President Trump has suggested that inflation could rapidly pay off the U.S. national debt, which currently stands at $40 trillion. The U.S. debt-to-GDP ratio exceeds 120% with annual interest payments reaching $2 trillion. J.P. Morgan had previously warned that U.S. policymakers might choose to erode the real value of debt through inflation rather than through budget cuts. This strategy involves reducing the value of existing debt by targeting inflation above the Federal Reserve’s 2% mandate, allowing the government to repurchase or refinance its debt at relatively cheaper rates.
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