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Old 11-26-2011, 08:58 PM
Sulla the Dictator Sulla the Dictator is offline
Join Date: Mar 2011
Location: Las Vegas, NV
Posts: 1,364
Default Re: Worldwise: German Sentiment (Karl Smith & Arash Molavi Vassei)

Originally Posted by BornAgainDemocrat View Post
Not to say there wouldn't be all kinds of problems, but we had that situation here in the U.S. back in the late 1970's. It was unpleasant ("stagflation") but we lived through it and came out the other side.
We came out the other side because paying higher yields on a hundred, or a couple hundred billion dollars is easier than paying higher yields on $15 trillion dollars. If we had to pay 8% yields on US debt, debt service would soon exceed Medicaid. In the medium term, it would surpass even Medicare. That is catastrophic; and we're in better shape than the Europeans.

Inflation transfers wealth from creditors to debtors: households in debt get relief, sovereign governments in debt get relief.
Well, why is that a superior order? Debtors to me aren't any more moral, necessarily, than creditors. Sovereign governments certainly aren't, when they've used borrowed money to bribe sections of the electorate for power.

It also lowers real wages and increases the volume of employment. The only alternative I know is austerity, but austerity is (or appears to be) a political impossibility. So inflation is the only alternative as far as I can see.
I suspect the economic annihilation radiating out of Europe in the wake of the Eurozone collapse will create a new paradigm on this. Austerity will become the default posture of politics.
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