"...Might the scam work? Can the United States really settle its debt with devalued dollars, free of all historical fall-out...?"

"WE CAN PAY ANYBODY by running a printing press," said Thomas Gale Moore, one of Ronald Reagan's economic advisors, when the United States became a net debtor to its foreign investors in 1986.

"Frankly, it's not clear to me how bad [being a net debtor] is," he added. And for the next two decades or so, owning fewer assets overseas than foreigners laid claim to inside the United States didn't seem so bad at all.

The long boom delivered by a steady inflow of foreign credit and cash delivered the greatest stock market gains ever enjoyed by US investors. When they topped out, the party switched straight into real estate - adding more than one-third to America's household wealth on the Federal Reserve's metrics.

So what if non-US claims on that surging wealth rose faster still? Now the party's over, inflating away the value of America's debt will worked just as beautifully as it always before. Right?

"In my view," says John H.Makin - a visiting scholar at the American Enterprise Institute writing in the Wall Street Journal - "the least bad option [in fixing the financial crisis] is for the Federal Reserve to print money to help stabilize housing prices and financial markets."

"America is a country that owes money," agrees Philippa Malmgren, a former Bush advisor and now head of a risk consultancy in London. "It is natural when you are a debtor that you lean in the direction of inflation, because it makes paying it back so much easier."

The logic is simple: inflate the number of Dollars in issue, and you'll shrink the real value of each outstanding Dollar you owe. But if escaping your debts really could prove that easy, how come history is littered with the mischief that inflation causes instead...?

Restoration England, 1668

Charles II - still playing his "divine right" as king some 20 years after Parliament cut off his father's head - steps up the issue of new bonds. Then called "stocks", they let the King raise cash for yet another losing war against the Dutch.

Charles side-steps Parliamentary approval for these new debts, and starts selling stocks against the promise of future tax receipts (the same wheeze adopted by governments worldwide today, of course). Come 1671, however, all the new money raised went straight to paying interest on the outstanding loans. So Charles opted to default, wiping out 11 of London's 14 biggest goldsmiths - those early banks who'd first lent the Crown money - and destroying his credit with England's loyal subjects.

The upshot? The King strikes a secret deal with France, promising to stay out of its war against the Dutch in return for regular cash pay-offs. But the deal - uncovered amid a rash of anti-Catholic panics in London - undermines all support for the Stuart royal family. Fifteen years later, and with the English crown bankrupt once more, his brother James II is overthrown in a popular and (pretty much) bloodless coup.

He's replaced by William of Orange...head of the Dutch Republic!

Revolutionary America, 1775

Lacking a mandate to tax its population while fighting a war, the second Continental Congress authorizes the "limited" issue of paper money. The new notes, known as Continentals, are backed by neither Gold nor silver, but by the expectation of future tax receipts.

Effectively acting as tradable bonds - but exchangeable for goods and services amongst the Patriots, rather than hard currency - the Continentals will only be redeemed when the Colonies win their independence from Great Britain. But long before that happy day, they race towards zero, becoming progressively worth less as their supply increases.

During the first six months, the supply of Continentals goes from $2 million to $6m. By 1779, the total supply reaches $242m on one estimate - more than twenty times the volume of gold & silver money in circulation before the war began.

"A wagonload of currency will hardly purchase a wagonload of provisions," complains George Washington. In March 1780, Congress announces a plan to redeem the Continentals at one-fortieth of their face value, effectively stuffing the American people and taxing the new citizenry more aggressively than George III ever did.

"So much for Congress's honor," notes Thomas E.Woods for Mises.org today. But for once, at least, these un-backed and over-inflated notes don't end with political or military defeat. Other than for the Patriots' cry for lower taxation, that is.

Weimar Germany, 1920

Besides losing 13% of its territory and 10% of its population under the Versailles Treaty after World War One, Germany also owes "reparations" to the Allied victors worth almost 37,000 tonnes of gold - around one-third of the world's entire above-ground supplies at the time.

Expected to settle the final payment seven decades later, the German government opts instead to pay early by printing money. The volume of Reichsnotes in issue rises 35 billion times over between 1918 and 1924 - and "the young and quick-witted did well," as the German journalist Sebastian Haffner will record, fifteen years later.

Equity prices in Berlin rose some 2,772,164% by the time a loaf of bread cost a wheel barrow-full of banknotes. The value of those Reichsnotes, however, went the other way - sinking from 8.0 per US Dollar to 4.2 billion per Dollar.

The resulting chaos, now regularly blamed for the rise of Hitler during the Great Depression of the early 1930s, saw "wages paid twice a day and promptly and completely spent within the hour," notes Glyn Davis in his History of Money.

"Large sections of society, including the middle classes, became impoverished; food riots were common; there was a complete flight from money, which had clearly become worthless to hold."

A more honorable legacy, perhaps, was the inflation-fighting Bundesbank of the 1970s and '80s. Staffed by bankers and academics who'd lived through both the Weimar inflation and its World War Two replay - which saw worthless coupons issued as money to Nazi citizens, Wehrmacht troops and even concentration camp victims - the West German central bank refused to devalue the Deutsche Mark alongside the Dollar, British Pound and French Franc by setting interest rates low.

The Bundesbank kept inflation far below the double-digit rates suffered by UK and US households as Gold Prices rose 20 times over against the Dollar. It finally bit the bullet with the birth of the Euro in 1999.

The new European Central Bank has since let slip its money-supply growth target of 4.5% per year. At last count, the supply of Euros was expanding by 10.3% per year, just below 2007's three-decade record for Europe monetary inflation.

The Global Banking Crisis, 2008: "US money supply growth is running at a 47-year high," notes Bedlam Asset Management, "as the authorities seek to inflate away the debt bubble and prop up house prices.

"Clearly printing such huge amounts of money is not great for the exchange rate. A weak Dollar has forced the hand of other central banks as they try and keep their currencies competitive with it."

But might the scam work? Not if China, Japan and the big Dollar-holders of the Arab oil kingdoms can help it. Will they really let their own currencies rise...just so the United States stuffs them by paying its debts with devalued Dollars?

Inflation, it's claimed, eases the burden of settling your debts. But for government and private debtors alike, that's only true if your income rises faster than your on-going cost of expenditure. Otherwise, you end up struggling to make ends meet today, only to leave yesterday's debts for repayment tomorrow again.

Middle-class families and savers looking to get ahead of the game - both inside and outside the Federal Reserve's fast-inflating currency zone - might want to consider Buying Gold as defense. Because however this latest attempt to inflate away debt pans out in the long run, it's sure to make history.

And history says - time and again - that solid Gold Bullion holds its value whenever man-made currencies are forced to lose value.