I am certain the government will devalue the dollar. It is the best alternative to pay down the deficit and give us a shot at increasing exports.
The government doesn’t care if individual families are hurt in bankruptcy or lose their homes. They are concerned with price stability and inflation.
As long as the country as a whole can keep paying the bills, so what if a few million people are financially insolvent?
They also realize that the debt game cannot go on forever. This excess liquidity must be wiped out.
Check out the Chart II in Bill Gross (PIMCO) article, which shows a parabolic rise in debt, greater than at any time in US history, greater than during the debt bubble leading to the Depression. He calls our the Finance-based Economy. Remember when we were the manufacturing economy, then the service economy? Now we are reduced to the finance economy. We finance our debt.
As someone wrote earlier, if we truly are the most productive nation on earth, why do we have the most debt? We are unproductive. We are consumers, who consume more than we make.
You can try all kinds of financial and monetary supply shenanigans, but you must ultimately face yourself and you will see that you consume far more than you make and pay for it with borrowed money. When the gig is up, where will you be?