Inflation only favors the debtor if he doesn’t have to take on more debt. USG has a lot of short term debt it needs to continuously roll over. If inflation pers

Inflation only favors the debtor if he doesn’t have to take on more debt. USG has a lot of short term debt it needs to continuously roll over. If inflation persists, the yields will go up, so USG will roll over the current low interest rate debt to new high interest rate debt. Given how much debt it has, the service payments will skyrocket: at 130% debt to GDP ratio, and at 27% tax to GDP ratio, each 1 percentage point increase in yields translates to additional 1.3% worth of GDP going to debt service payments, which is around 5% of total government spending. That means that if current inflation persists, and the bond investors will expect 7% inflation instead of 2% inflation, they’ll demand bond yields to be at least 5 percentage points higher. This will make the debt service payments go from current 6% of the budget to nearly 1/3rd of it, a tremendous increase. This will only increase fiscal pressure on the government, making it less credit worthy, which will push yields even higher. No, if you’re indebted above your head with mostly short term debt, inflation does not make you happy.