But this is what the United States are again

After deflation in 2009, would inflation be the way out of the doldrums The current crisis is a crisis of debt. In the United States, the huge debt of households and banks is in part transferred to the State, via various bailouts of financial institutions and credit guarantees. Fiscal stimulus will propel the deficits to levels never met in times of peace (11 of GDP in 2009). Debt American public, 60 of GDP before the crisis, could climb to 80 or even 100 of the GDP at the end of the crisis, not to mention the rest of private real estate debts.

A solution would be to repay these debts Ruby on the nail. The next American generation would reduce its consumption to its private debts, pay more taxes for public debt, on a background of growth and inflation low: a scenario for the Japanese. When we remember the visceral rejection of the tax by the Americans (the country was formed in 1773-1776 on a tax revolt, the famous Boston Tea Party), when we know that the Senate has refused to sign the Kyoto Protocol in 2000 on the grounds that it would hamper the standard of living of Americans, it is difficult to see this scenario accepted by the United States.

Another solution would be the default on us debt. Not a formal repudiation, but the erosion of the debt by inflation. The US lead wars front (Afghanistan and Iraq), while lowering taxes: of the never-seen. Someone must pay. As at the end of the war of the Viet Nam, the second world war or the American civil war, significant inflation will reduce the public debt inherited from the war and it will reduce the gigantic from private debts of the credit bubble. "Could not revive inflation, look at the Japan," it said. In an article published recently by the "American Economic Review", "great Expectations and the End of the depression", a brilliant young Economist of the Fed New York, Gauti Eggertsson, brings an interesting light. It shows that the end of the depression in 1933 - 1934 was triggered by a strong shift from deflation to inflation expectations. The crucial moment was when Roosevelt announced the end of the gold standard and the devaluation of the dollar, removed the independence of the Fed, revived the monetary creation to allow a reflation of the economy, presided over a public deficit of 9 of the GDP as early as 1934 (public debt rose from 25 to 42 of GDP in four years!). In April 1933, Roosevelt spoke of the need to revive inflation to reduce prices to their pre-crisis levels.

But this is what the United States are again. Treasury suggests that he let down the dollar. And the Fed has multiplied its balance sheet (i.e. its purchases of financial securities) by three a year! History will retain perhaps as the crisis turning point on December 16, 2008, date where the Fed announced both rates to zero for a long time and the deliberate "support at a high level the size of the balance sheet of the Fed buying more and more debt, debt agencies and mortgage debt". The Central Bank explained that it was ready to monetize the existing problems: the public debt and real estate debt. It is illusory to believe that it will be a day to be reimbursed for these claims. Added to the recovery of Obama plan, all the ingredients are there for a way out of crisis by inflation. Inflation of the order of 10 to 15 over five years would reduce us debt from 40 to 50. Unenviable Of course, but for Americans it will be preferable to the Japanese script. This will be the foreign creditors (mainly Asian) who will pay the addition. To paraphrase Clemenceau: "China will pay."

In the United Kingdom, with the same type of debt, a similar devaluation of the pound and inflation scenario is likely. But that will be the European Central Bank in the euro area The monetization of the debt it is prohibited by the Treaty and we can count on the Germans to oppose the stimulus by inflation. But is it safe, while public and private debts will strongly exploded and that the alternative will be a scenario to the Japanese Here, the history yet to build.