"Do you think letting the debtors of the world off the hook through inflation is the best means to prevent this happening again?"
Well it is not going to happen overnight - I would expect the deleveraging to occur over 10 years or so. I hardly think that is letting them off the hook as they have to live with their financial position year in year out.
At a 3% inflation rate over 10 years - money would be worth less by about 34% than it is today.
At a 6% inflation rate over 10 years - money would be worth less by about 79% than it is today.
In the space of 12 years at an inflation rate of around 6% relative debt levels could be halved.
The only thing that will prevent it happening again in the future is increased regulation, but in the end that won't even work as over time those regulations will change and the process will repeat itself again even if it is 50 years or so away (assuming we remain a consumer society).
