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A Pianist, Not Bernanke, Deserves Our Praise

 We’ve got some explaining to do, since some readers evidently took yesterday’s commentary – “A Cautious Bernanke Finally Gets It Right” — as a paean to the Fed chairman. In fact, we feel quite strongly that America and the rest of the world would be much better off if he’d renounce his role as a policymaker and return to Princeton, there to pursue the harmless, bumbling life of a tenured professor.
When we wrote here yesterday that he had “finally gotten it right,” we didn’t mean to imply that he had found a cure for an economy caught in the vortex of  deflation. Indeed, there is no cure, save hyperinflation — and that would be like curing cancer with a fatal dose of radiation.  We’d only intended to call attention to the fact that the Fed chairman had succeeded at making a major policy speech without upsetting Wall Street. This seemed worth mentioning – seemed extraordinary, really, given the stock market’s wild gyrations of late. But even if investors were briefly becalmed by Mr. Bernanke’s plan to tighten ever-so-gently, they will still have to reckon with the ongoing and inexorable collapse of a debt pyramid amounting to hundreds of trillions of dollars.

Since debts of such magnitude can never be repaid, it would appear inevitable, even to hard-core deflationists such as ourselves, that a hyperinflation lies somewhere down the road. However, with regard to the inflation-versus-deflation debate, the most urgent concern is when this will happen, not if. Many inflationists seem not to understand the implications thereof. “Are you [deflationists] going to pretend that [all this debt] won’t be monetized?” asked “Myron” in the Rick’s Picks forum. No, we deflationists won’t pretend anything, Myron — least of all that a hyperinflation is not coming. But we shall continue to insist that inflationists address the question of when, in the sequence of catastrophic events yet to unfold, this will occur. For if hyperinflation does not come in time to bail out 80 million homeowners who are, or who at some point will be, drowning in mortgage debt, then it can only imply that the lenders will eventually own us all.  On the other hand, if hyperinflation is effected in a way that pushes real estate values to the moon, effectively reducing current mortgage burdens to insignificance, it will necessarily destroy the rentiers who supposedly control our economic lives. You can’t have it both ways, and that is why we demand that you inflationists say exactly when, in the grand scheme of events, hyper-monetization will occur in the U.S.

Disclosure: No positions