Hyperinflationary Depression?

I fear I may have underestimated Ben Bernanke's willingness to destroy the dollar. Ever since I started blogging, I have said we are facing a deflationary depression, rather than a deep recession, followed by a period of inflation. The debt hole is just so big, and the velocity of money so low, that I figured the Fed would have time to change course once a recovery began.

I still lean toward the above view. However, recent events, namely QE2, and China's poor reponse to it, have raised doubts in my mind.

You see, if China starts dumping US Treasuries, we may be in trouble. We may be headed for a Weimar Germany type situation, where we have hyperinflation in the midst a depression.

This scenario will still be terrible for stocks, perhaps worse. The thing that would change would be interest rates. They would skyrocket.

I need to do more research on the subject.

I will post more on this later, and provide greater analysis and detail.