Great message, Bull. Glad to hear a missive from you.

I will disagree with you in the sense that we're not in a deflationary contraction - I think we are, and it's unmistakable. There is a lot of money being destroyed as values/assets backing debt are decreasing - thus forcing asset sales, lower prices, job losses, etc. I would say this is becoming a classic deflationary spiral - which would be inflation if the massive amount of money created by the Fed were actually released to the general public. Most of the inflation is sequestered in the large banks right now.

I do agree with you about the outcome - in the end, they will panic and create too much money - there is no "goldilocks" or "just right" amount of inflation. They will either try to be too cute with inflation, and allow deflation to take hold, or inflate too much and send the water bursting over the bowl. It would be a terrible Greek tragedy if Bernanke allowed deflation in the end, would it not?

I still do not think this is really possible - it would be the biggest policy blunder since, oh, I guess the last Kondratieff trough point.