One way out of the USA’s economic mess is for the treasury to instigate a hyperinflation. By devaluing the currency, several things could be accomplished:
-the debt held by China would be wiped out
-the debt of USA home mortgage holders would be wiped out
-the USA people’s savings accounts would be worthless-everybody would have to start over
Of course, you can only do this once, and when your international credit rating is shot, you have an awful lot of scrambling to do.
So, would a hyper-inflation induced devaluation be a a way out?
It would also be catastrophic for many businesses, leading to massive unemployment. Basically, you’re looking at wrecking the US economy for a couple of decades or so. Much suffering, poverty, probably violence. Very bad effects on the world economy.
Other than that, I can’t say that I see much downside to it.
Including people nearing retirement (guess the 65 year olds will have to keep working until they are 95 now); including retirees that are in no position to go back into the working world; including the disabled that may be living off legal settlements; including…
Everybody’s retirement savings will lose all its value. Any party who lets that happen on their watch is guaranteed to lose control of the White House and Congress in the very next election, because old people vote.
You simply can’t turn hyperinflation (or any other kind of monetary policy for that matter) on and off like a faucet.
Let’s say you devalue the dollar. Not only have you wrecked the economy in the short term, but you’ve set a series of events in motion.
You can’t get credit because lenders fear they will be repaid in cheaper dollars.
You can’t make long-term trade agreements because your trading partners fear they will be paid in cheaper dollars.
Social Security, private pension plans and 401K plans will be worthless because everyone fears long-term investing will be useless.
Immediate prices will go up as well, since sellers will try to recoup a higher price now to offset higher costs later.
All of these will combine into a massive downward spiiral that will be worse than the original problem.
What would inflation do to stock prices? Is it reasonable to assume that stock values would hold up (as the hard assets that a company owns (factory, inventory) rise in value)?
No it’s not reasonable. It is the opposite of reasonable.
In hyperinflation, stock trading would cease. Stocks are the presumed present value of future gains. If you cannot estimate the cost, prices, or value of anything in the future, stocks are meaningless. In inflation, stock values would not change at all, they’d just be expressed in higher numbers that get you nothing extra because all other costs would be rising simultaneously. A boat floats at the same level in a pond or in an ocean. The depth of the water doesn’t matter. Only the weight of the boat counts. Prices and value are two separate concepts.
I do note that you suddenly changed hyperinflation to inflation. There is as vast a difference between the two terms as there is between prices and value. Could you clarify what it is you’re talking about? Or perhaps you should get the proper vocabulary first to help you articulate your thoughts.
I agree that “several things could be accomplished” but I can’t see why we would want them to be.
It would destablize the Chinese economy (which would probably destroy relations between China and America and might cause a war) and would destroy any chance of our borrowing money in the future.
As would all of the banks that hold those mortgages.
I can’t even see how we can pretend this is a good thing.
As much as any act of suicide is a way out.
But what if the hyper-inflation was induced by giving stacks of bills to old people? 
Didn’t Zimbabwe essentially give stacks of bills to military members? They ended up on a treadmill where they’d print a bunch in the morning, give them out, and then everybody would rush out to spend them before the systemic lag time caught up and the additional money pushed down the value of the Zim dollar and raised the prices of everything.