Here’s Kevin Hassett on Fox discussing inflation: “It’s going to look like the seventies.” Braver readers might want to click on the link to see what he meant by that.

In the segment, Kevin refers to his latest piece in National Review on the debt, a piece in which he looks at default.

An extract:

We honored our debt from World War II, and the economy boomed. Perhaps we can just return to the playbook that delivered that miracle?

Perhaps not. A recent study by economists Julien Acalin and Laurence Ball looked at the methods that the U.S. government used to restore balance and found that it relied on three tools and a bit of good fortune. The first tool was our old friend, currency debasement. The government printed money, inflation was higher than expected, and bondholders were paid back with devalued money, just as in Syracuse back in the day. The second tool was something the literature refers to as “financial repression.” The government ordered financial institutions to hold large quantities of U.S. debt while it kept the interest rate close to zero. Thus the runaway expense was controlled, and the fact that low interest rates created little demand for our debt was neutralized. The third tool was austerity. The government recognized that it was in a perilous state, and so it regularly ran surpluses. Finally, the economy helped. Until the 1970s, the economy grew at a rate that was significantly higher than the interest rate. Higher incomes made it easier to retire debt.

Today, our productivity slowdown and ageing population make it unlikely that the economic-growth rate will exceed the interest rate; and financial repression, while an available tool, looks to be a dangerous one in the wake of the failure of Silicon Valley Bank and other banks. Congress could decide to run large surpluses in order to pay back the debt, but neither political party seems willing to propose such a thing, which leaves us with the most commonly relied-upon tool: inflation and consequent currency devaluation.

In other words, we know how this story has to end. . . .