How does inflation reduce the burden of national debt?

The effect
of inflation is to essentially to reduce the value of cash in the economy. As inflation
increases, the price of goods increases, which means that each dollar available has less buying
power.

Because of this, the government benefits in two ways. The first is
that it can levy higher taxes. In order to extract the same value from taxes, it will have to
bring in more cash, because cash now has less buying power. This will give the government higher
reserves that can pay down the debt.

Additionally, the overall value of the
debt decreases. Because each dollar is less valuable, the debt loses value. GDP will increase
with inflation, so the debt becomes a smaller percentage of that number, and it becomes easier
to pay down.