I've long argued that the most likely path is the slow puncture of inflation. Events since have made that outcome even more likely. The government is now on the hook for virtually the entire U.S. housing market through Timmy the Tax Cheat's perpetual unlimited bailout of criminal enterprises Fannie Mae and Freddie Mac, which along with the FHA dominate the entire mortgage market. If housing takes another leg down, the U.S. Treasury will take the brunt of the losses on the foreclosures, because Fannie and Freddie guarantee the whole market, and Timmy the Tax Cheat guarantees Fannie and Freddie (though banks retain enough exposure that we'd have a banking system collapse, too). If the government had an incentive to inflate away the debt before, they really have an incentive to inflate away the debt now, because inflation keeps millions of bad mortgages off the Treasury's books, and also keeps the banking system from collapsing again.
Nevertheless, inflation ain't pretty as Zimbabweans and Weimar Republicans can attest. Perhaps there's another way.
The Old Testament has a solution for times like these, the Jubilee:
«And you shall count seven weeks of years, seven times seven years, so that the time of the seven weeks of years shall be to you forty-nine years. Then you shall send abroad the loud trumpet on the tenth day of the seventh month; on the day of atonement you shall send abroad the loud trumpet throughout all your land. And you shall hallow the fiftieth year, and proclaim liberty throughout the land to all its inhabitants; it shall be a jubilee for you, when each of you shall return to his property and each of you shall return to his family» (Leviticus 25, 8-10).
«And if your brother becomes poor beside you, and sells himself to you, you shall not make him serve as a slave: he shall be with you as a hired servant and as a sojourner. He shall serve with you until the year of the jubilee; then he shall go out from you, he and his children with him, and go back to his own family, and return to the possession of his fathers. For they are my servants, whom I brought forth out of the land of Egypt; they shall not be sold as slaves. You shall not rule over him with harshness, but shall fear your God» (Leviticus, 25, 39-43).
Slaves are freed, debts are forgiven, and everyone can begin anew from a clean slate. It has the added bonus of severely reducing the total amount of indebtedness at all times because who's going to lend large amounts long-term when there's always a Jubilee coming?
Is it crazy? Sure, but is it any more crazy than default, inflation, or trillion-dollar deficits as far as the eye can see?