Since the Federal Reserve was created, inflation has averaged 4.4%. Assuming inflation rate doesn't greatly increase, does the deficit matter?

[Adaeva]

National Dept vs. National Deficit

Based on the price of gold and the cost of common labor, since congress created the Federal Reserve, the dollar has lost 99% of its value. In 1913 gold was $20.67 per ounce and common skilled labor was $1 per 8 hour day. Now gold is approximately 100 times higher at $2,000 per ounce and minimum skilled about $12 per hour ($100 per day).

If inflation average 5%, since the Federal Reserve will create extra money in 16 years the prices will double and presumably the annual deficit will double. Since that is about what happened over the last 16 years, proportionally prices, the deficit, and national debt remains the same. That is, if prices double, and the national debt and deficit double then, in effect, nothing changes.

I realize that inflation does not actually exist and instead it is actually the devaluation of the dollar. However, since that is the common definition of inflation, I am using that definition for inflation.

[richardcory]

People LIKE inflation. They like seeing their pay go up over time. Look at all the extra rules people have added to the monopoly game (like getting paid on "free parking"). Pretty much every rule in inflationary.

Inflation has the advantage of helping people escape debt. It also encourages people to spend money, not horde it.

Of course too much inflation causes all sorts of disruption, but a small amount seems beneficial

[Surely]

I would assume, at your age. You will definitely find the answer to your question long before you retire!

[Surely]

Thank you for the MHO. And good luck!

[jamesgoldman]

Not until one of the holders of the debt asks to cash their chips in, likely for gold, especially in the case of China

[Adaeva]

China will be paid in dollars. In fact, China is reducing their holding and possibly China wishes to eliminate their dollar and treasury holding. However, if that is the case, they dare not do it too quickly because that would greatly devalue the dollar making the dollars they receive worth considerably less.

[jamesgoldman]

Nah they'll add gold to the estimated 30,000 tonnes they truly have to set themselves up for reserve currency status
Always remember that old adage, who holds the gold makes the rules

[Adaeva]

That may happen. The USA will not pay China in gold. However, they can sell their dollar and U. S. Treasury holdings and use those dollars to buy gold.

[jamesgoldman]

Problem is that China will set the terms as such to either be paid in bullion gold or the US will have to admit it's too broke to deliver on the gold