Apparently even the U.S. Treasury expects inflation to be higher in the future, as they are planning to extend the duration on the Federal debt. As a citizen, I’m happy to see them do this—it saves all of us money. If I had the bulk of my assets in bonds, however, I would be signficantly less excited. There are only a few practical things that can be done to alleviate the deficit as a percentage of GDP: 1) cut spending, 2) increase taxes, or 3) inflate. Congress shows no inclination to cut spending and the public shows no inclination to support higher tax rates on themselves. Inflation doesn’t require anyone to vote and might turn out to be the path of least resistance.
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