I recently saw some videos where some guys say that USA can just print more notes to pay its debt because its debt is in US Dollar while other countries can’t, but isn’t it impossible because it would degrade the value of US dollar because that’s the reason countries don’t print unlimited currency notes.
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Say that money supply is the direct cause of inflation. Its not, but we can assume it for this model.
If you have to pay 1 trillion in interest payments and you have an economy that is valued at 10 trillion, when you add 1 trillion to the money supply you will increase it by 10% which causes prices, in this model, to increase by 10%. So your interest payments need to be 10% higher for lenders to see a real 10% growth. And we continue this loop until we eventually reach 1.111 trillion as the value those receiving interest payments need. Everything is balanced at this number as we have a trivial tail of decimals that is repeating.(10% of 10% of 10% leads to a really small number.
An important thing to note is that interest payments are always a small part of the sum of debt. You don’t pay off the whole debt in a year, you just pay the interest.
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