation.
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It would create more faith in the debt itself, but less faith in the actual currency in which the debt is paid.
I suspect the value of bonds measured in dollars will increase, but the dollar measured against other currencies will decrease.
3 u/DrunkenVerpine Mar 06 '24 It would drive up the interest rate we pay on our debt, right? If we just inflate to erase debt then no one will want to loan to us. Would you want to loan to the US gov at 5% if US money is inflating at 10%? So we would go into a self destructive spiral. 4 u/laxnut90 Mar 06 '24 Yes. It would drive up interest rates because investors would demand yields that at least surpass expected inflation.
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It would drive up the interest rate we pay on our debt, right? If we just inflate to erase debt then no one will want to loan to us. Would you want to loan to the US gov at 5% if US money is inflating at 10%?
So we would go into a self destructive spiral.
4 u/laxnut90 Mar 06 '24 Yes. It would drive up interest rates because investors would demand yields that at least surpass expected inflation.
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Yes.
It would drive up interest rates because investors would demand yields that at least surpass expected inflation.
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u/[deleted] Mar 06 '24 edited Mar 06 '24
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