Dec 7, 2009 We're Not Threatened by Inflation but by Depression Bill Bonner 321gold ...inc ...s

We're Not Threatened by Inflation but by Depression

Bill Bonner
Provided as a courtesy of Agora Publishing & The Daily Reckoning
Dec 7, 2009

So, central bankers are beginning to wonder if the US can pull off "another Volcker." Even Paul Volcker himself, who is still alive, doubts it. Today, too many people owe too much money and too many political favors. Put up rates to 18% today? Unthinkable. Cut 10% off government spending? Impossible.

But don't worry about it. Now, we're not threatened by inflation... but by depression!

It's fighting the depression that makes people worry. Smart investors and shrewd central bankers are afraid the depression-fighters will go too far... that they don't really know what they're doing.

Ben Bernanke is up for re-appointment. "Bernanke fights for 2nd term," says The Wall Street Journal. Does he know what he is doing? Well, no. He was wrong about the biggest single event in recent financial history. He thought the 2004-2007 super bubble was actually a period of "great moderation" brought about by his own superior monetary policies! He was still patting himself on the back when it blew up in his face.

And now, he still thinks the way to solve a problem caused by too much debt is to offer more debt. Of course, it didn't work for the Japanese. It won't work for us. But what we don't know is HOW it won't work.

That is big question. Will the feds simply retard a real recovery... with their bailouts and boondoggles... causing a long, slow motion depression, a la Japan? (In this case, gold may not be the one- way bet the smart money thinks.) Or will they tip the world into a hyperinflationary catastrophe, like the Weimar Republic in the '20s or Argentina in the '80s?

We don't know. No one knows. We wait to find out...

Source: http://www.dailyreckoning.com.au/threatened-by-inflation-depression/2009/12/07/

Dec 7, 2009
Bill Bonner
email: DR@dailyreckoning.com
website: The Daily Reckoning

Bill Bonner is the founder and editor of The Daily Reckoning.

Bill's book, Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics, is a must-read.

He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin's follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is - an empire built on delusions.

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