> it would not be inflationary to just pay them out That depends on what the creditors do with the money. If they keep it in a bank account, the effect on pri

> it would not be inflationary to just pay them out That depends on what the creditors do with the money. If they keep it in a bank account, the effect on prices is minimal. If they go out and buy a lot of goods and services or financial instruments like stocks, of course that will inflate prices.