Bernanke's Shoes

You couldn't pay me enough to be in Bernanke's shoes. He has such a mess on his hands that cleaning it up is impossible. He is going to oversee the biggest economic disaster in U. S. history and he will have no one to blame but his predecessors and the very institution he runs. On second thought, he could blame Keynes.

In the past, I have said Deflation is the biggest threat we are facing. I still believe this is true. However, I am becoming concerned about the dollar. We simply cannot afford QE 2 (a second round of quantitative easing), but the Fed seems hell bent on making it happen.

If the Fed pursues aggressive QE 2, instead of making financial institutions book their losses and forgive massive amounts of consumer debt, we are headed for a period of massive deflation in most asset classes (like real estate, stocks, & bonds), and hyperinflation in others (like food, fuel and medicine). This toxic combination will be deadly to our entire system.

There is no way out for Bernanke. He must allow the Depression he so greatly fears to happen, or the U.S. will end up like Argentina.