"but the creditor probably wanted principal + interest @ comparable purchasing power." When you are buying a bond, you know exactly what you will get in return

"but the creditor probably wanted principal + interest @ comparable purchasing power." When you are buying a bond, you know exactly what you will get in return. Bonds are a govern liability expressed in a govern unit of account. In a sense they are money: https://petermartin2001.wordpress.com/2015/04/03/3320/ https://petermartin2001.wordpress.com/2015/04/03/3320/ You are not entitle to anything else that a return in the government unit of account. In fact, this is the reason that bonds are considered safe assets, because they can always be payed. If you consider money as a claim over the real economy, a bond grant you that you will have a claim in the future about a percentage of the real economy. How big is this claim depends on what the real economy did in the time to maturity. The responsibility of a government should be with the real economy (physical capital, knowledge, etc.. ) not with the return of rentiers.