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> However, the alternative (inflation) would have the same effect.

I don't think this is necessarily true. Pre-euro, Greece devalued the drachma several times in order to manage its debts and trade balance (by around 15% each time in 1983, 1985, and 1998), but it didn't lead to rioting in the streets.

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That's interesting. I guess it depends on the scale of the inflation. Germany printed money to pay their war reparations with and when it got to the hyper-inflation stage everybody was screwed.

Inflation in relatively small amounts is only going to really hurt savers so I guess if the population distribution is skewed towards more people with debt than with savings (isn't it always!) then a government might be able to use it to reduce the likelyhood and scale of unrest.

Yeah; now that I think of it, it also may depend on how easily you can decouple inflation in external terms (currency devaluation vis-a-vis another currency) from internal inflation (change in prices in local currency). From what I can tell from Greek relatives, the average person didn't see much effect from the 83/85 devaluations, because there wasn't much internal inflation. Imported items got more expensive in drachma terms due to the exchange rate, but going to the barber didn't: he still charged about as many drachmas as previously, so your local buying power wasn't really reduced. It's just that everyone now both made and charged less money in dollar terms, which is actually deflation from an external perspective.

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