I knew the general facts but didn't realize the implication: the United States can't default via inflation because most of our debt has a short maturity and needs to be continually rolled over.

Here in the U.S., total Federal debt to GDP is also approaching 100%, but the debt held by the public (outside of that held by Social Security and the Federal Reserve) amounts to about 60% of GDP and rising, due to recent budget deficits of about 10% of GDP annually. This is presently manageable since so much of that debt is of short-maturity and is being financed at very low interest rates. And though U.S. Federal tax revenues have historically run near 19% of GDP (they're presently only about 16% due to the sluggish economy), those depressed interest rates mean that debt service doesn't consume a huge chunk of revenues just yet.

Still, it's precisely that short average maturity that makes the debt problematic from a long-run perspective, because it can't be inflated away easily. In the event of sustained inflation, the debt would have to be constantly refinanced at higher and higher yields. Contrary to the assertion that the U.S. can easily inflate its debts away, it is clear that sustained inflation would create enormous risks to our long-run fiscal condition by driving interest costs to an intolerable share of revenues. At that point, any shortfall in GDP growth or government revenues would result in a rapid spike in debt-to-GDP (as Greece and other peripheral European nations are experiencing now). Prior to embarking on an inflationary course, the first thing a government would want to do is dramatically lengthen the maturity of its debts.

If our debt was mostly 30-year notes we could inflate it away without worrying about interest rates, because the rates would be locked in for decades. But if we have to keep re-borrowing the money every few years we'll have to do it at ever-increasing rates... in inflation can't "save" us. We are so totally screwed.

(HT: Tyler Cowen.)

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