The Great(er) Depression with a twist (3/3)

That we are in a deflationary cycle is now clear. Gas is now 2.99 a gallon, agricultural commodities have crashed 60% during the last 3 months, stocks, bonds, all down big time.
The dollar is now the strongest currency in the world because of its reserve currency status as a safe haven... the irony.

This is a MUST see. (there are 8 parts, they are all incredible, see youtube if you want to watch them all, Marc Faber has a PhD in Economics from a European University magna cum laude)


What will happen next???
No one knows.
We have never been in a situation where ALL countries have bubbles in ALL asset classes.
One thing is certain. The "American Dream" for most Americans will end in a nightmare. The "way of life" of how most Americans "spend" their future income, will cease to exist. No more 3 cars per family, no more Hummers and S500's, no more 2nd homes in Sedona and Newport Beach, no more eating out 5 days a week, no more pools for the backyard, no more Mcmansions for people earning 70k a year, no more borrowing 100% to buy a car, ...
Those days are over and will never come back.

So how will the FED handle this mess?
Remember, in a deflation, the government suffers from the same problem of fixed debt and failling income (in the form of tax revenues) as the public does. Just as it does with the masses, this leads to insolvency.

In his speech "Deflation making sure it doesn't happen here", Ben Bernanke talks about dropping money from helicopters. That's why he is called "helicopter Ben" by the blogging community.
In the speech, he reveals just how far the FED is prepared to go to prevent deflation. His solution is to keep throwing more and more currency, not money, at the problem. He even talks about lowering interest rates to 0 percent.
This would cause massive inflation in a few years.

So what is the "twist" for this depression?
In the 1930's the FED was not able to print currency, because the dollar was pegged at gold. But NOW, since the dollar is not linked to gold anymore, dollars can be printed as the FED sees fit.

To sum it up, me thinks, we are in the deflation stage but the FED will throw money from "helicopters" which will cause hyperinflation (inflation +20% a year)in the next few years.

Just my 2 cents.