Death Before Deflation

It's going to take a lot more than a trillion new dollars to bring the kind of inflation Ben Bernanke wants. The chairman of the U.S. Federal Reserve Bank thought he had the problem licked just a few months ago, but now, for the third straight month, the "core" consumer price index (excluding food and energy) has fallen. That 1/10th of a penny you're now saving on every dollar? Don't spend it all in one place.

The two big items not covered in CPI -- energy and food -- are both either flat or falling.

"Why am I surrounded by idiots?" Bernanke demands, deep in his undersea money lab. With inflation hawks questioning his every move and disloyal Fed underlings urging an interest rate hike, Bernanke finds himself unable to do the one thing he's spent his career preparing to do: save the world by throwing money at it.

Like many supergeniuses, Bernanke is in trouble because his plan is too brilliant. It really is possible to create inflation if you have the will. Just print another trillion or two, stop paying banks to keep that money in their vaults, and the country will be flooded with dollars. The problem is that the Fed keeps trying to micromanage the inflation, explode the monetary base without anybody noticing. But at some point you have to commit to devaluation of your currency. The moment to strike is now: Personal savings rates have been increasing for the last three months [all pdfs] measured. There are still millions of jobs to save or create. It's time to send a clear message: We're going to keep printing money until you stop saving it.