Inflation, as we know, can be devatasting to people with fixed incomes, and even to wage earners who always experience an inertial time lag between increased prices and rises in salary. That $50K in greenbacks you have stufffed in your mattress may not be enough to buy you a cheap used car a few months down the line. Inflation is a bit less damaging to the wealthy, because much of what they own is in the form of real estate or stock, which automatically rises in value as prices go up, so they are somewhat insulated from it. The same for businesses, where much of their wealth is in the form of capital (facilities, machinery, property, etc., and they keep relatively little ready cash on hand). They also can pass on price increases to their customers and their debt gets smaller as the value of the dollar drops.

Depressions, on the other hand, are often associated with deflation, which means that fixed income and wage earners' money goes a lot further, but businesses face the prospect of not getting as much out of an investment tomorrow as they put into it today. Their debt increases as the value of the dollar rises. They dread deflation.

Obviously, both are bad, and no one wants either for a variety of reasons other than what I listed here. But we are now in a position where we may get to choose! A severe economic slowdown will bring deflation, but pumping money into the economy and lowereing interest rates and taxes will do just the opposite. Who stands to gain and who stands to lose if we are forced to make a choice? And how will the answer to that question influence the choice we make?

Right now, looking at our bipartisan spending binge, it looks like we are going with inflation.