Depression and inflation possible?

There is something about the impending crisis which I have been having a hard time thinking through… and I may not be alone. So I just want to put it down here. Let us just for the sake of backdrop take the following actions by respective economic powers as possible and look at what they mean.

1. The current situation in Europe points to a potential freeze up of liquidity in  the next few weeks, maybe days.
2. This will lead to at least one and probably several European banks to fail.
3. This will lead to a credit freeze up for sovereigns, banks and main street companies and citizens of Europe.
4. This will lead to markets to fall in Europe and contagion will spread through the banking system via liquidity and collateral calls and through the normal economies through the lowering of access to credit for consumption.
5. This will lead to Recession 2.0 or Depression 2.0
6. At this point the USA has been printing money for several years and will go into overdrive on printing money if the economy dips further downward.
7. Some people want the ECB to do the same, some think that China credit policy has similarly been too loose.
8. This will lead (at some point) to higher inflation, maybe hyperinflation.
9. We may have inflation and depression at the same time which is the Stagflation of the 70’s on steroids.
10. This may (or may not) be a global pattern of inflation and depression at the same time.

Now I don’t know what the map is for that scenario. This is beyond the experience of any economy in the past. We’ve seen hyperinflation in single economies: Germany, Argentina, Zimbabwe, some of the Eastern European countries. We’ve had depression and have Keynesian economics with its prescriptions of deficit spending to get out of that sort of crisis. But what if we have deflation, depression and deficit spending all at the same time? What happens then?

Mostly the recipe for getting stability back in serious single country situations is repudiation of sovereign debt (i.e. default), revaluation of the currency (i.e. a new currency), recapitalising the banks in the new currency, forcing the citizens to use the new currency (i.e. repudiating private debts in old currency or restating them at a penalty rate in the new currency) and starting from zero again.

How would that work in Europe, the USA and China in roughly a 5 year time frame? We see already that serious financial problems cause unrest in the streets. In fact it is well known that they are precursors of social revolutions or seizures of power by some cabal. Will we see the unrest of Greece spreading, even as we see the Occupy movement spreading. Is there violent revolutionary or reactionary action possible in some countries which we normally see as democratic. In current discussions of Greece there is a recurrent recital of the time of the time of the military Junta. and Argentina had its military react to the Socialist  moves of Allende.

If unrest spread globally, would some global political/ financial order come into place then? I am sure some would try to make that happen. What would be the precursors, the signs that we should look for then? The calling for a new Bretton Woods by China and Brazil? That has already started.