Unexpected Inflation and its gain

Today, the most serious issues we face is tremendous government debt we share. Most of the rich countries poured liquidity into the market by printing or borrowing from other countries.

What will be the best option for government to deal with this government debt we have right now? How many options do we have? 1. Growth 2. Austerity 3.Default 4. Inflation.

Let's dig into these options one by one.

1. Growth
   
   1. American consumers are already suffered from abundant debt they have borrowed from futre.
      
   2. Most of debt are related to Mortgage, and most of mortgages are provided by Fannie and Freddie .
      
   3. Now Treasury hold most of the MBS FF have.
      
   4. US government is trying to privatize MBSs they have sooner or later.
      
   5. What will happen? and What they are expecting?
      
   6. If housing market rebound, all the economy will survive magically.
      
   7. But the thing is how and when. If it is too fast, political options we have will counter with people opinion. So let's do it while people are unaware of it.
      

   
    

   
    

2. Austerity
   
   1. Ideally this is good idea. Spend less and save money sounds great, if this is matter of house. But government is different. If government stops spending, each economic subject will move independently. Y = C+I+G+(X-M) Let's look at this system. C and I, X-M looks independent in this formula. But correlation between each factor is so high. Money spend from G flows into C and X-M and even I, furthermore Government can change each economic subject's behavior by changing the rules of playing field.
      

 

1. Default
   

Many countries have tried to use it, but nowdays it's hard to implement this plan, because we are not north Korea.

 

1. Infaltion
   

This is the easiest and fastest way to tackle the problems we have. And no one can recognize that we are causing inflation.