The problems are too big to solve. This is a deflationary crash. US dollar rally is real. Bernanke is printing money and the dollar is going up. This is the problem Bernanke is facing. Credit can deflate faster than he can print! Money is not what Bernanke prints! Money is what we borrow. How often do you use cash to buy things? We use our checkbooks, our credit cards. They represent our bank account. And what are bank accounts? Bank accounts are not cash. They are only promises to pay from the bank to you. They are IOUs. There is no real cash backing them due to fractional reserve banking and this is part of our problem.
Bernanke's real job is to facilitate credit. The job of Federal Reserve Bank is not to just print money. It makes credit available. However, due to earlier optimism, we have already borrow for decades. Doing so we have created our money supply. Then we ran out of credit worthy borrowers. Now the banks expect us to pay back with interest. So, let us see where we are. Total money supply is X. It needs to be paid back with interest. So the debt is X+I. Without further borrowing, how will that happen? The aswer is, it won't. This is why Bernanke is printing the shortfall in money supply and inflation is not happening. However, this comes at a price. If creditors are afraid that Bernanke will keep printing, then they will refuse to lend money at low rates. This will be deflationary for credit markets. If you cannot borrow mortgage at low rates, you can't buy the same house. Prices will have to come down. This can kick off a deflationary downward spiral in housing and other credit dependent sectors of the economy. Bernanke is between two rocks.
Most of the world's debt is denominated in US dollars. Borrowers must find US dollars to pay. They will sell everything, stocks, bonds, houses, gold, oil... If they don't, their creditors will! Keep your dollars safe! Do not get into excessive debt. It will be worth it. At the bottom of the deflationary collapse, your dollars will buy more of everything.
