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You partially answered the question you asked in your first paragraph.

The ChiCom leadership is afraid of riots. The peasants gave up agriculture and moved to the cities to work in factories. Now the factories are not producing as much, there is increasingly less work, and the houses that these peasants purchased at the peak of the boom have lost in some cases more than half their value. The people there are very angry and have begun demonstrating. As I said previously, the ChiComs are trying to prevent as far as possible any further asset devaluation by creating a mild deflationary uptick. It won’t work, but that’s part of their goal.

Food will definitely be a problem there, and the ChiComs will cash in their investments to buy foreign food, which means our food. That will result in shortages here and an increased cost. Keep that in mind as this plays out and stock up on storable food (see the first part of my tagline).

They do need to unload their foreign investments. If they don’t, as those foreign currencies devalue, this will have the effect of over-heating their own currencies.

The Fed is definitely monetizing the debt and they are doing so through the equities markets, a double no-no. We have seen only mild inflation compared to the amount of new money because that new money never reached the second tier of money creation. The first tier is at the government and fed level, the approval, the digital ‘printing,’ and the lending of the new money to the primary borrowers through the discount window. The second tier is the second line of banks making that money available to people on the street through loans. That money never reached the second tier. It was borrowed by the primary tier taking advantage of the ZIRP and that money has been used for the past couple of years to artificially prop up the equities markets? Why? Because Obammie the Commie and the other socialist/communist Dems want everyone to believe the lie that they saved the economy by keeping the DJIA over 12K. Today’s completely fraudulent 300+ climb with no resistance and obscenely low volume is proof of the fact that the primary borrowers (Goldman Sachs, JPM, Citi, Chase and all the others) have been infused with liquid and that they are using HFT algorithms to pump the market up. This earns them profits and keeps the market high. The market also must be kept high because the pension and benefits of the public-sector unions were based upon the assumption that the markets would earn 8% profits every year, thus the DJIA has to be kept over 12K to keep those payments to the unions going. As close as I can figure, the DJIA should realistically be in the 6-7000 range, and that is based upon the assumption of a solid 3% economic growth every year for about the past decade, which is over optimistic, because most of that growth was the delusion of two bubble economies (the dot-com bubble and the housing bubble).

It will adjust, but the DNC is working very hard with the socialist banking cartel that is our Federal Reserve to try to time it so that it happens after 2012.

Regardless of when it happens, you can bank on the DNC blaming it on the TEA party or Republicans or conservatives. What else could we expect from the affirmative-action president who thinks his foreign policies rank up there in the top four presidents of all time?

Please have a look at my post #5.

I'm not sure that I can accept the idea of a conspiracy between the members of the Fed and the White House, all coordinated by Soros which would have to be the case if they were trying to time the reckoning but I do believe it is important to consider when the reckoning will come. Both of us believe that it is not to be avoided.

If it comes before the election, Obama will be defeated. If it comes after the election and Obama was voted out, the blame will fall on the Republican in the Oval Office because the electorate seemingly always reacts Pro hoc Proctor hoc.

If the reckoning comes with Obama still in office, it might well be used as a pretext for extra constitutional takeover.

It is interesting to speculate about the nature of the economy after a crash of the system, whether inflation, deflation, or stagflation. I am of the view that initially, at least, we will face deflation. I do not think we will get to inflation until we go through stagflation and I am not sure that we will ever get to inflation.

I say all of this in the context of trying to protect oneself beyond the survivalist level. If we go into deflation, gold and silver will lose value although perhaps not to the extent of paper assets. Foodstuffs will fare perhaps better. Gasoline, guns and ammunition, and medical supplies will probably fare the best. Real estate will be immune in the sense that it will float in the sea rising and lowering with the tide provided is not encumbered by mortgage and providing it is not expropriated. If you're sure we are going into inflation, add a mortgage that is if you are equally sure you can keep your job or source of income.

The real question will be not the degree of the wrenching of the system but the duration. Eventually the demographic and technological forces which are latent but growing inexorably will be unbound and a whole new economy will emerge. If you are George Soros and 33 instead of 83 you with look upon the new landscape which emerges with a high degree of cupidity.