[quote=DomoArigato]So we’d get some inflation which would cause the value of any remaining debt to go down, further alleviating any ‘debt crisis’. Additionally, the value of the dollar would likely go down, no? This would increase the competitiveness of American exports and likely lead to higher employment.

What are the bad things that would happen, if any? Would we just be trading fear of invisible bond vigilantes with fear of the inflation boogeyman? Maybe the only thing we have to fear is fear itself?[/quote]
It is strange to hear someone being blase about rising prices. If the value of the dollar falls, imports become more expensive. Imports include food. When food prices rise, people complain loudly.

Rising prices act like a consumption tax. Therefore they are regressive: The poorest people spend the largest portion of their incomes on consumption, so they feel the effect the most. The other group affected by inflation is conservative investors. Equity (that is, risk tolerant) investors are more able to survive a bout of inflation. So inflation hits poor people and old people. Not exactly where you want the effects to be felt.

The other, large problem with inflation and deflation is they are subject to positive feedback. If inflation is expected, people are more inclined to spend money sooner – before prices go up. Spending money sooner rather than later is itself inflationary. The opposite but also positive feedback mechanism works for deflation. Thus the central bank has to maintain an unstable equilibrium, with positive feedback mechanisms in both directions.

[quote=DomoArigato][quote=Fearful]
It is strange to hear someone being blase about rising prices. If the value of the dollar falls, imports become more expensive. Imports include food. When food prices rise, people complain loudly.
[/quote]

I would like to see the Government implement programs that would allow for any hungry person in America to be able to buy food. This may increase the deficit, but I would rather the U.S. take on more debt than allow people within its borders to starve.

How about you? Are you in favor of strengthening the social safety net?[/quote]

I’m in favor of it Domo. Why don’t we cut the wasteful GOV spending, payoff the debt and cut taxes back to where they were 100 years ago. The money people saved in taxes would lead to more donation on the local level instead of the thievery and waste and 40% return on investment we get on the federal level. That is exactly what happened 100 years and EVERYONE ate and had health care. It was not a problem then. As the GOV takes more power the people get poorer and can’t find jobs and demand more social services but eventually they all end up in squalor.

[quote=DomoArigato]QIf having a large debt-to-GDP ratio is certain to lead to doom, why shouldn’t the Federal Reserve just buy the U.S. debt and retire it?
[/quote]

Technically, the Fed would own the debt, but the government would still owe the money.

The Fed and the Federal Government are not exactly the same.

The Fed would need to pay a premium to buy up all the debt and that might cause the Fed to incur huge losses.

[quote=DomoArigato]

By ‘retire’ the debt, I meant that the Fed would just print whatever money they need to buy the debt. The Fed wouldn’t incur any losses because they would be buying the debt with money that they had printed.[/quote]

The printing of money is done by Treasury, not the Fed. I could be wrong though, I keep getting them mixed up.

[quote=dumbrenter][quote=DomoArigato]

By ‘retire’ the debt, I meant that the Fed would just print whatever money they need to buy the debt. The Fed wouldn’t incur any losses because they would be buying the debt with money that they had printed.[/quote]

The printing of money is done by Treasury, not the Fed. I could be wrong though, I keep getting them mixed up.[/quote]
You’re correct. Treasury prints the money.

Easy to get them confused – I think most political sites use them interchangeably (erroneously).