Predictions for 2010 - US Default is an option

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You are spot on with your predictions, but there are still a few missing pieces.

That said hard discipline is typical in year 2 of the presidential cycle so expansionary behaviour can be reintroduced for yeaR 3 & 4 ELECTION REQUIREMENTS.

Enjoyed the clip, I think 2010 to early for default as, tax hikes and inflation will prevail first in attempt to escape.

Its good to think the unthinkable as these are extranormal times.

However the bias will be inflationary in my view as first choice. This could mean continual outbursts of QE until the debt is untenable in an immediate sense ( it already is in a long run sense)

Try Depression, a huge depression greater than 1929.

Look for a massive explosion in the speculative asset bubble. Also look for a major correction in the stock market. These two things will be a major contributor to the USA going back into recession.

US deflation + US default? Unlikely

No, but I have traded an ounce of gold for a side of beef and a half ounce for $500 worth of freeze dried food.

The government will inflate rather than default on its obligations, perhaps it will default on some of its medicare liabilities, but my impression is that the new liabilities taken under by the new Health care bill will be far more substantial than current medicare.

The government cannot easily reverse course, it would look too bad, and the policy and massive investments would be revealed to be a failure, it would be a dramatic and politically suicidal move for the democrats.

If there is a default on U.S. obligations, it will likely come after 2011 or 2013 and will likely be the result of Congressional reformation (i.e. a republican takeover). Even then, it is still not terribly likely that even the Republicans will act responsibly. That is because they will be hesitant due to the political ramifications of acting responsibly. Only if the candidates are elected on the pretext of fiscal responsibility are they likely to default.