patrick.net

I also want to point out that the IMF bailout is really a bailout of European banks. They lent easy money similar to what happened in the US. In Basel 2 in 1997, off balance sheet banking was allowed, leading the way for all this easy money.

If you want the real story about the IMF you should read The Shock Doctrine by Naomi Klein. I can tell you that the IMF is NOT deflationary.

Well, I haven't read the book, but it is common sense that the IMF is or can be deflationary. The IMF requires that there be deep and even unfair cuts to mainstreet in order for bond guarantees and loans to roll over debt. That is highly deflationary. Mainstreet has less money to spend.

Initially I agree w/ you. But after a very painful bout of deflation (often coinciding w/ dictatorships, torture camps, disappearing citizens, etc - see also: Latin America) the (often succeeding) govt has no choice but devaluing the currency.

I guess the question turns on your definition of "default". For a person, default is deflationary as the canceling of debt decreases the money supply. However, when a country defaults and the debt is in their own currency, they simply devalue the currency which is inflationary. If their debts are denominated in foreign currencies then default would be deflationary.

In the case of Greece, my guess is that their debts are denominated in Euros. They surely own Euro printing presses and so could simply print Euros to pay their debts. If Germany has a problem w/ that they can kick them out (which is what I believe will happen at some point).

Also, for the US, our debt is denominated in our own currency so I believe high inflation is on our menu as well. However not without a few years of deflation first.

Well, that sounds about right. GRYWLFBG. Hope I spelled your name correctly. :))