> Why do people suggest inflating away debt rather than just defaulting on it? I'd guess that the debt markets would punish the two options equally, because bon

> Why do people suggest inflating away debt rather than just defaulting on it? I'd guess that the debt markets would punish the two options equally, because bonds would lose the same amount of real value either way. But inflation also screws up your economy as a side effect. Defaulting would impact the value of Treasurys far more than inflation, a bond’s price is merely the sum of its future cash flows, pricing in a default would push yields waaay higher than they would from inflation alone. There would also be massive liquidity problems since banks and companies hold a ton of Treasurys along with pensions and retirees. There’s far more negative impacts from a debt default that sibling comments already elaborated on. There are very few black swan scenarios that would cause me to liquidate the assets in my retirement accounts for cash, but a US sovereign default would be one of them.