The Oil Drum

Schiff:

The big problem politically is that hyper-inflation may superficially appear to be the lesser evil. If asset prices are allowed to collapse, ownership of those assets will pass to our creditors. If instead we repay our debts with debased currency, we retain ownership of our assets and shift the losses to our creditors. Since American debtors can vote in U.S. elections and foreign creditors can not, the choice seems obvious. Of course there are some American creditors as well, but since they comprise such a small percentage of the electorate, my guess is that their losses will be seen as acceptable collateral damage.

It seems to me that during deflation, debtors suffer more than creditors (savers), and during inflation, creditors suffer more than debtors (thus debtors were chasing creditors down the street in the German hyper-inflation trying to pay off their debts with debased currency). Given that debtors seem to outnumber savers in the US (with Uncle Sam most decidedly in the debtor camp), it seems more plausible to me that we are facing hyper-inflation.

But all I know for sure is that my goal for 2008 is to continue to slow the rate of decline in Texas oil production.