Holman Jenkins is so prescient sometimes it's unnerving. Noman found today's column to be one of those times.
All this, let's make plain, is setting the stage for a potential inflation solution to the developed world's vast debt overhang, both official debt and unfunded promises to future retirees. Think it can't happen here? It can, especially when countries representing more than 60% of the world's GDP, including Europe, Japan and the U.S, are seeking the same escape from unaffordable commitments...
A wise short seller once told us the secret of his profession: People always underestimate how bad things can get. That is, they see the cliff coming and put faith in decision-makers to avoid the cliff. The problem with the metaphor is there is no cliff, just a succession of decision points in a worsening situation. Have no fear that our decision-makers will impose both fiscal austerity and inflation on us when it becomes absolutely unavoidable. The momentous question is whether they will do anything productive in the meantime.
Jenkins writes that "Washington has shown no hesitancy to delegitimize legitimate claims by vilifying those asserting them--GM and Chrysler debt holders being the most recent examples." Noman would only correct that sentence by starting it with "Obama's Washington..." Otherwise, he's correct to point out that Japan will be printing money to rebuild itself; the European Central Bank is printing money to allow bailouts that transform smaller countries' obligations into larger countries' obligations; and, of course, the Federal Reserve Bank is printing money in the US through QE2. Moreover, the US already essentially defaults on Medicare payments each time it slashes physicians' reimbursements. Jenkins explains it all convincingly, and his opinion piece is linked for your consideration.