There's got to be a limit somewhere to the number of dollars that the rest of the world is willing to hold in exchange for their goods and services. Inflating away the value of past dollars exchanged is one way to prolong the spending spree. The rising prices of foreign goods measured in dollars will also work to slow the increase in the trade deficit.
The inflation of our currency is not only a cause of problems, it is a symptom of problems. The prime cause is spending more than one can afford, where "one" includes the federal government. The bailing out of financial institutions threatened by housing price declines is one way in which the government has been spending money.
If you think inflation is bad, you need to try a decade or two of deflation. Deflation of housing prices has already caused considerable pain. If the deflation spreads to other commodities there could be some very serious problems. Imagine if all economic activity slowed as much as housing sales have slowed.
Inflation always results in deflation.
Deflation is just the adjustment after the Boom-bust cycle.
At least in deflation prices are dropping and the dollar can buy more.
Neither is good and both are the results of government interventions in the market.
Excellent post and to the point....I agree. Our trade deficit and total debt as a nation is spelling a near future train crash or biblical proportions (so to speak).