Are We in Deflationary Crash Mode?

I usually link to articles but today I am quoting a composite of a few comments I have read at various financial sites. This particular smorgasbord offers the notion that the USD is a smart play and that America is entering a deflationary spiral.

Not so sure on deflation, though I have said before that I think it is very necessary for economic recovery. I am, however, very bullish on the dollar and will be giving my own altogether different reasons for buying the greenback tomorrow.

Take a look at the following and tell me if you agree of disagree.

The Dollar is the place to be. Not stocks. Not bonds. The rally in the USD is for real. We are in a deflationary crash and 2008 was just the warm up. The Bernank printed a trillion and we haven't seen inflation. That cannot work.

The money supply is NOT printed dollars. It is bank credit. We printed 2 trillion dollars. But we borrowed 50 to 300 trillion over many decades. This debt becomes our money supply. And it needs to be paid back with interest. Banks make money when people borrow.

At a given time principal plus interest does not exist. It will only exist with more borrowing, so that people can earn and pay it back. When the borrowing slows down, it becomes hard to find US dollars to pay back the debt. That is why when the economy goes down, US dollar rallies and everything else falls, including Gold.

We are at the early stages of a deflationary crash. The debt levels in the society are too high. This is why starting with 2006 housing top, economy started to come down. We ran out of borrowers. Thus we were not able to inflate the money supply as needed.

Sub-prime was intentional. No 20% down. The full amount borrowing was needed. Liar loans were OK, as long as people borrowed. Now they pay you 8K home buyer credit just to borrow. Will this lead to another housing crash? Quite possibly.

US state and local governments are going bust. They are cutting jobs. Banks are kept alive at tax payer expense. Fannie, Freddie losing billions, may reach a trillion, just so that cheap mortgage is available so that banks can sell their over prices homes to the home buyers. Stay away from bonds. Bonds are a bubble.

This is going to be a single dip depression. Stock market has head and shoulders pattern. 2000 is left shoulder, 2007 is head, 2010 is right shoulder. Stocks can go down lower than you can imagine. Get out while you can. Nothing has been fixed. We have borrowed and spent on consumer debt. We are not increasing our productive capacity or competitive edge. Borrowing from China to consume more Chinese products is not going to be a recovery.

Cash is the place to be for a while. Soon your USD will buy more stocks, more homes, more oil, more gold. A deflationary crash is coming or is silently already here.