This is a good question if you read today's headlines.  Jeff Belonger also wrote a great article about Deflation and Inflation and why we should be worried about a deflationary depression.  The big difference between 1929 and today is who will be in charge of the government over the next four years.

My worry right now is that we're actually going to see a inflationary spiral that we haven't seen except in third world countries in the 1980's.  When I was a teenager, I remember news reports of Argentina or Mexico going through incredible inflationary spirals.  I also remember studying post WWI Germany, and how some people had wheel barrels of worthless money at one point in that crisis.

The problem is we're heading that way ourselves.  Massive spending increases are fore-casted in the next few years.  Obama has an aggressive spending agenda, and then we're pouring Billions upon Billions into banks, auto makers and I have no doubt the government will continue to pump billions into this shaky economy.  But where is all this cash coming from?  It's not going to come from me and you, it's mathematically impossible due to the shear amount of obligations that are piling up each day.  The reality is they are going to PRINT the money and continue to PRINT until it finally catches up with us.

When you have an over supply of money you get inflation.  The difference between the Great Depression and today is that the government didn't spend massively until they were in the middle of the depression.  In this case we've been pouring trillions into the economy right from the onset.  Deflation will continue to exist until the American people feel more secure about lower prices, but then we need to be worried.  The MASSIVE public debt is going to be so overwhelming that we will be printing even more money to just pay the interest payments, and that's at all time interest rate lows!  Then inflation begins to bite down hard, because when things begin improving world wide, the the dollar becomes worthless!!  We don't have a manufacturing base anymore in this country, so low cost Walmart items will skyrocket, oil will sky rocket, and energy will skyrocket o nce again because of the lack of a long term energy policy.

My worry is we're setting the table for massive runaway inflation.  Recently I spoke to my father who's locked into his home in Boise Idaho, due to the declining market values.  At one point he thought he'd made a mistake buying instead of renting, but because he's a student of history he's now thinking he's in good shape for the future.  He has a 30 year fixed loan below 6% and if we do go through this hyper-inflationary spiral, then he's sitting in a good position in 3 to 5 years, and renters will be getting hammered with extremely high rental payments.

If I'm wrong and this economy degresses into a deflationary collapse, then I guess the result is not much different.  The problem is the public debt will not decrease, and we'll only have to pay it back with fewer tax revenue dollars.   The only difference is that you don't want to own a home until the deflationary collapse is hit rock bottom.  My bet however is that the media is going to do everything in their power to keep their president in power, and will make the classic mistake of painting a rosy economic picture, which in turn will get consumers to begin spending again, which for a brief period of time will seem like a strong recovery, and then we'll see all Hell break loose!