Well at the point in time that interest rates on treasuries went up it seems the cost to pay the interest would become so enormous that there would be no choice but default or inflate. I heard that 5 trillion of the debt rolls over every year because it has become short term. If that is the case wouldn’t the new higher rates almost certainly lead to immediate inflation?
Also, about the bond market. When you say “it would not necessarily lead to arbitraging into other bonds and higher rates for them. ” What would determine whether it would have a ripple effect or not?
