My understanding is that persistent higher inflation may actually be very good for the U.S. government as it’ll essentially erode the debt as inflation eats away at the value of the loans, so that should be taken into account. Of course, it’s bad for stability, especially if you runaway inflation, but with high employment mitigating some of the downside this seems like a major positive factor for the U.S. gov given the amount of debt it holds.
Edit to add: Thanks for taking the time to write this up, found it enjoyable and was a fun thought experiment!
My understanding is that persistent higher inflation may actually be very good for the U.S. government as it’ll essentially erode the debt as inflation eats away at the value of the loans, so that should be taken into account. Of course, it’s bad for stability, especially if you runaway inflation, but with high employment mitigating some of the downside this seems like a major positive factor for the U.S. gov given the amount of debt it holds.
Edit to add: Thanks for taking the time to write this up, found it enjoyable and was a fun thought experiment!
https://www.stlouisfed.org/on-the-economy/2022/aug/inflation-real-value-debt-double-edged-sword#:~:text=An%20increase%20in%20the%20price,higher%20prices%20increase%20nominal%20GDP.