Bonds are just money that pays interest. If you exchange interest bearing money with money that doesn't return interest, you tell me what you think will happen.
It’s extremely well known what happens in this scenario: When governments start printing money like nothing matters and there are no consequence, the currency collapse into a hyper inflationary death spiral.
You act like that interest payment is just a technicality or something. It’s not. It’s a market rate that reflects the world’s belief in the soundness of the currency and government.
Throw that away and it all comes crashing down.
The US doesn’t exist in global isolation. We still buy things internationally as inputs to our factories and to make everything work. If we start a hyper inflationary currency death spiral where the government prints money out of thin air as a solution to spending problems, the value of our dollars becomes progressively less, hence the inflation. Then we all, including the government, have to spend more of those dollars, so the printing increases, and it becomes a self-reinforcing cycle.
This entire line of thinking that it doesn’t matter is basically quackery. It has been tried. It does not work.
Interest rates will fall but beyond that it's very non-obvious what will happen. Money becomes a hot potato? Cashflow-generating assets get bid up to extreme valuations? Speculative assets like crypto gets carried along for the ride? An increase in private borrowing, the money supply, the velocity of money, and inflation?
On the other hand, the government debt interest burden goes down, which means a slowdown in the growth of the base money supply (even while borrowed money increases). Perhaps this slows long-term inflation, but that in turn might mean inflation driven by growing private debt and speculative malinvestment swings well past equilibrium and turns into a bubble that pops into eventual deflation.
How would swapping interest bearing money for non interest bearing money cause inflation? If anything it would force people to chase yields and you will get a boom in prices for other assets. But that money isn't going to be used to buy t-shirts, electronics, and cars because it's mostly owned by rich people and organizations.
Those rich people and organizations invest in stuff like businesses and real estate. The businesses spend money on things (including labor) driving up costs. Rent and land costs get more expensive too
Usually increasing money supply creates demand for new businesses. Under normal economic times this isn't inflationary because supply increases with growth in money. It's inflationary only if there are resource constraints (think covid).
I guess I would agree if there were no resource constraints, money supply increase wouldn't be inflationary, except I think there are resource constraints.
US is basically at full employment. Labor is a very constrained resource and quite inelastic (for example, it takes ~30 years to grow and train a new doctor). Housing supply in the US is increasing, but the timelines here are glacial. I don't see how increasing the money supply won't increases wages and land values. And labor and land pretty much feed into the costs of everything else.
Sure, a few things which are mostly imported or automated (t-shirts, some commodities, etc...) might be relatively stable in price, but the bulk of household budgets isn't t-shirts. It's stuff like housing and services (healthcare, education, etc...); if wages and land prices go up, housing and services get more expensive.
