The Powerline guys point to an article by Jeffrey Hummel that turns the inflation risk of debt on its head by taking the probably correct view of looking at what is in it for government. He makes a strong case that just going bust is better for government than inflating away the debt:
Hummel explains that most money is now created privately by banks and other institutions, not the government, so that "[o]nly in poor countries, such as Zimbabwe, with their primitive financial sectors, does inflation remain lucrative for governments."
Other points such as the historic max, even during war, of tax revenues is about 20% of GDB. Obama proposes 28% until the recession ends and then 22%.
Another point in favor of “bust” is that even if we don’t pay interest, we still run a deficit. This is called the primary deficit – and you can’t have one that exceeds GDP growth for very long.
So those of you like me, mid 40’s trying to put the finishing touches on our retirement plans, have to roll some dice. Buy inflation hedges get reamed by a bust, or buy bust hedges and watch them go negative during inflation.
But…. what I suspect will happen is a delicious combination of both. Inflation right up to bust.
Powerline concludes:
Obama and his advisers are gambling, evidently, that we don’t care much what happens to our children and grandchildren, or to our country after we’re gone.
I suspect Obama and his advisors want to screw us AND our children.