Noah Smith

It's the central bank prints money to pay off the debt.

People realize that's going to happen.

They realize inflation is coming.

And then that becomes a self-fulfilling prophecy where inflation goes up.

Everything, everyone gets poorer.

You remember 2021, 22 with 8% inflation?

There's some of these countries that can get a lot higher than that.

And so then people get abruptly poorer, people's, you know, bonds, you know, vanish like because, because inflation devalues debt.

And then, uh, you know, so, so basically bad things happen with that surge of inflation.

Everybody gets really, really mad and the economy essentially gets bad.

So you have this trap where people won't buy your debt, so you need to

raise the interest rate to pay off the debt, but then you have to roll over the debt at the new higher interest rate.

And so then you have to pay more debt.

And so you have to borrow even more.

And then people are like, wait a second, I can't lend you that much.

And so you have to raise interest rates again.

At some point it stops and private demand for your debt just collapses.

Chase won't buy your debt.

Grandma won't buy your debt.

China won't buy your debt.