My understanding of the general strategy to deal with the...

My understanding of the general strategy to deal with the subprime fallout is that the "weapon of choice" is inflation. The intention seems to be to drive up prices in order to restore equity and reduce debt. Example, inflation drives up house prices,equity increases,debt levels remain the same.If you can keep interest rates low increases borrowings etc. It is not as simple (wages pressure, prevention of hyperinflation and so on) as all this but that's the general gist of it. Commentators have critisized it as a "cheats way out", particularly in terms of foreigners who have lent money to the US (and others) and will see the value of their borrowings diminish. Hence our focus on gold as a hedge.