One of the best debates for the last few years has been the inflation versus deflation debate. It seems people can only take one side of the discussion, and the context of the two are simplified. But what has happened is there has been massive inflation and massive deflation, culminating to a point where nothing is relevant. I have called this point hyperinflation for lack of a better term, and I have also called it blobflation although that term is obtuse. Really, the best way to understand it, is that there has been so much deflation and inflation over the last few years that the system will break because of it.
Murdoch's scandal shows how deflation can still tear a hole in the wall of the system, which allows inflation to seep in and soak it up. Murdoch 's failure has allowed tens of billions of dollars to vanish into thin air, making room for Bernanke's fresh printed dollars. The game ends when there is no more deflation, so the best way to know when the game ends is to know when the deflation has been used up.
The housing market has supplied ample deflation to the market over the last several years, and it still has some room to provide. Housing prices are going to be cut in half by next summer, and then maybe only then will they bottom. That is why the fiat ponzi should last one more year.
The debt default is another story. I have not considered it deflationary or inflationary. If the ceiling is raised, then that adds inflation, but if not, I do not think the term would be deflation. All that will happen is that no one will buy US bonds for a few years, and money will run to gold etc. This will be seen as hyperinflation, because the system will have broken down.
So when considering the debate, it is best to have a view from afar, and understand that both are present in the system. The fight is to match deflation with a little higher inflation. This is the trick of the banks, and the trick of the fiat ponzi.